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DELAWARE POOLED TRUST, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 29, 1999
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Delaware Pooled Trust, Inc. ("Pooled Trust, Inc.") is an open-end
management investment company. Pooled Trust, Inc. consists of various series
("Portfolios") offering a broad range of investment choices. Pooled Trust, Inc.
is designed to provide clients with attractive alternatives for meeting their
investment needs. This Statement of Additional Information ("SAI") (Part B of
Pooled Trust, Inc.'s registration statement) addresses information of Pooled
Trust, Inc. applicable to each of the Portfolios. In addition, investors may
make investments in The Asset Allocation Portfolio. That Portfolio is a "fund of
funds" which primarily invests in several of the Portfolios of Pooled Trust,
Inc. The Asset Allocation Portfolio is a series of Delaware Group Foundation
Funds ("Foundation Funds") which is also an open-end management investment
company.
This SAI is not a prospectus but should be read in conjunction with the
related Prospectus for each Portfolio. Certain information from the Portfolio's
Annual Report has been incorporated by reference into this SAI. To obtain the
proper Prospectus or Annual Report for the Portfolios, please write to the
Delaware Pooled Trust, Inc. at One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103, Attn: Client Services or call Pooled Trust, Inc. at
800-231-8002. Correspondence relating to The Asset Allocation Portfolio will be
forwarded to Foundation Funds. To obtain the Prospectuses or Annual Report for
the Class A, B and C Shares or the Institutional Class of The Real Estate
Investment Trust Portfolio, write to the Distributor at 1818 Market Street,
Philadelphia, PA 19103 or call 800-523-1918 for the Class A, B and C Shares or
800-510-4015 for the Institutional Class.
TABLE OF CONTENTS Page
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Fund History
Investment Policies, Portfolio Techniques and Risk Considerations
Accounting and Tax Issues
Trading Practices and Brokerage
Portfolio Turnover
Purchasing Shares
Investment Plans
Determining Offering Price and Net Asset Value
Redemption and Exchange
Dividends and Capital Gain Distributions
Taxes
Valuation of Shares
Investment Management Agreements and Sub-Advisory Agreements
Officers and Directors
General Information
Performance Information
Financial Statements
Appendix A - Ratings
Appendix B--Investment Objectives of the Funds in the Delaware
Investments Family
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FUND HISTORY
Pooled Trust, Inc. was organized as a Maryland corporation on May 30,
1991. The Articles of Incorporation permit Pooled Trust, Inc. to issue two
billion shares of common stock with $.01 par value and fifty million shares have
been allocated to each Portfolio. The Board of Directors has the power to
designate one or more classes of shares of common stock and to classify and
reclassify any unissued shares with respect to such classes. Foundation Funds
was organized as a Delaware business trust on October 24, 1997.
The shares of each Portfolio, when issued, will be fully paid,
non-assessable, fully transferable and redeemable at the option of the holder.
The shares have no preference as to the conversion, exchange, dividends,
retirement or other features and have no preemptive rights. The shares of each
Portfolio have noncumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of directors/trustees can elect
100% of the directors/trustees if they choose to do so. Shares of each Portfolio
entitled to vote on a matter will vote in the aggregate and not by Portfolio,
except when the matter to be voted upon affects only the interests of
shareholders of a particular Portfolio or class of shares of a Portfolio when
otherwise expressly required by law. Neither Pooled Trust, Inc. nor Foundation
Funds issue certificates for shares unless a shareholder submits a specific
request. Under Maryland law, Pooled Trust, Inc. is not required, and does not
intend, to hold annual meetings of its shareholders unless, under certain
circumstances, it is required to do so under the Investment Company Act of 1940
(the "1940 Act"). Under Foundation Funds' Declaration of Trust and By-Laws, it
is also not required, and does not intend, to hold annual meetings unless
required to do so by the 1940 Act.
Delaware Pooled Trust, Inc. offers various Portfolios providing
eligible investors a broad range of investment choices coupled with the
advantage of a no-load mutual fund with the service companies of Delaware
Investments providing customized services as investment adviser, administrator
and distributor. Each Portfolio, other than The Real Estate Investment Trust
Portfolio, The Real Estate Investment Trust Portfolio II, The Global Fixed
Income Portfolio, The International Fixed Income Portfolio, The Emerging Markets
Portfolio, The Asset Allocation Portfolio and The Select Equity Portfolio, is a
diversified fund as defined by the 1940 Act. The Real Estate Investment Trust
Portfolio, The Real Estate Investment Trust Portfolio II, The Global Fixed
Income Portfolio, The International Fixed Income Portfolio, The Emerging Markets
Portfolio, The Asset Allocation Portfolio and The Select Equity Portfolio are
nondiversified funds as defined by the 1940 Act.
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INVESTMENT POLICIES, PORTFOLIO TECHNIQUES AND RISK CONSIDERATIONS
Investment Restrictions
The investment objectives of all the Portfolios, except The Labor
Select International Equity Portfolio, are non-fundamental, and may be changed
without shareholder approval. However, The Board of Directors or Trustees, as
appropriate for will notify shareholders prior to a material change in a
Portfolio's objective.
Fundamental Investment Restrictions -- Pooled Trust, Inc. and
Foundation Funds, as applicable, have adopted the following restrictions for
each of the Portfolios (except where otherwise noted) which cannot be changed
without approval by the holders of a "majority" of the respective Portfolio's
outstanding shares, which is a vote by the holders of the lesser of a) 67% or
more of the voting securities present in person or by proxy at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy; or b) more than 50% of the outstanding voting securities.
The percentage limitations contained in the restrictions and policies set forth
herein apply at the time a Portfolio purchases securities.
Each Portfolio, other than The Labor Select International Equity
Portfolio, shall not:
1. With respect to each Portfolio, except the Real Estate Investment
Trust Portfolios, make investments that will result in the concentration (as
that term may be defined in the 1940 Act, any rule or order thereunder, or U.S.
Securities and Exchange Commission ("SEC") staff interpretation thereof) of its
investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit the Portfolio from investing in
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, or in tax-exempt securities or certificates of deposit. The
Real Estate Investment Trust Portfolios will concentrate their respective
investments in the real estate industry. Each of The Real Estate Investment
Trust Portfolios otherwise make investments that will result in the
concentration (as that term may be defined in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof) of its investments in the
securities of issuers primarily engaged in the same industry, provided that this
restriction does not limit the Portfolio from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or in
tax-exempt securities or certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the
Portfolio may engage in transactions involving the acquisition, disposition or
resale of its portfolio securities, under circumstances where it may be
considered to be an underwriter under the Securities Act of 1933.
4. With respect to each Portfolio, purchase or sell real estate, unless
acquired as a result of ownership of securities or other instruments and
provided that this restriction does not prevent the Portfolio from investing in
issuers which invest, deal or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real estate or
interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Portfolio from engaging in transactions
involving futures contracts and options thereon or investing in securities that
are secured by physical commodities.
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6. Make loans, provided that this restriction does not prevent the
Portfolio from purchasing debt obligations, entering into repurchase agreements,
loaning its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
Prospectuses, each Portfolio, other than The Labor Select International Equity
Portfolio, will be subject to the following investment restrictions, which are
considered non-fundamental and may be changed by the Board of Directors or
Trustees without shareholder approval.
1. Each Portfolio is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, none of the Portfolios, except The Asset
Allocation Portfolio, may operate as a "fund of funds" which invests primarily
in the shares of other investment companies as permitted by Section 12(d)(1)(F)
or (G) of the 1940 Act, if its own shares are utilized as investments by such a
"fund of funds."
2. Each Portfolio may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Portfolio has valued
the investment.
The Labor Select International Equity Portfolio shall not:
1. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with the Portfolio's investment
objective and policies, are considered loans, and except that the Portfolio may
loan up to 25% of its respective assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
2. Purchase or sell real estate or real estate limited partnerships,
but this shall not otherwise prevent a Portfolio from investing in securities
secured by real estate or interests therein.
3. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Portfolio may be
deemed to be an "underwriter" as that term is defined in the Securities Act of
1933.
4. Make any investment which would cause more than 25% of the market or
other fair value of its respective total assets to be invested in the securities
of issuers all of which conduct their principal business activities in the same
industry. This restriction does not apply to obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities.
5. Purchase or sell commodities or commodity contracts.
6. Enter into futures contracts or options thereon.
7. Make short sales of securities, or purchase securities on margin.
8. Purchase or retain the securities of any issuer which has an
officer, director or security holder who is a director or officer of Pooled
Trust, Inc. or of either of the investment advisers if or so long as the
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directors and officers of Pooled Trust, Inc. and of the investment advisers
together own beneficially more than 5% of any class of securities of such
issuer.
9. Invest in interests in oil, gas and other mineral leases or other
mineral exploration or development programs.
10. Borrow money, except as a temporary measure for extraordinary
purposes or to facilitate redemptions. Any borrowing will be done from a bank
and to the extent that such borrowing exceeds 5% of the value of its respective
net assets, asset coverage of at least 300% is required. In the event that such
asset coverage shall at any time fall below 300%, the Portfolio shall, within
three days thereafter (not including Sunday or holidays) or such longer period
as the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%. No investment securities will be purchased while the Portfolio
has an outstanding borrowing. The Portfolio will not pledge more than 10% of its
respective net assets. The Portfolio will not issue senior securities as defined
in the 1940 Act), except for notes to banks.
11. As to 75% of its respective total assets, invest more than 5% of
its respective total assets in the securities of any one issuer (other than
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities).
In addition to the restrictions set forth above, in connection with the
qualification of the Portfolio's shares for sale in certain states, the
Portfolio may not invest in warrants if such warrants, valued at the lower of
cost or market, would exceed 5% of the value of the Portfolio's net assets.
Included within such amount, but not to exceed 2% of the Portfolio's net assets
may be warrants which are not listed on the New York Stock Exchange or American
Stock Exchange. Warrants acquired by the Portfolio in units or attached to
securities may be deemed to be without value.
Non-fundamental Investment Restrictions -- The following lists
non-fundamental investment restrictions for the Portfolios. Unlike the
fundamental investment restrictions listed above, these investment restrictions
may be changed by Pooled Trust, Inc.'s Board of Directors or Foundation Funds'
Board of Trustees, as appropriate, without shareholder approval.
The Large-Cap Value Equity Portfolio, The Mid-Cap Growth Equity
Portfolio, The Small-Cap Growth Equity Portfolio, The Real Estate Investment
Trust Portfolios, The International Equity Portfolio, The Labor Select
International Equity Portfolio, The Intermediate Fixed Income Portfolio, The
High-Yield Bond Portfolio, The Global Fixed Income Portfolio and The
International Fixed Income Portfolio shall not:
1. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with a Portfolio's investment
objective and policies, are considered loans, and except that each Portfolio may
loan up to 25% of its respective assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
2. Purchase or sell real estate or real estate limited partnerships,
but this shall not otherwise prevent a Portfolio from investing in securities
secured by real estate or interests therein and except that The Real Estate
Investment Trust Portfolio and The Real Estate Investment Trust Portfolio II
(collectively, "The Real Estate Investment Trust Portfolios") may each own real
estate directly as a result of a default on securities the Portfolio owns.
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3. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, a Portfolio may be deemed
to be an "underwriter" as that term is defined in the Securities Act of 1933.
4. Make any investment which would cause more than 25% of the market or
other fair value of its respective total assets to be invested in the securities
of issuers all of which conduct their principal business activities in the same
industry, except that each of The Real Estate Investment Trust Portfolios shall
invest in excess of 25% of its total assets in the securities of issuers in the
real estate industry. This restriction does not apply to obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
5. Purchase or sell commodities or commodity contracts, except that The
Mid-Cap Growth Equity Portfolio, The Real Estate Investment Trust Portfolios and
The International Fixed Income Portfolio may enter into futures contracts and
may purchase and sell options on futures contracts in accordance with the
related Prospectus, subject to investment restriction 6 below.
6. Enter into futures contracts or options thereon, except that The
Mid-Cap Growth Equity Portfolio, The Real Estate Investment Trust Portfolios and
The International Fixed Income Portfolio may each enter into futures contracts
and options thereon to the extent that not more than 5% of its assets are
required as futures contract margin deposits and premiums on options and only to
the extent that obligations under such contracts and transactions represent not
more than 20% of its total assets.
7. Make short sales of securities, or purchase securities on margin,
except that The Mid-Cap Growth Equity Portfolio, The Real Estate Investment
Trust Portfolios and The International Fixed Income Portfolio may satisfy margin
requirements with respect to futures transactions.
8. Purchase or retain the securities of any issuer which has an
officer, director or security holder who is a director or officer of Pooled
Trust, Inc. or of either of the investment advisers if or so long as the
directors and officers of Pooled Trust, Inc. and of the investment advisers
together own beneficially more than 5% of any class of securities of such
issuer.
9. Invest in interests in oil, gas and other mineral leases or other
mineral exploration or development programs.
10. Borrow money, except as a temporary measure for extraordinary
purposes or to facilitate redemptions. Any borrowing will be done from a bank
and to the extent that such borrowing exceeds 5% of the value of its respective
net assets, asset coverage of at least 300% is required. In the event that such
asset coverage shall at any time fall below 300%, a Portfolio shall, within
three days thereafter (not including Sunday or holidays) or such longer period
as the Securities and Exchange Commission ("Commission") may prescribe by rules
and regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. No investment
securities will be purchased while a Portfolio has an outstanding borrowing. A
Portfolio will not pledge more than 10% of its respective net assets. A
Portfolio will not issue senior securities as defined in the Investment Company
Act of 1940 (the "1940 Act"), except for notes to banks.
In addition to the restrictions set forth above, in connection with the
qualification of a Portfolio's shares for sale in certain states, a Portfolio
may not invest in warrants if such warrants, valued at the lower of cost or
market, would exceed 5% of the value of a Portfolio's net assets. Included
within such amount, but not to exceed 2% of a Portfolio's net assets may be
warrants which are not listed on the New York Stock Exchange or American Stock
Exchange. Warrants acquired by a Portfolio in units or attached to securities
may be deemed to be without value.
The Large-Cap Value Equity Portfolio, The Mid-Cap Growth Equity
Portfolio, The Small Cap-Growth Equity Portfolio, The Global Equity Portfolio,
The International Equity Portfolio, The Intermediate Fixed Income Portfolio, The
Global Fixed Income Portfolio and, only where noted, The High-Yield Bond
Portfolio shall not:
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1. As to 75% of its respective total assets, invest more than 5% of its
respective total assets in the securities of any one issuer (other than
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities). This restriction shall also apply to The High-Yield Bond
Portfolio. This restriction shall apply to only 50% of the total assets of The
Global Fixed Income Portfolio.
2. Invest in securities of other investment companies, except by
purchase in the open market involving only customary brokers' commissions or in
connection with a merger, consolidation or other acquisition or as may otherwise
be permitted by the 1940 Act.
3. Purchase more than 10% of the outstanding voting securities of any
issuer, or invest in companies for the purpose of exercising control or
management.
4. Write, purchase or sell options, puts, calls or combinations thereof
with respect to securities, except that The Mid-Cap Growth Equity Portfolio may:
(a) write covered call options with respect to any or all parts of its portfolio
securities; (b) purchase call options to the extent that the premiums paid on
all outstanding call options do not exceed 2% of the Portfolio's total assets;
(c) write secured put options; and (d) purchase put options, if the Portfolio
owns the security covered by the put option at the time of purchase, and
provided that premiums paid on all put options outstanding do not exceed 2% of
its total assets. The Portfolio may sell call or put options previously
purchased and enter into closing transactions with respect to the activities
noted above.
5. Invest more than 5% of the value of its respective total assets in
securities of companies less than three years old. Such three-year period shall
include the operation of any predecessor company or companies.
6. Invest more than 10% of its respective total assets in repurchase
agreements maturing in more than seven days and other illiquid assets.
For purposes of investment restriction 6, it is Pooled Trust, Inc.'s
policy, changeable without shareholder vote, that "illiquid assets" include
securities of foreign issuers which are not listed on a recognized U.S. or
foreign exchange and for which a bona fide market does not exist at the time of
purchase or subsequent valuation.
The following additional non-fundamental investment restrictions apply
to The Labor Select International Equity Portfolio, The Real Estate Investment
Trust Portfolios, The International Fixed Income Portfolio and The High-Yield
Bond Portfolio.
Except as noted below, each of The Labor Select International Equity
Portfolio, The Real Estate Investment Trust Portfolios, The International Fixed
Income Portfolio and The High-Yield Bond Portfolio shall not:
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1. As to 50% of the respective total assets of The Real Estate
Investment Trust Portfolios and The International Fixed Income Portfolio, invest
more than 5% of its respective total assets in the securities of any one issuer
(other than obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities).
2. Invest in securities of other investment companies, except by
purchase in the open market involving only customary brokers' commissions or in
connection with a merger, consolidation or other acquisition or as may otherwise
be permitted by the 1940 Act.
3. Invest more than 5% of the value of its respective total assets in
securities of companies less than three years old. Such three-year old period
shall include the operation of any predecessor company or companies. This
restriction shall not apply to The Real Estate Investment Trust Portfolios and
their investments in the securities of real estate investment trusts.
4. Purchase more than 10% of the outstanding voting securities of any
issuer, or invest in companies for the purpose of exercising control or
management.
5. Write, purchase or sell options, puts, calls or combinations thereof
with respect to securities, except that each of The Real Estate Investment Trust
Portfolios may: (a) write covered call options with respect to any or all parts
of its portfolio securities; (b) purchase call options to the extent that the
premiums paid on all outstanding call options do not exceed 2% of the
Portfolio's total assets; (c) write secured put options; and (d) purchase put
options, if the Portfolio owns the security covered by the put option at the
time of purchase, and provided that premiums paid on all put options outstanding
do not exceed 2% of its total assets. Each Portfolio may sell call or put
options previously purchased and enter into closing transactions with respect to
the activities noted above.
6. Invest more than 15% of its respective total assets, determined at
the time of purchase, in repurchase agreements maturing in more than seven days
and other illiquid assets.
For purposes of investment restriction 6, it is Pooled Trust, Inc.'s
policy that "illiquid assets" include securities of foreign issuers which are
not listed on a recognized U.S. or foreign exchange and for which no bona fide
market exists at the time of purchase.
The following additional non-fundamental investment restrictions apply
to The Mid-Cap Value Equity Portfolio, The Global Equity Portfolio, The Emerging
Markets Portfolio, The Aggregate Fixed Income Portfolio and The Diversified Core
Fixed Income Portfolio (except where otherwise noted). The percentage
limitations contained in these restrictions and policies apply at the time a
Portfolio purchases securities.
Except as noted below, each of The Mid-Cap Value Equity Portfolio, The
Global Equity Portfolio, The Emerging Markets Portfolio, The Aggregate Fixed
Income Portfolio and The Diversified Core Fixed Income Portfolio shall not:
1. As to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer (other than obligations issued, or
guaranteed by, the U.S. government, its agencies or instrumentalities). This
restriction shall not apply to The Emerging Markets Portfolio.
2. Invest 25% or more of its total assets in any one industry provided
that there is no limitation with respect to investments in obligations issued or
guaranteed as to principal or interest by the U.S. Government, its agencies or
instrumentalities.
3. Make loans other than by the purchase of all or a portion of a
publicly or privately distributed issue of bonds, debentures or other debt
securities of the types commonly offered publicly or privately and purchased by
financial institutions (including repurchase agreements), whether or not the
purchase was made upon the original issuance of the securities, and except that
the Portfolio may loan its assets to qualified broker/dealers or institutional
investors.
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4. Engage in underwriting of securities of other issuers, except that
portfolio securities, including securities purchased in private placements, may
be acquired under circumstances where, if sold, the Portfolio might be deemed to
be an underwriter under the Securities Act of 1933. No limit is placed on the
proportion of the Portfolio's assets which may be invested in such securities.
5. Borrow money or issue senior securities, except to the extent
permitted by the 1940 Act or any rule or order thereunder or interpretation
thereof. Subject to the foregoing, the Portfolio may engage in short sales,
purchase securities on margin, and write put and call options.
6. Purchase or sell physical commodities or physical commodity
contracts, including physical commodity options or futures contracts in a
contract market or other futures market.
7. Purchase or sell real estate; provided that the Portfolio may invest
in securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
Investment Policies and Risks
Foreign Investment Information (The International Mid-Cap Sub Portfolio, The
International Equity Portfolio, The Labor Select International Equity Portfolio,
The Real Estate Investment Trust Portfolios, The Global Fixed Income Portfolio,
The International Fixed Income Portfolio, The High-Yield Bond Portfolio, The
Diversified Core Fixed Income Portfolio, The Emerging Markets Portfolio, The
Global Equity Portfolio, The International Small-Cap Portfolio, The Balanced
Portfolio, The Equity Income Portfolio, The Asset Allocation Portfolio, The
Small-Cap Value Equity Portfolio, The Small-Cap Growth Equity Portfolio and The
Core Equity Portfolio)
Investors in The International Mid-Cap Sub, The International Equity,
The Labor Select International Equity, The Global Fixed Income, The
International Fixed Income, The Emerging Markets, The Global Equity and The
International Small-Cap Portfolio (as well as in The Real Estate Investment
Trust, The Diversified Core Fixed Income, The High-Yield Bond, The Asset
Allocation, The Small-Cap Growth Equity, The Balanced, The Equity Income and The
Core Equity Portfolios, each of which possesses a limited ability to invest in
foreign securities) should recognize that investing in securities issued by
foreign corporations and foreign governments involves certain considerations,
including those set forth in the related Prospectus, which are not typically
associated with investments in United States issuers. Since the securities of
foreign issuers are frequently denominated in foreign currencies, and since each
Portfolio may temporarily hold uninvested reserves in bank deposits in foreign
currencies, these Portfolios will be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies. The investment
policies of each Portfolio, except The High-Yield Bond Portfolio, permit each to
enter into forward foreign currency exchange contracts and permit The
International Fixed Income, The Diversified Core Fixed Income, The Emerging
Markets, The Global Equity, The Asset Allocation, The Small-Cap Growth Equity
and The Core Equity Portfolios to engage in certain options and futures
activities, in order to hedge holdings and commitments against changes in the
level of future currency rates. See "FOREIGN CURRENCY TRANSACTIONS (THE
INTERNATIONAL EQUITY PORTFOLIO, THE INTERNATIONAL MID-CAP SUB PORTFOLIO, THE
LABOR SELECT INTERNATIONAL EQUITY PORTFOLIO, THE REAL ESTATE INVESTMENT TRUST
PORTFOLIOS, THE GLOBAL FIXED INCOME PORTFOLIO, THE INTERNATIONAL FIXED INCOME
PORTFOLIO, THE EMERGING MARKETS PORTFOLIO, THE GLOBAL EQUITY PORTFOLIO, THE
INTERNATIONAL SMALL-CAP PORTFOLIO, THE DIVERSIFIED CORE FIXED INCOME PORTFOLIO,
THE ASSET ALLOCATION PORTFOLIO, THE SMALL-CAP GROWTH EQUITY PORTFOLIO AND THE
CORE EQUITY PORTFOLIO)," below.
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The International Mid-Cap Sub, The International Equity, The Labor
Select International Equity, The Global Equity, The Emerging Markets, The Global
Fixed Income, The International Fixed Income and The International Small-Cap
Portfolios (and The Real Estate Investment Trust, The High-Yield Bond, The
Diversified Core Fixed Income, The Asset Allocation, The Small-Cap Growth
Equity, The Balanced , The Equity Income, The Small-Cap Value Equity and The
Core Equity Portfolios, up to 10%, 10%, 20%, 10%, 5%, 25%, 5%, 5% and 20%,
respectively, of their total assets) will invest in securities of foreign
issuers and may hold foreign currency. Each of these Portfolios has the right to
purchase securities in any developed, underdeveloped or emerging country. The
Emerging Markets Portfolio, under normal market conditions, will invest at least
65% of its total assets in securities of issuers in emerging markets. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations. These risks
are in addition to the usual risks inherent in domestic investments. There is
the possibility of expropriation, nationalization or confiscatory taxation,
taxation of income earned in foreign nations or other taxes imposed with respect
to investments in foreign nations, foreign exchange control (which may include
suspension of the ability to transfer currency from a given country), default in
foreign government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about companies
in the United States and this information tends to be of a lesser quality.
Foreign companies are not subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. In particular, the
assets and profits appearing on the financial statements of a developing or
emerging country issuer may not reflect its financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require for both tax and accounting purposes,
that certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses or profits. Consequently,
financial data may be materially affected by restatements for inflation and may
not accurately reflect the real condition of those issuers and securities
markets.
It is also expected that the expenses for custodial arrangements of The
International Equity, The Labor Select International Equity, The Real Estate
Investment Trust, The Diversified Core Fixed Income, The Global Fixed Income,
The International Fixed Income, The High-Yield Bond, The Global Equity, The
Emerging Markets, The Asset Allocation, The Small-Cap Value Equity, The
Small-Cap Growth Equity, The International Small-Cap and The Core Equity
Portfolios' foreign securities will be somewhat greater than the expenses for
the custodial arrangements for U.S. securities of equal value. Dividends and
interest paid by foreign issuers may be subject to withholding and other foreign
taxes. Although in some countries a portion of these taxes is recoverable, the
non-recovered portion of foreign withholding taxes will reduce the income a
Portfolio receives from the companies comprising the Portfolio's investments.
See "TAXES."
Further, a Portfolio may encounter difficulty or be unable to pursue
legal remedies and obtain judgments in foreign courts. Commission rates on
securities transactions in foreign countries, which are sometimes fixed rather
than subject to negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets, and may be subject to administrative
uncertainties. In many foreign countries, there is less government supervision
and regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States, and capital requirements for
brokerage firms are generally lower. The foreign securities markets of many of
the countries in which a Portfolio may invest may also be smaller, less liquid
and subject to greater price volatility than those in the United States.
Compared to the United States and other developed countries, emerging
countries may have volatile social conditions, relatively unstable governments
and political systems, economies based on only a few industries and economic
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structures that are less diverse and mature, and securities markets that trade a
small number of securities, which can result in a low or nonexistent volume of
trading. Prices in these securities markets tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries. Until
recently, there has been an absence of a capital market structure or
market-oriented economy in certain emerging countries. Further, investments and
opportunities for investments by foreign investors are subject to a variety of
national policies and restrictions in many emerging countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, limits on the types of
companies in which foreigners may invest and prohibitions on foreign investments
in issuers or industries deemed sensitive to national interests. Additional
restrictions may be imposed at any time by these or other countries in which a
Portfolio invests. Also, the repatriation of both investment income and capital
from several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging countries, the investment advisers for the Portfolios do not
believe that any current repatriation restrictions would affect their decision
to invest in such countries. Countries such as those in which a Portfolio may
invest, and in which The Emerging Markets Portfolio will primarily invest, have
historically experienced and may continue to experience, substantial, and in
some periods extremely high rates of inflation for many years, high interest
rates, exchange rate fluctuations or currency depreciation, large amounts of
external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Other factors which may influence the ability or willingness
to service debt include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of its debt service burden to the economy as a whole,
its government's policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints to which a
government debtor may be subject.
With respect to investment in debt issues of foreign governments, the
ability of a foreign government or government-related issuer to make timely and
ultimate payments on its external debt obligations will also be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected. If a foreign government or
government-related issuer cannot generate sufficient earnings from foreign trade
to service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the issuer's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a government issuer to obtain sufficient foreign exchange
to service its external debt.
As a result of the foregoing, a foreign governmental issuer may default
on its obligations. If such a default occurs, a Portfolio may have limited
effective legal recourse against the issuer and/or guarantor. Remedies must, in
some cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
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government and government-related debt obligations in the event of default under
their commercial bank loan agreements.
The issuers of the foreign government and government-related
high-yield securities, including Brady Bonds, in which The Emerging Markets, The
International Fixed Income, The Global Fixed Income, The Diversified Core Fixed
Income, The International Small-Cap and The Asset Allocation Portfolios expect
to invest have in the past experienced substantial difficulties in servicing
their external debt obligations, which have led to defaults on certain
obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds, and
obtaining new credit to finance interest payments. Holders of certain foreign
government and government-related high yield securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that the Brady Bonds and other
foreign government and government-related high yield securities in which The
Emerging Markets, The International Fixed Income, The Global Fixed Income, The
Diversified Core Fixed Income and The Asset Allocation Portfolios may invest
will not be subject to similar defaults or restructuring arrangements which may
adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
With respect to forward foreign currency exchange, the precise matching
of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain. See "FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS" below.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Portfolios.
Payment of such interest equalization tax, if imposed, would reduce a
Portfolio's rate of return on its investment. Dividends paid by foreign issuers
may be subject to withholding and other foreign taxes which may decrease the net
return on such investments as compared to dividends paid to a Portfolio by
United States issuers. Special rules govern the federal income tax treatment of
certain transactions denominated in terms of a currency other than the U.S.
dollar or determined by reference to the value of one or more currencies other
than the U.S. dollar. The types of transactions covered by the special rules
include, as relevant, the following: (i) the acquisition of, or becoming the
obligor under, a bond or other debt instrument (including, to the extent
provided in Treasury Regulations, preferred stock); (ii) the accruing of certain
trade receivables and payables; and (iii) the entering into or acquisition of
any forward contract and similar financial instrument if such instrument is not
"marked to market." The disposition of a currency other than the U.S. dollar by
a U.S. taxpayer is also treated as a transaction subject to the special currency
rules. With respect to transactions covered by the special rules, foreign
currency gain or loss is calculated separately from any gain or loss on the
underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts that are capital assets
in the hands of the taxpayer and which are not part of a straddle. The Treasury
Department has authority to issue regulations under which certain transactions
subject to the special currency rules that are part of a "section 988 hedging
transaction" (as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), and the Treasury Regulations) will be integrated and treated as a
single transaction or otherwise treated consistently for purposes of the Code.
Any gain or loss attributable to the foreign currency component of a transaction
engaged in by a Portfolio which is not subject to the special currency rules
(such as foreign equity investments other than certain preferred stocks) will be
treated as capital gain or loss and will not be segregated from the gain or loss
on the underlying transaction. It is anticipated that some of the non-U.S.
dollar denominated investments and foreign currency contracts the Portfolios may
make or enter into will be subject to the special currency rules described
above.
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With reference to the Portfolios' investments in foreign government
securities, there is the risk that a foreign governmental issuer may default on
its obligations. If such a default occurs, a Portfolio may have limited
effective legal recourse against the issuer and/or guarantor. Remedies must, in
some cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government and government-related debt obligations in the event of default under
their commercial bank loan agreements.
The issuers of foreign government and government-related debt
securities have in the past experienced substantial difficulties in servicing
their external debt obligations, which have led to defaults on certain
obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds, and
obtaining new credit to finance interest payments. Holders of certain foreign
government and government-related high-yield securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that Brady Bonds and other foreign
government and government-related securities will not be subject to similar
defaults or restructuring arrangements which may adversely affect the value of
such investments. Furthermore, certain participants in the secondary market for
such debt may be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.
Investments and opportunities for investments by foreign investors in
emerging market countries are subject to a variety of national policies and
restrictions. These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by foreigners, limits
on the types of companies in which foreigners may invest and prohibitions on
foreign investments in issuers or industries deemed sensitive to national
interests. Additional restrictions may be imposed at any time by these or other
countries in which the Portfolios' invest. Although these restrictions may in
the future make it undesirable to invest in emerging countries, a Portfolio's
adviser or sub-adviser, as relevant, does not believe that any current
registration restrictions would affect its decision to invest in such countries.
As disclosed in the Prospectuses for The International Mid-Cap Sub
Portfolio, The International Equity Portfolio, The Labor Select International
Equity Portfolio, The International Fixed Income Portfolio and The International
Small-Cap Portfolio, the foreign short-term fixed-income securities in which the
Portfolio may invest may be U.S. dollar or foreign currency denominated,
including EURO. Such securities may include supranational entities. A
supranational entity is an entity established or financially supported by the
national governments of one or more countries to promote development or
reconstruction. They include: The Work Bank, European Investment Bank, Asian
Development Bank, European Economic Community and the Inter-American Development
Bank. Such fixed-income securities will be typically rated, at the time of
purchase, AA or higher by Standard & Poor's Ratings Group or Aa or higher by
Moody's Investor Service, Inc. or of comparable quality as determined by the
Portfolio's investment adviser.
Foreign Currency Transactions (The International Equity Portfolio, The
International Mid-Cap Sub Portfolio, The Labor Select International Equity
Portfolio, The Real Estate Investment Trust Portfolios, The Global Fixed Income
Portfolio, The International Fixed Income Portfolio, The Emerging Markets
Portfolio, The Global Equity Portfolio, The International Small-Cap, The
Diversified Core Fixed Income Portfolio, The Asset Allocation Portfolio, The
Small-Cap Growth Equity Portfolio, The Small-Cap Value Equity Portfolio, The
Balanced, The Equity Income and The Core Equity Portfolio)
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<PAGE>
The International Equity, The International Mid-Cap Sub, The Labor
Select International Equity, The Global Fixed Income, The International Fixed
Income, The Emerging Markets, The Global Equity and The International Small-Cap
Portfolios (as well as The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Asset Allocation, The Small-Cap Value Equity, The Small-Cap
Growth Equity, The Balanced, The Equity Income and The Core Equity Portfolios,
consistent with their limited ability to invest in foreign securities) may
purchase or sell currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations.
Forward foreign currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A Portfolio will account for
forward contracts by marking to market each day at daily exchange rates.
When a Portfolio enters into a forward contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of its assets denominated in
such foreign currency, its Custodian Bank will place or will cause to be placed
cash or liquid equity or debt securities in a separate account of that Portfolio
in an amount not less than the value of that Portfolio's total assets committed
to the consummation of such forward contracts. If the additional cash or
securities placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of that Portfolio's commitments with respect
to such contracts.
The International Fixed Income, The Emerging Markets, The Global
Equity, The International Small-Cap, The Balanced, The Equity Income, The
Diversified Core Fixed Income and The Asset Allocation Portfolios may also enter
into transactions involving foreign currency options, futures contracts and
options on futures contracts, in order to minimize the currency risk in its
investment portfolio.
Foreign currency options are traded in a manner substantially similar
to options on securities. In particular, an option on foreign currency provides
the holder with the right to purchase, in the case of a call option, or to sell,
in the case of a put option, a stated quantity of a particular currency for a
fixed price up to a stated expiration date. The writer of the option undertakes
the obligation to deliver, in the case of a call option, or to purchase, in the
case of a put option, the quantity of the currency called for in the option,
upon exercise of the option by the holder. The purchase of an option on a
foreign currency may constitute an effective hedge against fluctuations in
exchange rates although, in the event of a rate movement adverse to a
Portfolio's position, a Portfolio may forfeit the entire amount of the premium
plus any related transaction costs. As in the case of other types of options,
the writing of an option on a foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and a Portfolio could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses.
A Portfolio will write call options only if they are "covered" and put
options only if they are secured. A call written by a Portfolio will be
considered covered if a Portfolio owns short-term debt securities with a value
equal to the face amount of the option contract and denominated in the currency
upon which the call is written. A put option written by a Portfolio will be
considered secured if, so long as a Portfolio is obligated as the writer of the
put, it segregates with its Custodian Bank cash or liquid high grade debt
securities equal at all times to the aggregate exercise price of the put.
As in the case of other types of options, the holder of an option on
foreign currency is required to pay a one-time, non-refundable premium, which
represents the cost of purchasing the option. The holder can lose the entire
amount of this premium, as well as related transaction costs, but not more than
this amount. The writer of the option, in contrast, generally is required to
make initial and variation margin payments, similar to margin deposits required
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<PAGE>
in the trading of futures contacts and the writing of other types of options.
The writer is therefore subject to risk of loss beyond the amount originally
invested and above the value of the option at the time it is entered into.
Certain options on foreign currencies, like forward contracts, are
traded over-the-counter through financial institutions acting as market-makers
in such options and the underlying currencies. Such transactions therefore
involve risks not generally associated with exchange-traded instruments. Options
on foreign currencies may also be traded on national securities exchanges
regulated by the Commission or commodities exchanges regulated by the Commodity
Futures Trading Commission.
A foreign currency futures contract is a bilateral agreement providing
for the purchase and sale of a specified type and amount of a foreign currency.
By its terms, a futures contract provides for a specified settlement date on
which, in the case of the majority of foreign currency futures contracts, the
currency underlying the contract is delivered by the seller and paid for by the
purchaser, or on which, in the case of certain futures contracts, the difference
between the price at which the contract was entered into and the contract's
closing value is settled between the purchaser and seller in cash. Futures
contracts differ from options in that they are bilateral agreements, with both
the purchaser and the seller equally obligated to complete the transactions. In
addition, futures contracts call for settlement only on the expiration date, and
cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit.
Subsequent payments to and from the broker referred to as "variation margin" are
made on a daily basis as the value of the currency underlying the futures
contract fluctuates, making positions in the futures contract more or less
valuable, a process known as "marking to the market."
A futures contract may be purchased or sold only on an exchange, known
as a "contract market," designated by the Commodity Futures Trading Commission
for the trading of such contract, and only through a registered futures
commission merchant which is a member of such contract market. A commission must
be paid on each completed purchase and sale transaction. The contract market
clearinghouse guarantees the performance of each party to a futures contract by
in effect taking the opposite side of such contract. At any time prior to the
expiration of a futures contract, a trader may elect to close out its position
by taking an opposite position on the contract market on which the position was
entered into, subject to the availability of a secondary market, which will
operate to terminate the initial position. At that time, a final determination
of variation margin is made and any loss experienced by the trader is required
to be paid to the contract market clearing house while any profit due to the
trader must be delivered to it.
A call option on a futures contract provides the holder with the right
to purchase, or enter into a "long" position in, the underlying futures
contract. A put option on a futures contract provides the holder with the right
to sell, or enter into a "short" position, in the underlying futures contract.
In both cases, the option provides for a fixed exercise price up to a stated
expiration date. Upon exercise of the option by the holder, the contract market
clearinghouse establishes a corresponding short position for the writer of the
option, in the case of a call option, or a corresponding long position in the
case of a put option and the writer delivers to the holder the accumulated
balance in the writer's margin account which represents the amount by which the
market price of the futures contract at exercise exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. In the event that an option written by the Portfolio is
exercised, the Portfolio will be subject to all the risks associated with the
trading of futures contracts, such as payment of variation margin deposits. In
addition, the writer of an option on a futures contract, unlike the holder, is
subject to initial and variation margin requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
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<PAGE>
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option becomes worthless to the holder when it expires. Upon
exercise of an option, the exchange or contract market clearinghouse assigns
exercise notices on a random basis to those of its members which have written
options of the same series and with the same expiration date. A brokerage firm
receiving such notices then assigns them on a random basis to those of its
customers which have written options of the same series and expiration date. A
writer therefore has no control over whether an option will be exercised against
it, nor over the timing of such exercise.
Forward Foreign Currency Exchange Contracts
The foreign investments made by The International Mid-Cap Sub, The
International Equity, The Labor Select International Equity, The Real Estate
Investment Trust, The Diversified Core Fixed Income, The Global Fixed Income,
The International Fixed Income, The Global Equity, The Emerging Markets, The
International Small-Cap, The Balanced, The Equity Income, The Asset Allocation,
The Small-Cap Value Equity, The Small-Cap Growth Equity and The Core Equity
Portfolios present currency considerations which pose special risks. The
investment advisers use a purchasing power parity approach to evaluate currency
risk. A purchasing power parity approach attempts to identify the amount of
goods and services that a dollar will buy in the United States and compares that
to the amount of a foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less abroad, the foreign
currency may be considered to be overvalued. When the dollar buys more abroad,
the foreign currency may be considered to be undervalued. Eventually, currencies
should trade at levels that should make it possible for the dollar to buy the
same amount of goods and services overseas as in the United States.
Although The International Mid-Cap Sub, The International Equity, The
Labor Select International Equity, The Real Estate Investment Trust, The
Diversified Core Fixed Income, The Global Fixed Income, The International Fixed
Income, The Global Equity, The Emerging Markets, The International Small-Cap,
The Balanced, The Equity Income, The Asset Allocation, The Small-Cap Growth
Equity, The Small-Cap Value Equity and The Core Equity Portfolios value their
assets daily in terms of U.S. dollars, they do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis. A Portfolio
will, however, from time to time, purchase or sell foreign currencies and/or
engage in forward foreign currency transactions in order to expedite settlement
of Portfolio transactions and to minimize currency value fluctuations. A
Portfolio may conduct its foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or through entering into contracts to purchase or sell foreign currencies
at a future date (i.e., a "forward foreign currency" contract or "forward"
contract). A Portfolio will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion.
A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract, agreed upon by the parties, at a price set at the time
of the contract.
A Portfolio may enter into forward contracts to "lock in" the price of
a security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, a Portfolio will be able to protect itself against a
possible loss resulting from an adverse change in currency exchange rates during
the period between the date the security is purchased or sold and the date on
which payment is made or received.
For example, when the investment adviser believes that the currency of
a particular foreign country may suffer a significant decline against the U.S.
dollar or against another currency, a Portfolio may enter into a forward
contract to sell, for a fixed amount of U.S. dollars or other appropriate
17
<PAGE>
currency, the amount of foreign currency approximating the value of some or all
of the Portfolio's securities denominated in such foreign currency. A Portfolio
will not enter into forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the Portfolio
to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities or other assets denominated in that currency.
The Portfolios may enter into forward contracts to hedge the currency
risk associated with the purchase of individual securities denominated in
particular currencies. In the alternative, the Portfolios may also engage in
currency "cross hedging" when, in the opinion of the investment advisers, as
appropriate, the historical relationship among foreign currencies suggests that
the Portfolios may achieve the same protection for a foreign security at reduced
cost and/or administrative burden through the use of a forward contract relating
to a currency other than the U.S. dollar or the foreign currency in which the
security is denominated.
At the maturity of a forward contract, a Portfolio may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Portfolio may realize gain or loss from currency
transactions.
With respect to forward foreign currency contracts, the precise
matching of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain.
It is impossible to forecast the market value of Portfolio securities
at the expiration of the contract. Accordingly, it may be necessary for a
Portfolio to purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security is less than
the amount of foreign currency the Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of a Portfolio security if its market value
exceeds the amount of foreign currency the Portfolio is obligated to deliver.
Brady Bonds (The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The Diversified Core Fixed Income Portfolio, The Emerging Markets
Portfolio, The International Small-Cap and The Asset Allocation Portfolio)
The Global Fixed Income, The International Fixed Income, The
Diversified Core Fixed Income, The Emerging Markets, The International Small-Cap
and The Asset Allocation Portfolios may invest, within the limits specified in
the related Prospectus, in Brady Bonds and other sovereign debt securities of
countries that have restructured or are in the process of restructuring
sovereign debt pursuant to the Brady Plan. Brady Bonds are debt securities
issued under the framework of the Brady Plan, an initiative announced by then
U.S. Treasury Secretary Nicholas F. Brady in 1989, as a mechanism for debtor
nations to restructure their outstanding external indebtedness (generally,
commercial bank debt). In restructuring its external debt under the Brady Plan
framework, a debtor nation negotiates with its existing bank lenders as well as
multilateral institutions such as the World Bank and the International Monetary
Fund (the "IMF"). The Brady Plan framework, as it has developed, contemplates
the exchange of commercial bank debt for newly issued bonds (Brady Bonds). The
World Bank and/or the IMF support the restructuring by providing funds pursuant
to loan agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount. Under these arrangements with the World Bank and/or the IMF, debtor
nations have been required to agree to the implementation of certain domestic
monetary and fiscal reforms. Such reforms have included the liberalization of
trade and foreign investment, the privatization of state-owned enterprises and
the setting of targets for public spending and borrowing. These policies and
programs seek to promote the debtor country's ability to service its external
obligations and promote its economic growth and development. Investors should
recognize that the Brady Plan only sets forth general guiding principles for
economic reform and debt reduction, emphasizing that solutions must be
negotiated on a case-by-case basis between debtor nations and their creditors.
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The investment adviser to the Portfolios believes that economic reforms
undertaken by countries in connection with the issuance of Brady Bonds make the
debt of countries which have issued or have announced plans to issue Brady Bonds
a viable opportunity for investment.
Investors should recognize that Brady Bonds have been issued only
recently, and accordingly do not have a long payment history. Agreements
implemented under the Brady Plan to date are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, the financial packages offered by each country
differ. The types of options have included the exchange of outstanding
commercial bank debt for bonds issued at 100% of face value of such debt, bonds
issued at a discount of face value of such debt, bonds bearing an interest rate
which increases over time and bonds issued in exchange for the advancement of
new money by existing lenders. Certain Brady Bonds have been collateralized as
to principal due at maturity by U.S. Treasury zero coupon bonds with a maturity
equal to the final maturity of such Brady Bonds, although the collateral is not
available to investors until the final maturity of the Brady Bonds. Collateral
purchases are financed by the IMF, the World Bank and the debtor nations'
reserves. In addition, the first two or three interest payments on certain types
of Brady Bonds may be collateralized by cash or securities agreed upon by
creditors.
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Options on Securities, Futures Contracts and Options on Futures Contracts (The
Mid-Cap Growth Equity Portfolio, The Real Estate Investment Trust Portfolios,
The Diversified Core Fixed Income Portfolio, The Emerging Markets Portfolio, The
Global Equity Portfolio, The International Small-Cap Portfolio, The Balanced
Portfolio, The Equity Income Portfolio, The Select Equity Portfolio, The Asset
Allocation Portfolio, The Small-Cap Growth Equity Portfolio and The Core Equity
Portfolio)
In order to remain fully invested, and to reduce transaction costs, The
Mid-Cap Growth Equity, The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Emerging Markets, The Global Equity, The International
Small-Cap, The Balanced, The Equity Income, The Select Equity, The Asset
Allocation, The Small-Cap Growth Equity, The Small-Cap Value Equity and The Core
Equity Portfolios may, to the limited extent identified in the related
Prospectus, use futures contracts, options on futures contracts and options on
securities and may enter into closing transactions with respect to such
activities. The Portfolios may only enter into these transactions for hedging
purposes, if it is consistent with the Portfolios' investment objectives and
policies. The Portfolios will not engage in such transactions to the extent that
obligations resulting from these activities in the aggregate exceed 25% of the
Portfolios' assets.
Options
The Mid-Cap Growth Equity, The Real Estate Investment Trust, The
Emerging Markets, The Global Equity, The International Small-Cap, The Balanced,
The Equity Income, The Select Equity, The Asset Allocation, The Small-Cap Growth
Equity, The Small-Cap Value Equity and The Core Equity Portfolios may purchase
call options, write call options on a covered basis, purchase put options and
write put options. Writing put options will require the Portfolio to segregate
assets sufficient to cover the put while the option is outstanding.
The Portfolios may invest in options that are either exchange-listed or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close options positions and this may have an adverse
impact on the Portfolios' ability to effectively hedge their securities. The
Mid-Cap Growth Equity Portfolio will not invest more than 10% of its assets in
illiquid securities, and The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Emerging Markets, The Global Equity, The Asset Allocation, The
Small-Cap Value Equity, The Small-Cap Growth Equity and The Core Equity
Portfolios will not invest more than 15% of their respective assets in illiquid
securities.
A. Covered Call Writing--The Portfolios may write covered call options
from time to time on such portion of their securities as the investment adviser
determines is appropriate given the limited circumstances under which the
Portfolios intend to engage in this activity. A call option gives the purchaser
of such option the right to buy and the writer (in this case a Portfolio) the
obligation to sell the underlying security at the exercise price during the
option period. The advantage is that the writer receives a premium income and
the purchaser may hedge against an increase in the price of the securities it
ultimately wishes to buy. If the security rises in value, however, the Portfolio
may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to options on actual portfolio securities owned by the
Portfolios, a Portfolio may enter into closing purchase transactions. A closing
purchase transaction is one in which the Portfolio, when obligated as a writer
of an option, terminates its obligation by purchasing an option of the same
series as the option previously written.
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Consistent with the limited purposes for which the Portfolios intend to
engage in the writing of covered calls, closing purchase transactions will
ordinarily be effected to realize a profit on an outstanding call option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to enable the Portfolios to write another call option on
the underlying security with either a different exercise price or expiration
date or both.
The Portfolios may realize a net gain or loss from a closing purchase
transaction depending upon whether the net amount of the original premium
received on the call option is more or less than the cost of effecting the
closing purchase transaction. Any loss incurred in a closing purchase
transaction may be partially or entirely offset by the premium received from a
sale of a different call option on the same underlying security. Such a loss may
also be wholly or partially offset by unrealized appreciation in the market
value of the underlying security. Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part by a decline in the
market value of the underlying security.
If a call option expires unexercised, a Portfolio will realize a
short-term capital gain in the amount of the premium on the option, less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, a Portfolio will realize a gain or loss from the sale of
the underlying security equal to the difference between the cost of the
underlying security, and the proceeds of the sale of the security plus the
amount of the premium on the option, less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
The Portfolios will write call options only on a covered basis, which
means that the Portfolios will own the underlying security subject to a call
option at all times during the option period. Unless a closing purchase
transaction is effected, the Portfolios would be required to continue to hold a
security which they might otherwise wish to sell, or deliver a security it would
want to hold. Options written by the Portfolios will normally have expiration
dates between one and nine months from the date written. The exercise price of a
call option may be below, equal to, or above the current market value of the
underlying security at the time the option is written.
B. Purchasing Call Options--The Portfolios may purchase call options to
the extent that premiums paid by the Portfolios do not aggregate more than 2% of
their total assets. When a Portfolio purchases a call option, in return for a
premium paid by the Portfolio to the writer of the option, the Portfolio obtains
the right to buy the security underlying the option at a specified exercise
price at any time during the term of the option. The writer of the call option,
who receives the premium upon writing the option, has the obligation, upon
exercise of the option, to deliver the underlying security against payment of
the exercise price. The advantage of purchasing call options is that the
Portfolios may alter portfolio characteristics and modify portfolio maturities
without incurring the cost associated with portfolio transactions.
The Portfolios may, following the purchase of a call option, liquidate
their positions by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Portfolios will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Portfolios will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
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Although the Portfolios will generally purchase only those call options
for which there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
option, or at any particular time, and for some options no secondary market on
an exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Portfolios would
have to exercise their options in order to realize any profit and would incur
brokerage commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by a Portfolio may expire without any
value to the Portfolio.
C. Purchasing Put Options--The Portfolios may purchase put options to
the extent premiums paid by the Portfolios do not aggregate more than 2% of
their total assets. The Mid-Cap Growth Equity, The Real Estate Investment Trust
and The Diversified Core Fixed Income Portfolios will, at all times during which
they hold a put option, own the security covered by such option.
A put option purchased by the Portfolios gives them the right to sell
one of their securities for an agreed price up to an agreed date. Consistent
with the limited purposes for which the Portfolios intend to purchase put
options, the Portfolios intend to purchase put options in order to protect
against a decline in the market value of the underlying security below the
exercise price less the premium paid for the option ("protective puts"). The
ability to purchase put options will allow a Portfolio to protect unrealized
gain in an appreciated security in its portfolio without actually selling the
security. If the security does not drop in value, the Portfolio will lose the
value of the premium paid. The Portfolio may sell a put option which it has
previously purchased prior to the sale of the securities underlying such option.
Such sales will result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold.
The Portfolios may sell a put option purchased on individual portfolio
securities. Additionally, the Portfolios may enter into closing sale
transactions. A closing sale transaction is one in which a Portfolio, when it is
the holder of an outstanding option, liquidates its position by selling an
option of the same series as the option previously purchased.
D. Writing Put Options--A put option written by a Portfolio obligates
it to buy the security underlying the option at the exercise price during the
option period and the purchaser of the option has the right to sell the security
to the Portfolio. During the option period, the Portfolio, as writer of the put
option, may be assigned an exercise notice by the broker/dealer through whom the
option was sold requiring the Portfolio to make payment of the exercise price
against delivery of the underlying security. The obligation terminates upon
expiration of the put option or at such earlier time at which the writer effects
a closing purchase transaction. A Portfolio may write put options only if the
Portfolio will maintain in a segregated account with its Custodian Bank, cash,
U.S. government securities or other assets in an amount not less than the
exercise price of the option at all times during the option period. The amount
of cash, U.S. government securities or other assets held in the segregated
account will be adjusted on a daily basis to reflect changes in the market value
of the securities covered by the put option written by the Portfolios.
Consistent with the limited purposes for which the Portfolios intend to engage
in the writing of put options, such put options will generally be written in
circumstances where the investment adviser wishes to purchase the underlying
security for the Portfolios at a price lower than the current market price of
the security. In such event, a Portfolio would write a put option at an exercise
price which, reduced by the premium received on the option, reflects the lower
price it is willing to pay.
Following the writing of a put option, the Portfolios may wish to
terminate the obligation to buy the security underlying the option by effecting
a closing purchase transaction. This is accomplished by buying an option of the
same series as the option previously written. The Portfolios may not, however,
effect such a closing transaction after they have been notified of the exercise
of the option.
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Options on Stock Indices
The Emerging Markets, The Global Equity, The Diversified Core Fixed
Income, The Asset Allocation, The Small-Cap Growth Equity, The International
Small-Cap, The Balanced, The Equity Income, The Select Equity and The Core
Equity Portfolios may acquire options on stock indices. A stock index assigns
relative values to the common stocks included in the index with the index
fluctuating with changes in the market values of the underlying common stock.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received to make delivery of this amount. Gain or loss to a Portfolio on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities. As with stock options, a
Portfolio may offset its position in stock index options prior to expiration by
entering into a closing transaction on an Exchange or it may let the option
expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indices are currently
traded on domestic exchanges such as: The Chicago Board Options Exchange, the
New York Stock Exchange and American Stock Exchange as well as on foreign
exchanges.
A Portfolio's ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the Portfolio's securities. Since a Portfolio
will not duplicate the components of an index, the correlation will not be
exact. Consequently, a Portfolio bears the risk that the prices of the
securities being hedged will not move in the same amount as the hedging
instrument. It is also possible that there may be a negative correlation between
the index or other securities which would result in a loss on both such
securities and the hedging instrument.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on a Portfolio's ability effectively to
hedge its securities. A Portfolio will enter into an option position only if
there appears to be a liquid secondary market for such options.
A Portfolio will not engage in transactions in options on stock indices
for speculative purposes but only to protect appreciation attained and to take
advantage of the liquidity available in the option markets.
Futures and Options on Futures
Consistent with the limited circumstances under which The Mid-Cap
Growth Equity, The Real Estate Investment Trust, The Diversified Core Fixed
Income, The Emerging Markets, The Global Equity, The International Small-Cap,
The Balanced, The Equity Income, The Select Equity, The Asset Allocation, The
Small-Cap Growth Equity and The Core Equity Portfolios will use futures, the
Portfolios may enter into contracts for the purchase or sale for future delivery
of securities. While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by entering
into an offsetting transaction. When a Portfolio enters into a futures
transaction, it must deliver to the futures commission merchant selected by the
Portfolio an amount referred to as "initial margin." This amount is maintained
by the futures commission merchant in an account at the Portfolio's Custodian
Bank. Thereafter, a "variation margin" may be paid by the Portfolio to, or drawn
by the Portfolio from, such account in accordance with controls set for such
account, depending upon changes in the price of the underlying securities
subject to the futures contract.
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Consistent with the limited purposes for which the Portfolios may
engage in these transactions, a Portfolio may enter into such futures contracts
to protect against the adverse effects of fluctuations in interest rates without
actually buying or selling the securities. For example, if interest rates are
expected to increase, a Portfolio might enter into futures contracts for the
sale of debt securities. Such a sale would have much the same effect as selling
an equivalent value of the debt securities owned by the Portfolio. If interest
rates did increase, the value of the debt securities in the portfolio would
decline, but the value of the futures contracts to the Portfolio would increase
at approximately the same rate, thereby keeping the net asset value of the
Portfolio from declining as much as it otherwise would have. Similarly, when it
is expected that interest rates may decline, futures contracts may be purchased
to hedge in anticipation of subsequent purchases of securities at higher prices.
Because the fluctuations in the value of futures contracts should be similar to
those of debt securities, a Portfolio could take advantage of the anticipated
rise in value of debt securities without actually buying them until the market
had stabilized. At that time, the futures contracts could be liquidated and the
Portfolio could then buy debt securities on the cash market.
With respect to options on futures contracts, when a Portfolio is not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration of
the option is below the exercise price, the Portfolio will retain the full
amount of the option premium which provides a partial hedge against any decline
that may have occurred in the Portfolio's holdings. The writing of a put option
on a futures contract constitutes a partial hedge against the increasing price
of the security which is deliverable upon exercise of the futures contract. If
the futures price at the expiration of the option is higher than the exercise
price, the Portfolio will retain the full amount of option premium which
provides a partial hedge against any increase in the price of securities which
the Portfolio intends to purchase.
If a put or call option that a Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions, a
Portfolio's losses from existing options on futures may, to some extent, be
reduced or increased by changes in the value of portfolio securities. The
purchase of a put option on a futures contract is similar in some respects to
the purchase of protective puts on portfolio securities. For example, consistent
with the limited purposes for which the Portfolios will engage in these
activities, a Portfolio will purchase a put option on a futures contract to
hedge the Portfolio's securities against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Portfolios may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if a Portfolio
is hedged against the possibility of an increase in interest rates which would
adversely affect the price of securities held in its portfolio and interest
rates decrease instead, the Portfolio will lose part or all of the benefit of
the increased value of its securities which it has because it will have
offsetting losses in its futures position. In addition, in such situations, if
the Portfolio had insufficient cash, it may be required to sell securities from
its portfolio to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the rising market. The Portfolios may be required to sell securities at a time
when it may be disadvantageous to do so.
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Further, with respect to options on futures contracts, the Portfolios
may seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same exercise
price and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market, which
cannot be assured.
Futures Contracts And Options On Futures Contracts
In order to remain fully invested, to facilitate investments in
portfolio securities and to reduce transaction costs, The Mid-Cap Growth Equity,
The Mid-Cap Value Equity, The Real Estate Investment Trust, The Diversified Core
Fixed Income, The Global Equity, The Emerging Markets, The International
Small-Cap Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio, The Asset Allocation, The Small-Cap Growth Equity and
The Core Equity Portfolios may, to a limited extent, enter into futures
contracts, purchase or sell options on futures contracts and engage in certain
transactions in options on securities, and may enter into closing transactions
with respect to such activities. For the same purposes, The Balanced, The Equity
Income, The Select Equity and The Core Equity Portfolio may also enter into
futures contracts on stock indices and purchases or sell options on stock index
futures and stock indices and may enter into closing transactions with respect
to these activities. The Portfolios will only enter into these transactions for
hedging purposes if it is consistent with the Portfolios' investment objectives
and policies and the Portfolios will not engage in such transactions to the
extent that obligations relating to futures contracts, options on futures
contracts and options on securities, in the aggregate, exceed 25% of the
Portfolios' assets.
Additionally, The International Fixed Income, The Global Equity, The
Emerging Markets, The Diversified Core Fixed Income, The International Small-Cap
and The Asset Allocation Portfolios may enter into futures contracts, purchase
or sell options on futures contracts, and trade in options on foreign
currencies, and may enter into closing transactions with respect to such
activities to hedge or "cross hedge" the currency risks associated with its
investments.
The Mid-Cap Growth Equity, The Mid-Cap Value Equity, The Real Estate
Investment Trust, The Diversified Core Fixed Income, The Global Equity, The
Emerging Markets, The International Small-Cap, The Asset Allocation, The
Small-Cap Growth Equity, The Balanced, The Equity Income, The Select Equity and
The Core Equity Portfolios may enter into contracts for the purchase or sale for
future delivery of securities. A futures contract is a bilateral agreement
providing for the purchase and sale of a specified type and amount of a
financial instrument, or for the making and acceptance of a cash settlement, at
a stated time in the future for a fixed price. By its terms, a futures contract
provides for a specified settlement date on which the securities underlying the
contracts are delivered, or in the case of securities index futures contracts,
the difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and the seller in
cash. Futures contracts differ from options in that they are bilateral
agreements, with both the purchaser and the seller equally obligated to complete
the transaction. In addition, futures contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalents, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying the
futures contract fluctuates, making positions in the futures contract more or
less valuable, a process known as "marking to the market."
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Foreign currency futures contracts operate similarly to futures
contracts concerning securities. When The International Fixed Income, The Global
Equity, The Emerging Markets, The Diversified Core Fixed Income or The Asset
Allocation Portfolios sells a futures contract on a foreign currency, it is
obligated to deliver that foreign currency at a specified future date.
Similarly, a purchase by the Portfolio gives it a contractual right to receive a
foreign currency. This enables the Portfolio to "lock in" exchange rates. The
Portfolios may also purchase and write options to buy or sell futures contracts
in which the Portfolio's may invest and enter into related closing transactions.
Options on futures are similar to options except that options on futures give
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract, rather than actually to purchase or sell the futures
contract, at a specified exercise price at any time during the period of the
option. The Portfolios will not enter into futures contracts and options thereon
to the extent that more than 5% of a Portfolio's assets are required as futures
contract margin deposits and premiums on options and only to the extent that
obligations under such futures contracts and options thereon would not exceed
20% of the Portfolio's total assets. In the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limit.
To the extent that interest or exchange rates move in an unexpected
direction, the Portfolio may not achieve the anticipated benefits of investing
in futures contracts and options thereon, or may realize a loss. To the extent
that a Portfolio purchases an option on a futures contract and fails to exercise
the option prior to the exercise date, it will suffer a loss of the premium
paid. Further, the possible lack of a secondary market would prevent the
Portfolio from closing out its positions relating to futures.
Asset-Backed Securities (The Intermediate Fixed Income Portfolio, The Aggregate
Fixed Income Portfolio, The Diversified Core Fixed Income Portfolio, The Asset
Allocation Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio and The Core Equity Portfolio)
The Intermediate Fixed Income, The Aggregate Fixed Income, The
Diversified Core Fixed Income, The Asset Allocation, The Balanced, The Equity
Income, The Select Equity and The Core Equity Portfolios may each invest a
portion of their assets in asset-backed securities. All such securities must be
rated in one of the four highest rating categories by a reputable credit rating
agency (e.g., BBB by S&P or Baa by Moody's). Such receivables are securitized in
either a pass-through or a pay-through structure. Pass-through securities
provide investors with an income stream consisting of both principal and
interest payments in respect of the receivables in the underlying pool.
Pay-through asset-backed securities are debt obligations issued usually by a
special purpose entity, which are collateralized by the various receivables and
in which the payments on the underlying receivables provide the Portfolio to pay
the debt service on the debt obligations issued.
The rate of principal payment on asset-backed securities generally
depends on the rate of principal payments received on the underlying assets.
Such rate of payments may be affected by economic and various other factors such
as changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
The credit quality of most asset-backed securities depends primarily on the
credit quality of the assets underlying such securities, how well the entities
issuing the securities are insulated from the credit risk of the originator or
affiliated entities, and the amount of credit support provided to the
securities. Due to the shorter maturity of the collateral backing such
securities, there tends to be less of a risk of substantial prepayment than with
mortgage-backed securities but the risk of such a prepayment does exist. Such
asset-backed securities doe however, involve certain risks not associated with
mortgage-backed securities, including the risk that security interest cannot be
adequately or in many case, ever, established and other risks which may be
peculiar classes of collateral. For example, with respect to credit card
receivables, a number of state and federal consumer credit laws give debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
outstanding balance. In the case of automobile receivables, there is a risk that
the holders may not have either a proper or first security interest in all of
the obligations backing such receivables due to the large number of vehicles
involved in a typical issuance and technical requirements under state laws.
Therefore, recoveries on repossessed collateral may not always be available to
support payments on the securities.
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Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Portfolios will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquencies or losses in excess of those anticipated could adversely
affect the return on an investment in such issue.
High-Yield, High Risk Securities
The International Fixed Income, The Global Fixed Income, The
Diversified Core Fixed Income, The Asset Allocation and Equity Income Portfolios
may invest up to 5%, 5%, 20%, 55% and 15%, respectively, of its assets in high
risk, high-yield fixed-income securities of foreign governments, including, with
specified limitations, so-called Brady Bonds. The Emerging Markets Portfolio may
invest up to 35% of its net assets in fixed-income securities issued by emerging
country companies, and foreign governments, their agencies and instrumentalities
or political sub-divisions, all of which may be high-yield, high risk
securities, including Brady Bonds. The International Small-Cap Portfolio may
invest up to 15% of its net assets in fixed-income securities some or all of
which may be corporate obligations, and some or all of which may be below
investment grade, or unrated. These high-yield, high risk securities are rated
lower than BBB by S&P and Baa by Moody's or, if unrated, are considered by the
investment adviser to have characteristics similar to such rated securities.
The High-Yield Bond Portfolio invests primarily in securities rated B-
or higher by S&P or B3 or higher by Moody's or, if unrated, judged to be of
comparable quality by the investment adviser. In its U.S. high yield sector, The
Diversified Core Fixed Income Portfolio, under normal circumstances, invests
between 5% and 30% in U.S. Bonds generally rated BB or lower by S&P or Fitch or
Ba or lower by Moody's or similarly rated by another nationally recognized
statistical rating organization. The Small-Cap Value Equity Portfolio may invest
up to 25% of its net assets in U.S. corporate bonds rated below B by Moody's or
S&P when the Portfolio investment adviser believes that capital appreciation is
likely from an investment in those securities. See "APPENDIX A--RATINGS" to this
SAI for more rating information.
Fixed-income securities of this type are considered to be of poor
standing and predominantly speculative. Such securities are subject to a
substantial degree of credit risk. In the past, the high-yields from these bonds
have more than compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default rates on these
bonds in the future. The Portfolios' investment advisers intend to maintain an
adequately diversified portfolio of these bonds. While diversification can help
to reduce the effect of an individual default on the Portfolios, there can be no
assurance that diversification will protect the Portfolios from widespread bond
defaults brought about by a sustained economic downturn.
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Medium and low-grade bonds held by the Portfolios may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also, these bonds are
often issued by smaller, less creditworthy companies or by highly leveraged
(indebted) firms, which are generally less able than more financially stable
firms to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.
The economy and interest rates may affect these high-yield, high risk
securities differently from other securities. Prices have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. Changes by recognized rating agencies in their rating of any security
and in the ability of an issuer to make payments of interest and principal will
also ordinarily have a more dramatic effect on the values of these investments
than on the values of higher rated securities. Such changes in value will not
affect cash income derived from these securities, unless the issuers fail to pay
interest or dividends when due. Such changes will, however, affect the
Portfolios' net asset value per share.
Although the market for high-yield bonds has been in existence for many
years, including periods of economic downturns, the high-yield market grew
rapidly during the long economic expansion which took place in the United States
during the 1980s. During the economic expansion, the use of high-yield debt
securities to fund highly leveraged corporate acquisitions and restructurings
increased dramatically. As a result, the high-yield market grew substantially
during the economic expansion. Although experts disagree on the impact
recessionary periods have had and will have on the high-yield market, some
analysts believe a protracted economic downturn would severely disrupt the
market for high yield bonds, would adversely affect the value of outstanding
bonds and would adversely affect the ability of high-yield issuers to repay
principal and interest. Those analysts cite volatility experienced in the
high-yield market in the past as evidence for their position. It is likely that
protracted periods of economic uncertainty would result in increased volatility
in the market prices of high-yield bonds, an increase in the number of
high-yield bond defaults and corresponding volatility in the Portfolio's net
asset value.
In addition, if, as a result of volatility in the high-yield market or
other factors, the Portfolio experiences substantial net redemptions of the
Portfolio's shares for a sustained period of time, the Portfolio may be required
to sell securities without regard to the investment merits of the securities to
be sold. If the Portfolio sells a substantial number of securities to generate
proceeds for redemptions, the asset base of the Portfolio will decrease and the
Portfolio's expense ratios may increase.
Furthermore, the secondary market for high-yield securities is
currently dominated by institutional investors, including mutual funds and
certain financial institutions. There is generally no established retail
secondary market for high-yield securities. As a result, the secondary market
for high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions which dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse effect on the
Portfolio's ability to dispose of particular issues, when necessary, to meet the
Portfolio's liquidity needs or in response to a specific economic event, such as
the deterioration in the creditworthiness of the issuer. In addition, a less
liquid secondary market makes it more difficult for the Portfolio to obtain
precise valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role in valuing
high-yield securities than is normally the case. The secondary market for
high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. The Portfolio's privately placed
high-yield securities are particularly susceptible to the liquidity and
valuation risks outlined above.
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Finally, there are a variety of legislative actions which have been
taken or which are considered from time to time by the United States Congress
which could adversely affect the market for high-yield bonds. For example,
Congressional legislation limited the deductibility of interest paid on certain
high-yield bonds used to finance corporate acquisitions. Also, Congressional
legislation has, with some exceptions, generally prohibited federally-insured
savings and loan institutions from investing in high-yield securities.
Regulatory actions have also affected the high-yield market. For example, many
insurance companies have restricted or eliminated their purchase of high-yield
bonds as a result of, among other factors, actions taken by the National
Association of Insurance Commissioners. If similar legislative and regulatory
actions are taken in the future, they could result in further tightening of the
secondary market for high-yield issues, could reduce the number of new
high-yield securities being issued and could make it more difficult for the
Portfolio to attain its investment objective.
Convertible, Debt and Non-Traditional Equity Securities
A portion of The International Mid-Cap Sub, The Mid-Cap Value Equity,
The Small-Cap Value Equity, The High-Yield Bond, The Asset Allocation, The
Small-Cap Growth Equity, The International Small-Cap, The Balanced, The Equity
Income, The Select Equity and The Core Equity Portfolios' assets may be invested
in convertible and debt securities of issuers in any industry, and The Real
Estate Investment Trust Portfolios' assets may be invested in convertible
securities of issuers in the real estate industry. A convertible security is a
security which may be converted at a stated price within a specified period of
time into a certain quantity of the common stock of the same or a different
issuer. Convertible and debt securities are senior to common stocks in a
corporation's capital structure, although convertible securities are usually
subordinated to similar nonconvertible securities. Convertible and debt
securities provide a fixed-income stream and the opportunity, through its
conversion feature, to participate in the capital appreciation resulting from a
market price advance in the convertible security's underlying common stock. Just
as with debt securities, convertible securities tend to increase in market value
when interest rates decline and tend to decrease in value when interest rates
rise. However, the price of a convertible security is also influenced by the
market value of the security's underlying common stock and tends to increase as
the market value of the underlying stock rises, whereas it tends to decrease as
the market value of the underlying stock declines. Investments in debt
securities by The Small-Cap Growth Equity Portfolio will be limited to those
that are, at the time of investment, within the four highest grades assigned by
a nationally recognized statistical rating agency (e.g., Baa or higher by
Moody's or BBB or higher by Standard & Poor's) or deemed to be of comparable
quality by the investment adviser. Convertible and debt securities acquired by
The Mid-Cap Value Equity, The Real Estate Investment Trust, The High-Yield Bond,
The Asset Allocation, The Equity Income, The Select Equity and, with respect to
5% of their assets, The Balanced and The Core Equity Portfolios may be rated
below investment grade, or unrated. These lower rated convertible and debt
securities are subject to credit risk considerations substantially similar to
such considerations affecting high risk, high-yield bonds, commonly referred to
as "junk bonds." See "HIGH-YIELD, HIGH RISK SECURITIES" for a further discussion
of these types of investments.
The International Mid-Cap Sub, The Mid-Cap Value Equity, The Small-Cap
Value Equity, The Real Estate Investment Trust, The High-Yield Bond, The
Emerging Markets and The Asset Allocation Portfolios may invest in convertible
preferred stocks that offer enhanced yield features, such as Preferred Equity
Redemption Cumulative Stock ("PERCS"), which provide an investor, such as a
Portfolio, with the opportunity to earn higher dividend income than is available
on a company's common stock. A PERCS is a preferred stock which generally
features a mandatory conversion date, as well as a capital appreciation limit
which is usually expressed in terms of a stated price. Upon the conversion date,
most PERCS convert into common stock of the issuer (PERCS are generally not
convertible into cash at maturity). Under a typical arrangement, if after a
predetermined number of years the issuer's common stock is trading at a price
below that set by the capital appreciation limit, each PERCS would convert to
one share of common stock. If, however, the issuer's common stock is trading at
a price above that set by the capital appreciation limit, the holder of the
PERCS would receive less than one full share of common stock. The amount of that
fractional share of common stock received by the PERCS holder is determined by
dividing the price set by the capital appreciation limit of the PERCS by the
market price of the issuer's common stock. PERCS can be called at any time prior
to maturity, and hence do not provide call protection. However, if called early,
the issuer may pay a call premium over the market price to the investor. This
call premium declines at a preset rate daily, up to the maturity date of the
PERCS.
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The International Mid-Cap Sub, The Mid-Cap Value Equity, The Small-Cap
Value Equity, The Real Estate Investment Trust, The High-Yield Bond, The
Emerging Markets, The International Small-Cap and The Asset Allocation
Portfolios may also invest in other enhanced convertible securities. These
include but are not limited to ACES (Automatically Convertible Equity
Securities), PEPS (Participating Equity Preferred Stock), PRIDES (Preferred
Redeemable Increased Dividend Equity Securities), SAILS (Stock Appreciation
Income Linked Securities), TECONS (Term Convertible Notes), QICS (Quarterly
Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.
REITS
The Real Estate Investment Trust Portfolios', The Asset Allocation
Portfolio's, The Small-Cap Value Equity Portfolio's and The Core Equity
Portfolio's investment in REITs presents certain further risks that are unique
and in addition to the risks associated with investing in the real estate
industry in general. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be affected by
the quality of any credit extended. REITs are dependent on management skills,
are not diversified, and are subject to the risks of financing projects. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.
REITs (especially mortgage REITs) are also subject to interest rate
risks - when interest rates decline, the value of a REIT's investment in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
REITs may have limited financial resources, may trade less frequently
and in a limited volume, and may be subject to more abrupt or erratic price
movements than other securities.
Depositary Receipts
The Balanced, The Equity Income, The Select Equity, The Small-Cap
Growth Equity, The Core Equity, The Large-Cap Value Equity, The International
Equity, The Mid-Cap Value Equity, The Small-Cap Value Equity, The Real Estate
Investment Trust, The Diversified Core Fixed Income, The Global Fixed Income,
The International Fixed Income, The Global Equity, The Emerging Markets, The
International Small-Cap and The Asset Allocation Portfolios may invest in
sponsored and unsponsored ADRs. Such ADRs that The Balanced, The Equity Income,
The Select Equity, The Small-Cap Growth Equity, The Core Equity, The Large-Cap
Value Equity, The Mid-Cap Value Equity Portfolio, The Small-Cap Value Equity,
The Real Estate Investment Trust, The Diversified Core Fixed Income, and The
Asset Allocation Portfolios may invest in will be those that are actively traded
in the United States.
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The Global Fixed Income, The International Fixed Income, The
International Mid-Cap Sub, The International Equity, The Global Equity, The
Emerging Markets, The International Small-Cap and The Asset Allocation
Portfolios may also invest in sponsored and unsponsored European Depositary
Receipts ("EDRs") and Global Depositary Receipts ("GDRs"). The Small-Cap Growth
Equity Portfolio may also invest in sponsored and unsponsored GDRs. Subject to
its 10% limit on investments in foreign securities.
ADRs are receipts typically issued by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs and GDRs are receipts issued by non-U.S. Banks or trust
companies and foreign branches of U.S. banks that evidence ownership of the
underlying foreign or U.S. securities. "Sponsored" ADRs, EDRs or GDRs are issued
jointly by the issuer of the underlying security and a Depositary, and
"unsponsored" ADRs, EDRs or GDRs are issued without the participation of the
issuer of the deposited security. Holders of unsponsored ADRs, EDRs or GDRs
generally bear all the costs of such facilities and the Depositary of an
unsponsored ADR, EDR or GDR facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts in
respect of the deposited securities. Therefore, there may not be a correlation
between information concerning the issuer of the security and the market value
of an unsponsored ADR, EDR or GDR. ADRs may be listed on a national securities
exchange or may be traded in the over-the-counter market. EDRs and GDRs traded
in the over-the-counter market which do not have an active or substantial
secondary market will be considered illiquid and therefore will be subject to a
Portfolio's limitation with respect to such securities. ADR prices are
denominated in U.S. dollars although the underlying securities are denominated
in a foreign currency. Investments in ADRs, EDRs and GDRs involve risks similar
to those accompanying direct investments in foreign securities.
Repurchase Agreements
While each Portfolio is permitted to do so, it normally does not invest
in repurchase agreements, except to invest cash balances or for temporary
defensive purposes.
The funds in the Delaware Investments family, including Pooled Trust,
Inc. and Foundation Funds, have obtained an exemption from the joint-transaction
prohibitions of Section 17(d) of the 1940 Act to allow such funds jointly to
invest cash balances. Each Portfolio may invest cash balances in a joint
repurchase agreement in accordance with the terms of the Order and subject
generally to the conditions described below.
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to a
Portfolio, if any, would be the difference between the repurchase price and the
market value of the security. If bankruptcy proceedings are commences with
respect to the seller a Portfolio's realization upon the collateral may be
delayed or limited. Each Portfolio will limit its investments in repurchase
agreements to those which its respective investment adviser, under the
guidelines of the Board of Directors or Trustees, as applicable, determines to
present minimal credit risks and which are of high quality. In addition, a
Portfolio must have collateral of at least 102% of the repurchase price,
including the portion representing the Portfolio's yield under such agreements
which is monitored on a daily basis. The term of these agreements is usually
from overnight to one week and never exceeds one year. Not more than 10% of a
Portfolio's assets may be invested in repurchase agreements having a maturity in
excess of seven days.
Portfolio Loan Transactions
Each Portfolio may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use relating to short sales
or other security transactions.
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It is the understanding of Pooled Trust, Inc. and Foundation Funds, as
applicable, that the staff of the Commission permits portfolio lending by
registered investment companies if certain conditions are met. These conditions
are as follows: 1) each transaction must have 100% collateral in the form of
cash, short-term U.S. government securities, or irrevocable letters of credit
payable by banks acceptable to Pooled Trust, Inc. from the borrower; 2) this
collateral must be valued daily and should the market value of the loaned
securities increase, the borrower must furnish additional collateral to a
Portfolio; 3) a Portfolio must be able to terminate the loan after notice, at
any time; 4) a Portfolio must receive reasonable interest on any loan, and any
dividends, interest or other distributions on the lent securities, and any
increase in the market value of such securities; 5) a Portfolio may pay
reasonable custodian fees in connection with the loan; and 6) the voting rights
on the lent securities may pass to the borrower; however, if the Board of
Directors or Trustees of Pooled Trust, Inc. or Foundation Funds, as applicable,
know that a material event will occur affecting an investment loan, they must
either terminate the loan in order to vote the proxy or enter into an
alternative arrangement with the borrower to enable the directors to vote the
proxy.
The major risk to which a Portfolio would be exposed on a loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, a Portfolio will only enter into loan
arrangements after a review of all pertinent facts by the respective investment
adviser, under the supervision of the Board of Directors or Trustees as
applicable, including the creditworthiness of the borrowing broker, dealer or
institution and then only if the consideration to be received from such loans
would justify the risk. Creditworthiness will be monitored on an ongoing basis
by the respective investment adviser.
Restricted and Rule 144A Securities
Each Portfolio may invest in restricted securities, including
securities eligible for resale without registration pursuant to Rule 144A ("Rule
144A Securities") under the Securities Act of 1933. Rule 144A Securities are
traded among qualified institutional investors. While maintaining oversight, the
Board of Directors or Trustees, as applicable, has delegated to the respective
investment adviser the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of each Portfolio's
limitation (whether 15% or 10% of total assets) on investments in illiquid
assets. The Boards have instructed the respective investment adviser to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of other potential purchasers; (iii) whether at least two dealers are making a
market in the security; and (iv) the nature of the security and the nature of
the marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer).
Investing in Rule 144A Securities could have the effect of increasing
the level of a Portfolio's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. After the purchase of a Rule 144A Security, however, the Board of
Directors or Trustees, as applicable, and the respective investment adviser will
continue to monitor the liquidity of that security to ensure that a Portfolio
has no more than 10% or 15%, as appropriate, of its total assets in illiquid
securities. If an investment adviser determines that a Rule 144A Security which
was previously determined to be liquid is no longer liquid and, as a result, the
Portfolio's holdings of illiquid securities exceed the Portfolio's 10% or 15%
limit, as applicable, on investment in such securities, the investment adviser
will determine what action shall be taken to ensure that the Portfolio continues
to adhere to such limitation.
The International Mid-Cap Sub, The Diversified Core Fixed Income, The
Asset Allocation, The Small-Cap Growth Equity, The International Small-Cap, The
Balanced, The Equity Income, The Select Equity and The Core Equity Portfolios
may purchase privately-placed securities whose resale is restricted under
applicable securities laws. Such restricted securities generally offer a higher
return potential than comparable registered securities but involve some
additional risk since they can be resold only in privately-negotiated
transactions or after registration under applicable securities laws. The
registration process may involve delays which would result in the Portfolio
obtaining a less favorable price on a resale. The International Mid-Cap Sub,
Diversified Core Fixed Income, The Asset Allocation, The Small-Cap Growth Equity
and The Core Equity Portfolios will not purchase illiquid assets if more than
15% of its net assets would then consist of such illiquid securities.
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U.S. Government Securities
The U.S. government securities in which the various Portfolios may
invest for temporary purposes and otherwise (see "INVESTMENT RESTRICTIONS" and
the Prospectus of the Portfolios for additional information), include a variety
of securities which are issued or guaranteed as to the payment of principal and
interest by the U.S. government, and by various agencies or instrumentalities
which have been established or sponsored by the U.S. government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are, in effect, backed
by the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the Treasury,
if needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S. Treasury
to purchase certain amounts of their securities to assist the institutions in
meeting their debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the Federal Home Loan Mortgage Corporation,
are federally chartered institutions under U.S. government supervision, but
their debt securities are backed only by the creditworthiness of those
institutions, not the U.S. government.
Some of the U.S. government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks and the Federal National Mortgage Association.
Mortgage-Backed Securities
The Real Estate Investment Trust, The Aggregate Fixed Income, The
Diversified Core Fixed Income, The Intermediate Fixed Income, The Global Fixed
Income, The Asset Allocation, The Balanced and The Core Equity Portfolios may
invest in mortgage-backed securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or by government sponsored
corporations. Those securities include, but are not limited to, GNMA
certificates. Such securities differ from other fixed-income securities in that
principal is paid back by the borrower over the length of the loan rather than
returned in a lump sum at maturity. When prevailing interest rates rise, the
value of a GNMA security may decrease as do other debt securities. When
prevailing interest rates decline, however, the value of GNMA securities may not
rise on a comparable basis with other debt securities because of the prepayment
feature of GNMA securities. Additionally, if a GNMA certificate is purchased at
a premium above its principal value because its fixed rate of interest exceeds
the prevailing level of yields, the decline in price to par may result in a loss
of the premium in the event of prepayment. Funds received from prepayments may
be reinvested at the prevailing interest rates which may be lower than the rate
of interest that had previously been earned.
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The Portfolios also may invest in collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs are debt
securities issued by U.S. government agencies or by financial institutions and
other mortgage lenders and collateralized by a pool of mortgages held under an
indenture. CMOs are issued in a number of classes or series with different
maturities. The classes or series are retired in sequence as the underlying
mortgages are repaid. REMICs, which were authorized under the Tax Reform Act of
1986, are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities. To the extent any
privately-issued CMOs or REMICs in which the Portfolios may invest are
considered by the Commission to be investment companies, the Portfolios will
limit their investments in such securities in a manner consistent with the
provisions of the 1940 Act.
The mortgages backing these securities include conventional 30-year
fixed rate mortgages, graduated payment mortgages and adjustable rate mortgages.
These mortgages may be supported by various types of insurance, may be backed by
GNMA certificates or other mortgage pass-throughs issued or guaranteed by the
U.S. government, its agencies or instrumentalities. However, the guarantees do
not extend to the mortgage-backed securities' value, which is likely to vary
inversely with fluctuations in interest rates. These certificates are in most
cases "pass-through" instruments, through which the holder receives a share of
all interest and principal payments from the mortgages underlying the
certificate. Because the prepayment characteristics of the underlying mortgages
vary, it is not possible to predict accurately the average life or realized
yield of a particular issue of pass-through certificates. During periods of
declining interest rates, prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. When the mortgage obligations are
prepaid, the Portfolio may reinvest the prepaid amounts in securities, the yield
of which reflects interest rates prevailing at the time. Moreover, prepayments
of mortgages which underlie securities purchased at a premium could result in
capital losses.
Certain CMOs and REMICs may have variable or floating interest rates
and others may be stripped. Stripped mortgage securities have greater market
volatility than other types of mortgage securities in which the Portfolios may
invest.
Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the "interest-only" class), while the other class will receive
all of the principal (the "principal-only" class). The yield to maturity on an
interest-only class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on a Portfolio's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, a Portfolio may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed and, accordingly,
these securities are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed 10% of a Portfolio's net assets.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Each of the
Portfolios may invest in such private-backed securities but, the Portfolios,
other than The Intermediate Fixed Income Portfolio and The Aggregate Fixed
Income Portfolio, will do so (i) only if the securities are 100% collateralized
at the time of issuance by securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities and (ii) currently, only if they
are rated at the time of purchase in the two (and, in the case of The Core
Equity Portfolio, the four) highest grades by a nationally-recognized
statistical rating agency.
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The Intermediate Fixed Income, The Aggregate Fixed Income, The
Diversified Core Fixed Income and The Asset Allocation Portfolios each may
invest up to 20% of its total assets in CMOs and REMICs issued by private
entities which are not collateralized by securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, so-called non-agency
mortgage-backed securities. Investments in these securities may be made only if
the securities (i) are rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating organization (e.g., BBB
or better by S&P or Baa or better by Moody's) and (ii) represent interests in
whole-loan mortgages, multi-family mortgages, commercial mortgages and other
mortgage collateral supported by a first mortgage lien on real estate.
Non-agency mortgage-backed securities are subject to the interest rate and
prepayment risks, described above, to which other CMOs and REMICs issued by
private issuers are subject. Non-agency mortgage-backed securities may also be
subject to a greater risk of loss of interest and principal because they are not
collateralized by securities issued or guaranteed by the U.S. government. In
addition, timely information concerning the loans underlying these securities
may not be as readily available and the market for these securities may be less
liquid than other CMOs and REMICs.
Short-Term Investments
The short-term investments in which The International Mid-Cap Sub, The
Large-Cap Value Equity, The Mid-Cap Growth Equity, The International Equity, The
Mid-Cap Value Equity, The Diversified Core Fixed Income, The Labor Select
International Equity, The Real Estate Investment Trust, The Global Fixed Income,
The International Fixed Income, The High-Yield Bond, The Global Equity, The
Emerging Markets, The International Small-Cap, The Asset Allocation, The
Small-Cap Growth Equity, The Balanced, The Equity Income, The Select Equity and
The Core Equity Portfolios may invest include:
(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a U.S.
commercial bank. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.
Time deposits maturing in more than seven days will not be purchased by a
Portfolio, and time deposits maturing from two business days through seven
calendar days will not exceed 10% of the total assets of a Portfolio, in the
case of The Large-Cap Value Equity, The Mid-Cap Growth Equity, The International
Equity, The Global Fixed Income and The International Fixed Income Portfolios,
and 15% of the total assets of a Portfolio, in the case of The International
Mid-Cap Sub, The Mid-Cap Value Equity, The Small-Cap Value Equity, The
Diversified Core Fixed Income, The Labor Select International Equity, The Real
Estate Investment Trust, The Global Equity, The Emerging Markets, The
International Small-Cap, The High-Yield Bond, The Asset Allocation, The
Small-Cap Growth Equity, The Balanced, The Equity Income, The Select Equity and
The Core Equity Portfolios. Certificates of deposit are negotiable short-term
obligations issued by commercial banks against funds deposited in the issuing
institution. Variable rate certificates of deposit are certificates of deposit
on which the interest rate is periodically adjusted prior to their stated
maturity based upon a specified market rate. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods).
A Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion or, in the case of a
bank which does not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the principal
amount of such investment is insured in full by the Federal Deposit Insurance
Corporation, (ii) it is a member of the Federal Deposit Insurance Corporation,
and (iii) the bank or its securities have received the highest quality rating by
a nationally-recognized statistical rating organization;
(2) Commercial paper with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., A-1 by S&P or
Prime-1 by Moody's) or, if not so rated, of comparable quality as determined by
a Portfolio's investment adviser;
(3) Short-term corporate obligations with the highest quality rating by
a nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if not so rated, of comparable quality as determined by a
Portfolio's investment adviser;
(4) U.S. government securities (see "U.S. Government Securities"); and
(5) Repurchase agreements collateralized by securities listed above.
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<PAGE>
(6) And in the case of The International Mid-Cap Sub, The Global
Equity, The International Equity, The Labor Select International Equity, The
Emerging Markets, The International Small-Cap, The Global Fixed Income and The
International Fixed Income Portfolios, bank deposits held by or at the
Portfolio's Custodian Bank or one of its sub-custodians.
Investment Company Securities
Any investments that The International Mid-Cap Sub, The Emerging
Markets, The Global Equity, The International Small-Cap, The Balanced, The
Equity Income, The Select Equity, The Diversified Core Fixed Income, The
Small-Cap Growth Equity and The Core Equity Portfolios make in either closed-end
or open-end investment companies will be limited by the 1940 Act, and would
involve an indirect payment of a portion of the expenses, including advisory
fees, or such other investment companies. Under the 1940 Act's current
limitations, the Portfolios may not (1) own more than 3% of the voting stock of
another investment company; and (2) invest more than 5% of the Portfolio's total
assets in the shares of any one investment company; nor, (3) invest more than
10% of the Portfolio's total assets in shares of other investment companies.
These percentage limitations also apply to the Portfolio's investments in
unregistered investment companies. Each Portfolio in which The Asset Allocation
Portfolio invests may not operate as a "fund of funds" by investing in other
registered open-end investment companies or registered unit investment trusts
that are part of the Delaware Investments family of funds.
Zero Coupon and Pay-In-Kind Bonds
Zero coupon bonds are debt obligations which do not entitle the holder
to any periodic payments of interest prior to maturity or a specified date when
the securities begin paying current interest, and therefore are issued and
traded at a discount from their face amounts or pay value. PIK bonds pay
interest through the issuance to holders of additional securities. Zero coupon
bonds and PIK bonds are generally considered to be more interest-sensitive than
income bearing bonds, to be more speculative than interest-bearing bonds, and to
have certain tax consequences which could, under certain circumstances, be
adverse to the Portfolio's authorized to invest in them. For example, with zero
coupon bonds, the Portfolio accrue, and is required to distribute to
shareholders, income on such bonds. However, the Portfolio may not receive the
cash associated with this income until the bonds are sold or mature. If the
Portfolio did not have sufficient cash to make the required distribution of
accrued income, the Portfolio could be required to sell other securities in its
portfolio or to borrow to generate the cash required.
When-Issued and Delayed Delivery Securities
Each Portfolio may purchase securities on a when-issued or delayed
delivery basis. In such transactions, instruments are purchased with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. A Portfolio will maintain with its custodian a
separate account with a segregated portfolio of securities in an amount at least
equal to these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time the Portfolio enters into the
commitment and no interest accrues to the Portfolio until settlement. Thus, it
is possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. It is a current policy of The Balanced Portfolio not to enter into
when-issued commitments exceeding in the aggregate 5% of the market value its
total assets less liabilities other than the obligations created by these
commitments.
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Warrants
The Equity Income Portfolio, The International Mid-Cap Sub, The Global
Equity, The International Equity, The Labor Select International Equity, The
Emerging Markets and The International Small-Cap Portfolios may purchase
warrants and similar rights, which are privileges issued by corporations
enabling the owners to subscribe to and purchase a specified number of shares of
the corporation at a specified price during a specified period of time. The
purchase of warrants involves the risk that the Portfolio could lose the
purchase value of a warrant if the right to subscribe to additional shares is
not exercised prior to the warrant's expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security.
Concentration
In applying the Portfolio's policies on concentration: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
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Risks Associated with the Asset Allocation Portfolio
The Asset Allocation Portfolio's assets may be primarily invested in a
combination of the Portfolios. As a result, the Asset Allocation Portfolio is
subject to the same risks as any of the Portfolios in the Fund in which its
invests. Moreover, The Asset Allocation Portfolio's investment performance may
be directly related to the investment performance of the Portfolios of the Fund
held by it. The ability of The Asset Allocation Portfolio to meet its investment
objective may thus be directly related to the ability of the Portfolios of the
Fund to meet their objectives as well as the allocation among those Portfolios
of the fund by Delaware. There can be no assurance that the investment objective
of The Asset Allocation Portfolio or any of the Portfolios of the Fund will be
achieved.
Because The Asset Allocation Portfolio and the other Portfolios of the
Fund are separately managed, it is possible that certain Portfolios of the Fund
in which The Asset Allocation Portfolio invests may be acquiring securities at
the same time that other Portfolios of the Fund in which that Portfolio invests
are selling the same security. Similarly, it is possible that The Asset
Allocation Portfolio may directly acquire a security at the same time that a
Portfolio of the Fund in which it invests is selling the same security, or vice
versa. This practice could result in higher indirect transactions costs for The
Asset Allocation Portfolio, and thus adversely affect The Asset Allocation
Portfolio's returns, than would be the case if it were only investing directly
in securities.
Delaware has adopted Asset Allocation Guidelines (the "Guidelines")
which govern The Asset Allocation Portfolio's purchases and redemptions of
shares of the Portfolios of the Fund. Pursuant to these Guidelines, if the
investment adviser anticipates that The Asset Allocation Portfolio's allocation
transaction will disrupt the investment activities of a Portfolio of the Fund,
the portfolio managers of the relevant Portfolios will confer on steps to
minimize adverse effects on both The Asset Allocation Portfolio and the
Portfolio of the Fund, such as staggering the timing and amounts of such
allocation transactions. In addition, Delaware will attempt to minimize the
number and size of allocation transactions taking place at any one time while
attempting to avoid losing investment opportunities for The Asset Allocation
Portfolio. As a result, The Asset Allocation Portfolio may, on occasion, be
unable to purchase or redeem shares of a Portfolio of the Fund as quickly or in
such amounts as they otherwise would in the absence of such Guidelines. Such
delays or changes in amounts may decrease the total return and/or increase the
volatility of The Asset Allocation Portfolio.
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<PAGE>
ACCOUNTING AND TAX ISSUES
When The Mid-Cap Growth Equity Portfolio, either of The Real Estate
Investment Trust Portfolios, The International Fixed Income Portfolio, The
Emerging Markets Portfolio, The Global Equity Portfolio, The International
Small-Cap Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio, The Diversified Core Fixed Income Portfolio, The Asset
Allocation Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth
Equity Portfolio or The Core Equity Portfolio writes a call, or purchases a put
option, an amount equal to the premium received or paid by it is included in the
section of the Portfolio's assets and liabilities as an asset and as an
equivalent liability.
In writing a call, the amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and ask prices. If an option which a Portfolio has written
expires on its stipulated expiration date, the Portfolio recognizes a short-term
capital gain. If a Portfolio enters into a closing purchase transaction with
respect to an option which the Portfolio has written, the Portfolio realizes a
short-term gain (or loss if the cost of the closing transaction exceeds the
premium received when the option was sold) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which a Portfolio has written is exercised, the
Portfolio realizes a capital gain or loss from the sale of the underlying
security on foreign currency and the proceeds from such sale are increased by
the premium originally received.
The premium paid by a Portfolio for the purchase of a put option is
reported in the section of the Portfolio's assets and liabilities as an
investment and subsequently adjusted daily to the current market value of the
option. For example, if the current market value of the option exceeds the
premium paid, the excess would be unrealized appreciation and, conversely, if
the premium exceeds the current market value, such excess would be unrealized
depreciation. The current market value of a purchased option is the last sale
price on the principal exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and ask prices. If an option
which the Portfolio has purchased expires on the stipulated expiration date, the
Portfolio realizes a short-term or long-term capital loss for federal income tax
purposes in the amount of the cost of the option. If the Portfolio exercises a
put option, it realizes a capital gain or loss (long-term or short-term,
depending on the holding period of the underlying security) from the sale of the
underlying security and the proceeds from such sale will be decreased by the
premium originally paid.
Options on Certain Stock Indices
Accounting for options on certain stock indices will be in accordance
with generally accepted accounting principles. The amount of any realized gain
or loss on closing out such a position will result in a realized gain or loss
for tax purposes. Such options held by a Portfolio at the end of each fiscal
year on a broad-based stock index will be required to be "marked to market" for
federal income tax purposes. Generally, 60% of any net gain or loss recognized
on such deemed sales or on any actual sales will be treated as long-term capital
gain or loss, and the remainder will be treated as short-term capital gain or
loss.
Other Tax Requirements
Each Portfolio has qualified or intends to qualify, and each that has
qualified intends to continue to qualify, as a regulated investment company
under Subchapter M of the Code. As such, a Portfolio will not be subject to
federal income tax, or to any excise tax, to the extent its earnings are
distributed as provided in the Code and it satisfies other requirements relating
to the sources of its income and diversification of its assets.
In order to qualify as a regulated investment company for federal
income tax purposes, each Portfolio must meet certain specific requirements,
including:
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(i) Each Portfolio must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of a Portfolio's total
assets, and, with respect to 50% of a Portfolio's total assets, no investment
(other than cash and cash items, U.S. government securities and securities of
other regulated investment companies) can exceed 5% of a Portfolio's total
assets. For purposes of the tax diversification test under Subchapter M of the
Internal Revenue Code, repurchase agreements constitute securities are not
considered to be cash or cash items;
(ii) Each Portfolio must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) Each Portfolio must distribute to its shareholders at least 90%
of its net investment income and net tax-exempt income for each of its fiscal
years, and
(iv) Each Portfolio must realize less than 30% of its gross income for
each fiscal year from gains from the sale of securities and certain other assets
that have been held by the Portfolio for less than three months ("short-short
income"). The Taxpayer Relief Act of 1997, as amended, (the "1997 Act") repealed
the 30% short-short income test for tax years of regulated investment companies
beginning after August 5, 1997; however, this rule may have continuing effect in
some states for purposes of classifying the Portfolio as a regulated investment
company.
The Code requires the Portfolios to distribute at least 98% of its
taxable ordinary income earned during the calendar year and 98% of its capital
gain net income earned during the 12 month period ending October 31 (in addition
to amounts from the prior year that were neither distributed nor taxed to a
Portfolio) to you by December 31 of each year in order to avoid federal excise
taxes. The Portfolios intend as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by you as received in
December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains or when
the offsetting position is sold.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Portfolio must recognize gain (but not loss) on any
constructive sale of an appreciated financial position in stock, a partnership
interest or certain debt instruments. The Portfolio will generally be treated as
making a constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities
Certain of the Portfolios are authorized to invest certain limited
amounts in foreign securities. Such investments, if made, will have the
following additional tax consequences to each Portfolio:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Portfolio accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Portfolio actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
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attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Portfolio's net investment company taxable income, which, in turn, will
affect the amount of income to be distributed to you by a Portfolio.
If a Portfolio's Section 988 losses exceed a Portfolio's other net
investment company taxable income during a taxable year, a Portfolio generally
will not be able to make ordinary dividend distributions to you for that year,
or distributions made before the losses were realized will be recharacterized as
return of capital distributions of federal income tax purposes, rather than as
an ordinary dividend or capital gain distribution. If a distribution is treated
as a return of capital, your tax basis in your Portfolio shares will be reduced
by a like amount (to the extent of such basis), and any excess of the
distribution over your tax basis in your Portfolio shares will be treated as
capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Portfolio to track and record adjustments to foreign taxes paid on foreign
securities in which it invests. Under a Portfolio's current reporting procedure,
foreign security transactions are recorded generally at the time of each
transaction using the foreign currency spot rate available for the date of each
transaction. Under the new law, a Portfolio will be required to record a fiscal
year end (and at calendar year end for excise tax purposes) an adjustment that
reflects the difference between the spot rates recorded for each transaction and
the year-end average exchange rate for all of a Portfolio's foreign securities
transactions. There is a possibility that the mutual fund industry will be given
relief from this new provision, in which case no year-end adjustments will be
required.
The Portfolios may be subject to foreign withholding taxes on income
from certain of its foreign securities. If more than 50% of the total assets of
a Portfolio at the end of its fiscal year are invested in securities of foreign
corporations, a Portfolio may elect to pass-through to you your pro rata share
of foreign taxes paid by a Portfolio. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Portfolio); and (ii) entitled to
either deduct your share of such foreign taxes in computing your taxable income
or to claim a credit for such taxes against your U.S. income tax, subject to
certain limitations under the Code. You will be informed by a Portfolio at the
end of each calendar year regarding the availability of any such foreign tax
credits and the amount of foreign source income (including any foreign taxes
paid by a Portfolio). If a Portfolio elects to pass-through to you the foreign
income taxes that it has paid, you will be informed at the end of the calendar
year of the amount of foreign taxes paid and foreign source income that must be
included on your federal income tax return. If a Portfolio invests 50% or less
of its total assets in securities of foreign corporations, it will not be
entitled to pass-through to you your pro-rata shares of foreign taxes paid by a
Portfolio. In this case, these taxes will be taken as a deduction by a
Portfolio, and the income reported to you will be the net amount after these
deductions. The 1997 Act also simplifies the procedures by which investors in
funds that invest in foreign securities can claim tax credits on their
individual income tax returns for the foreign taxes paid by a Portfolio. These
provisions will allow investors who pay foreign taxes of $300 or less on a
single return or $600 or less on a joint return during any year (all of which
must be reported on IRS Form 1099-DIV from a Portfolio to the investor) to claim
a tax credit against their U.S. federal income tax for the amount of foreign
taxes paid by a Portfolio. This process will allow you, if you qualify, to
bypass the burdensome and detailed reporting requirements on the foreign tax
credit schedule (Form 1116) and report your foreign taxes paid directly on page
2 of Form 1040.
Investment in Passive Foreign Investment Company securities--The
Portfolios may invest in shares of foreign corporations which may be classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Portfolio receives an "excess distribution" with
respect to PFIC stock, the Portfolio itself may be subject to U.S. federal
income tax on a portion of the distribution, whether or not the corresponding
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income is distributed by a Portfolio to you. In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which a Portfolio held the PFIC shares. A Portfolio itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Portfolio taxable years, and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years. In this
case, you would not be permitted to claim a credit on your own tax return for
the tax paid by a Portfolio. Certain distributions from a PFIC as well as gain
from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain distribution might have been classified
as capital gain. This may have the effect of increasing Portfolio distributions
to you that are treated as ordinary dividends rather than long-term capital gain
dividends.
A Portfolio may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, a Portfolio generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC during such period. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market the Portfolio's PFIC
shares at the end of each taxable year (and on certain other dates as prescribed
in the Code), with the result that unrealized gains would be treated as though
they were realized. The Portfolio would also be allowed an ordinary deduction
for the excess, if any, of the adjusted basis of its investment in the PFIC
stock over its fair market value at the end of the taxable year. This deduction
would be limited to the amount of any net mark-to-market gains previously
included with respect to that particular PFIC security. If a Portfolio were to
make this second PFIC election, tax at the Portfolio level under the PFIC rules
would generally be eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Portfolio (if any), the amounts distributable to you
by a Portfolio, the time at which these distributions must be made, and whether
these distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Portfolio acquires shares in that corporation. While
a Portfolio will generally seek to avoid investing in PFIC shares to avoid the
tax consequences detailed above, there are no guarantees that it will do so and
it reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Portfolio, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Portfolio's income available for distribution to you, and may cause
some or all of a Portfolio's previously distributed income to be classified as a
return of capital.
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TRADING PRACTICES AND BROKERAGE
The investment adviser or sub-adviser of each Portfolio, as the case
may be, selects brokers or dealers to execute transactions on behalf of a
Portfolio for the purchase or sale of portfolio securities on the basis of its
judgment of their professional capability to provide the service. The primary
consideration is to have brokers or dealers execute transactions at best
execution. Best execution refers to many factors, including the price paid or
received for a security, the commission charged, the promptness and reliability
of execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. A number of trades are made on a net basis where securities either
are purchased directly from the dealer or are sold to the dealer. In these
instances, there is no direct commission charged but there is a spread (the
difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, the investment adviser or sub-adviser
pays reasonably competitive brokerage commission rates based upon the
professional knowledge of its trading department as to rates paid and charged
for similar transactions throughout the securities industry. In some instances,
Pooled Trust, Inc. or Foundation Funds, as appropriate, pays a minimal share
transaction cost when the transaction presents no difficulty. A number of trades
are made on a net basis where the Portfolios either buy the securities directly
from the dealer or sell them to the dealer. In these instances, there is not
direct commission charged but there is a spread (the difference between the buy
and sell price) which is the equivalent of a commission.
Securities transactions for The International Equity, The International
Mid-Cap Sub, The Labor Select International Equity, The Global Equity, The
Emerging Markets, The Global Fixed Income, The International Fixed Income, The
High Yield Bond, The Real Estate Investment Trust , The International Small-Cap
and The Diversified Core Fixed Income Portfolios may be effected in foreign
markets which may not allow negotiation of commissions or where it is customary
to pay fixed rates.
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During the fiscal years ended October 31, 1996, 1997 and 1998, the
aggregate dollar amounts of brokerage commissions paid by the Portfolios listed
below amounted to the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
The Large Cap Value Equity Portfolio $198,202 $137,685 $117,326
The Mid-Cap Growth Equity Portfolio $19,470 $66,754 $26,361
The International Equity Portfolio $390,649 $618,700 $398,781
The Global Fixed Income Portfolio N/A N/A N/A
The Labor Select International Equity Portfolio (1) $134,410 $72,413 $78,514
The Real Estate Investment Trust Portfolio (2) $185,742 $111,633 $122,865
The Emerging Markets Portfolio (3) $194,207 $92,535 N/A
The Global Equity Portfolio (4) $3,549 $5,176 N/A
The Core Equity Portfolio (5) $2,458 N/A N/A
The Mid-Cap Value Equity Portfolio(6) $15,643 N/A N/A
The Small-Cap Growth Equity Portfolio (5) $1,702 N/A N/A
The Real Estate Investment Trust Portfolio II (7) $16,638 N/A N/A
The Intermediate Fixed Income Portfolio (8) N/A N/A N/A
The Aggregate Fixed Income Portfolio (6) N/A N/A N/A
The High-Yield Bond Portfolio (9) N/A N/A N/A
The Diversified Core Fixed Income Portfolio(6) N/A N/A N/A
The International Fixed Income Portfolio(10) N/A N/A N/A
The Asset Allocation Portfolio (11) N/A N/A N/A
The International Mid-Cap Sub Portfolio (11) N/A N/A N/A
The Small-Cap Value Equity Portfolio (11) N/A N/A N/A
The Balanced Portfolio(12) N/A N/A N/A
The Equity Income Portfolio(12) N/A N/A N/A
The Select Equity Portfolio(12) N/A N/A N/A
The International Small-Cap Portfolio(12) N/A N/A N/A
</TABLE>
(1) Commenced operations on December 19, 1995.
(2) Commenced operations on December 6, 1995
(3) Commenced operations on April 14, 1997.
(4) Commenced operations on October 15, 1997.
(5) Commenced operations on September 15, 1998.
(6) Commenced operations on December 29, 1997.
(7) Commenced operations on November 4, 1997.
(8) Commenced operations on March 12, 1996.
(9) Commenced operations on December 2, 1996.
(10) Commenced operations on April 11, 1997.
(11) Has not commenced operations as of October 31, 1998.
(12) Has not commenced operations as of the date of this Part B.
44
<PAGE>
The investment advisers or sub-advisers may allocate out of all
commission business generated by all of the Portfolios and accounts under
management by them, brokerage business to brokers or dealers who provide
brokerage and research services. These services include advice, either directly
or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities or industries; providing
information on economic factors and trends; assisting in determining portfolio
strategy; providing computer software and hardware used in security analyses;
and providing portfolio performance evaluation and technical market analyses.
Such services are used by the investment advisers in connection with their
investment decision-making process with respect to one or more funds and
accounts they manage, and may not be used, or used exclusively, with respect to
the fund or account generating the brokerage.
During the fiscal year ended October 31, 1998, portfolio transactions
of the following Portfolios in the amounts listed below, resulting in brokerage
commissions in the amounts listed below, were directed to brokers for brokerage
and research services provided:
Portfolio Brokerage
Transactions Commissions
Amounts Amounts
------- -------
The Large Cap Value Equity Portfolio $87,352,536 $92,557
The Mid-Cap Growth Equity Portfolio $7,338,957 $13,974
The International Equity Portfolio $19,488,896 $43,480
The Labor Select International Equity Portfolio $10,198,546 $22,822
The Real Estate Investment Trust Portfolio $38,144,721 $86,183
The Emerging Markets Portfolio none none
The Mid-Cap Value Equity Portfolio(1) $9,636,086 $14,985
The Core Equity Portfolio (2) $176,340 $276
The Small-Cap Growth Equity Portfolio $673,401 $1,548
The Real Estate Investment Trust Portfolio II(3) $2,777,792 $6,341
The Intermediate Fixed Income Portfolio N/A N/A
The Aggregate Fixed Income Portfolio(1) N/A N/A
The High-Yield Bond Portfolio N/A N/A
The Diversified Core Fixed Income Portfolio N/A N/A
The Global Equity Portfolio $752,875 $884
The Global Fixed Income Portfolio N/A N/A
The Asset Allocation Portfolio (4) N/A N/A
The International Mid-Cap Sub Portfolio (4) N/A N/A
The Small-Cap Value Equity Portfolio (4) N/A N/A
The Balanced Portfolio(5) N/A N/A
The Equity Income Portfolio(5) N/A N/A
The Select Equity Portfolio(5) N/A N/A
The International Small-Cap Portfolio(5) N/A N/A
(1) Commenced operations on December 29, 1997.
(2) Commenced operations on September 15, 1998.
(3) Commenced operations on November 4, 1997.
(4) Has not commenced operations as of October 31, 1998.
(5) Has not commenced operations as of the date of this Part B.
45
<PAGE>
As provided in the Securities Exchange Act of 1934 and each Portfolio's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, Pooled Trust, Inc. and Foundation
Funds believe that the commissions paid to such broker/dealers are not, in
general, higher than commissions that would be paid to broker/dealers not
providing such services and that such commissions are reasonable in relation to
the value of the brokerage and research services provided. In some instances,
services may be provided to the investment advisers which constitute in some
part brokerage and research services used by the investment advisers in
connection with their investment decision-making process and constitute in some
part services used by them in connection with administrative or other functions
not related to their investment decision-making process. In such cases, the
investment advisers will make a good faith allocation of brokerage and research
services and will pay out of their own resources for services used by them in
connection with administrative or other functions not related to their
investment decision-making process. In addition, so long as no fund is
disadvantaged, portfolio transactions which generate commissions or their
equivalent are allocated to broker/dealers who provide daily portfolio pricing
services to Pooled Trust, Inc., Foundation Funds and to other funds in the
Delaware Investments family. Subject to best execution, commissions allocated to
brokers providing such pricing services may or may not be generated by the
Portfolios receiving the pricing service.
Combined orders for two or more accounts or funds engaged in the
purchase or sale of the same security may be placed if the judgment is made that
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the investment advisers, the
Board of Directors of Pooled Trust, Inc. and the Board of Trustees of Foundation
Funds that the advantages of combined orders outweigh the possible disadvantages
of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best execution, orders may be
placed with broker/dealers that have agreed to defray certain Portfolio
expenses, such as custodian fees.
Subject to best execution, Portfolio orders may be placed with
qualified broker/dealers who recommend the Portfolios or who acts as agents in
the purchase of shares of the Portfolios for their clients.
46
<PAGE>
PORTFOLIO TURNOVER
Portfolio trading will be undertaken principally to accomplish each
Portfolio's objective in relation to anticipated movements in the general level
of interest rates. A Portfolio is free to dispose of portfolio securities at any
time, subject to complying with the Code and the 1940 Act, when changes in
circumstances or conditions make such a move desirable in light of the
investment objective. A Portfolio will not attempt to achieve or be limited to a
predetermined rate of portfolio turnover. Such a turnover always will be
incidental to transactions undertaken with a view to achieving a Portfolio's
investment objective.
The degree of portfolio activity may affect brokerage costs of a
Portfolio and taxes payable by a Portfolio's shareholders. A turnover rate of
100% would occur, for example, if all the investments in a Portfolio's
securities at the beginning of the year were replaced by the end of the year. In
investing for capital appreciation, a relevant Portfolio may hold securities for
any period of time. Portfolio turnover will also be increased by The Mid-Cap
Growth Equity Portfolio, either of The Real Estate Investment Trust Portfolios,
The International Equity Portfolio, The Emerging Markets Portfolio, The Global
Equity Portfolio, The International Small-Cap Portfolio, The Equity Income
Portfolio, The Select Equity Portfolio, The Diversified Core Fixed Income
Portfolio, The Asset Allocation Portfolio, The Small-Cap Growth Equity Portfolio
and The Core Equity Portfolio, if the Portfolio writes a large number of call
options which are subsequently exercised. To the extent a Portfolio realizes
gains on securities held for less than six months, such gains are taxable to the
shareholder subject to tax or to a Portfolio at ordinary income tax rates. The
turnover rate also may be affected by cash requirements from redemptions and
repurchases of Portfolio shares. High portfolio turnover involves
correspondingly greater brokerage costs and may affect taxes payable by
shareholders that are subject to federal income taxes.
Under normal circumstances: (1) the annual portfolio turnover rate of
The International Equity Portfolio is not expected to exceed 150%; (2) the
annual portfolio turnover rate of The Global Fixed Income Portfolio and The
International Fixed Income Portfolio is not expected to exceed 200%; (3) the
annual portfolio turnover rate of The Large-Cap Value Equity Portfolio, The
Mid-Cap Growth Equity Portfolio, The Mid-Cap Value Equity Portfolio, The
Small-Cap Value Equity Portfolio, The Labor Select International Equity
Portfolio, The Real Estate Investment Trust Portfolios, The Emerging Markets
Portfolio, The Global Equity Portfolio, The International Small-Cap Portfolio,
The High-Yield Bond Portfolio, The International Mid-Cap Sub Portfolio, The
Balanced, The Equity Income, The Core Equity Portfolio and The Asset Allocation
Portfolio is not expected to exceed 100%; (4) the annual portfolio turnover rate
of The Intermediate Fixed Income Portfolio and The Aggregate Fixed Income
Portfolio is not expected to exceed 250%; (5) the annual portfolio turnover rate
of The Diversified Core Fixed Income Portfolio is not expected to exceed 50%;
(6) the annual portfolio turnover rate of The Small-Cap Growth Equity Portfolio
is expected to be 100%; and (7) the annual portfolio turnover rate for The
Select Equity Portfolio is not expected to exceed 300%. The portfolio turnover
rate of a Portfolio is calculated by dividing the lesser of purchases or sales
of securities for the particular fiscal year by the monthly average of the value
of the securities owned by the Portfolio during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.
47
<PAGE>
The portfolio turnover rates of the following Portfolios for the past
two fiscal years were as follows:
<TABLE>
<CAPTION>
October 31, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
The Large Cap Value Equity Portfolio 85% 73%
The Mid-Cap Growth Equity Portfolio 154% 117%
The International Equity Portfolio 5% 8%
The Global Fixed Income Portfolio 131% 114%
The Labor Select International Equity Portfolio 2% 11%
The Real Estate Investment Trust Portfolio 51% 58%
The Intermediate Fixed Income Portfolio 181% 205%
The High-Yield Bond Portfolio (1) 211% 281%*
The International Fixed Income Portfolio (2) 104% 145%*
The Emerging Markets Portfolio (3) 39% 46%*
The Global Equity Portfolio (4) 47% 0%*
The Core Equity Portfolio (5) 53%* N/A
The Mid-Cap Value Equity Portfolio (6) 155%* N/A
The Small-Cap Value Equity Portfolio (7) N/A N/A
The Small-Cap Growth Equity Portfolio (5) 98%* N/A
The Real Estate Investment Trust Portfolio II (8) 54%* N/A
The Aggregate Fixed Income Portfolio (6) 438%* N/A
The Diversified Core Fixed Income Portfolio (6) 312%* N/A
The Asset Allocation Portfolio (7) N/A N/A
The International Mid-Cap Sub Portfolio (7) N/A N/A
The Balanced Portfolio(9) N/A N/A
The Equity Income Portfolio(9) N/A N/A
The Select Equity Portfolio(9) N/A N/A
The International Small-Cap Portfolio(9) N/A N/A
</TABLE>
*Annualized
(1) Commenced operations on December 2, 1996.
(2) Commenced operations on April 11, 1997.
(3) Commenced operations on April 14, 1997.
(4) Commenced operations on October 15, 1997.
(5) Commenced operations on September 15, 1998.
(6) Commenced operations on December 29, 1997.
(7) Has not commenced operations as of October 31, 1998.
(8) Commenced operations on November 4, 1997.
(9) Has not commenced operations as of the date of this Part B.
48
<PAGE>
PURCHASING SHARES
The following supplements the disclosure provided in the Portfolios'
Prospectuses.
Delaware Distributors, L.P. (the "Distributor") serves as the national
distributor for each Portfolio's shares. See the related Prospectus for
information on how to invest. Pooled Trust, Inc. or Foundation Funds, as
applicable, reserves the right to suspend sales of Portfolio shares, and reject
any order for the purchase of Portfolio shares if in the opinion of management
such rejection is in the Portfolio's best interest.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares of The Real Estate Investment Trust
Portfolio, in the case of The International Mid-Cap Sub Portfolio shares, or in
the case of any retirement plan account including self-directed IRAs. However,
purchases not involving the issuance of certificates are confirmed to the
investor and credited to the shareholder's account on the books maintained on
behalf of Pooled Trust, Inc. and Foundation Funds. The investor will have the
same rights of ownership with respect to such shares as if certificates had been
issued. An investor that is permitted to obtain a certificate may receive a
certificate representing full share denominations purchased by sending a letter
signed by each owner of the account to the Transfer Agent requesting the
certificate. No charge is assessed by Pooled Trust, Inc. or Foundation Funds for
any certificate issued. A shareholder may be subject to fees for replacement of
a lost or stolen certificate, under certain conditions, including the cost of
obtaining a bond covering the lost or stolen certificate. Please contact the
Portfolios for further information. Investors who hold certificates representing
any of their shares may only redeem those shares by written request. The
investor's certificate(s) must accompany such request.
Purchasing Shares (The Real Estate Investment Trust Portfolio class of
The Real Estate Investment Trust Portfolio and all other Portfolios)
Shares of each Portfolio are sold on a continuous basis directly to
institutions and high net-worth individuals at the net asset value next
determined after the receipt of a purchase order and a Federal Funds wire as
described more fully in the related Prospectus. In addition, for purchases of
shares in The Emerging Markets Portfolio, a purchase reimbursement fee of 0.75%
of the dollar amount invested is charged to investors and paid to the Portfolio
to help defray expenses of investing purchase proceeds. For The International
Mid-Cap Sub Portfolio, the purchase reimbursement fee is equal to 0.60% of the
dollar amount invested, for The Global Equity Portfolio, the purchase
reimbursement fee is equal to 0.40% of the dollar amount invested and for The
International Small-Cap Portfolio the purchase reimbursement fee is equal to
0.55% of the dollar amount invested. In lieu of paying that fee, an investor in
The International Mid-Cap Sub Portfolio, The Global Equity Portfolio or The
International Small-Cap Portfolio may elect, subject to agreement by DIA Ltd.,
to invest by a contribution of in-kind securities or may follow another
procedure that has the same economic impact on the Portfolio and its
shareholders, in which case the purchase reimbursement fee will not apply. See
"DETERMINING OFFERING PRICE AND NET ASSET VALUE." The minimum for initial
investments is $1,000,000 for each Portfolio. There are no minimums for
subsequent investments. See the related Prospectus for special purchase
procedures and requirements that may be applicable to prospective investors in
The International Equity Portfolio, The Global Equity Portfolio and The
International Small-Cap Portfolio. At such time as Pooled Trust, Inc. receives
appropriate regulatory approvals to do so in the future, under certain
circumstances, Pooled Trust, Inc. may, at its sole discretion, allow eligible
investors who have an existing investment counseling relationship with Delaware
International or an affiliate of Delaware to make investments in the Portfolios
by a contribution of securities in-kind to such Portfolios.
49
<PAGE>
Purchasing Shares (REIT Fund A, B, C and Institutional Classes of
The Real Estate Investment Trust Portfolio)
The minimum initial investment generally is $1,000 for REIT Fund A
Class, B Class and C Class. Subsequent purchases of such Classes generally must
be at least $100. The initial and subsequent investment minimums for Class A
Shares will be waived for purchases by officers, directors and employees of any
Delaware Investments fund, the investment adviser or any of the investment
adviser's affiliates if the purchases are made pursuant to a payroll deduction
program. Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Delaware Investments Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
Institutional Class, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See "INVESTMENT PLANS" for purchase limitations
applicable to retirement plans. Pooled Trust, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $50,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Pooled Trust, Inc. reserves the right to reject any order for the purchase of
its shares if in the opinion of management such rejection is in the Portfolio's
best interest. If a purchase is canceled because your check is returned unpaid,
you are responsible for any loss incurred. The Portfolio can redeem shares from
your account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Investments family.
The Portfolio reserves the right to reject purchase orders paid by third-party
checks or checks that are not drawn on a domestic branch of a United States
financial institution. If a check drawn on a foreign financial institution is
accepted, you may be subject to additional bank charges for clearance and
currency conversion.
The Portfolio also reserves the right, following shareholder
notification, to charge a service fee on non-retirement accounts that, as a
result of redemption, have remained below the minimum stated account balance for
a period of three or more consecutive months. Holders of such accounts may be
notified of their insufficient account balance and advised that they have until
the end of the current calendar quarter to raise their balance to the stated
minimum. If the account has not reached the minimum balance requirement by that
time, the Portfolio will charge a $9 fee for that quarter and each subsequent
calendar quarter until the account is brought up to the minimum balance. The
service fee will be deducted from the account during the first week of each
calendar quarter for the previous quarter, and will be used to help defray the
cost of maintaining low-balance accounts. No fees will be charged without proper
notice, and no CDSC will apply to such assessments.
The Portfolio also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Pooled Trust, Inc. and the
Distributor intend to operate in compliance with these rules.
50
<PAGE>
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the appropriate Prospectus. Class A
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 1% if shares are
redeemed during the sixth year following purchase. Class B Shares are also
subject to annual 12b-1 Plan expenses which are higher than those to which Class
A Shares are subject and are assessed against Class B Shares for approximately
eight years after purchase. See "AUTOMATIC CONVERSION OF CLASS B SHARES," below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See "PLANS UNDER RULE 12B-1 FOR THE PORTFOLIO CLASSES"
under "PURCHASING SHARES," and "DETERMINING OFFERING PRICE AND NET ASSET VALUE"
in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in the Portfolio's assets and will
receive a proportionate interest in that Portfolio's income, before application,
as to Class A, Class B and Class C Shares, of any expenses under that
Portfolio's 12b-1 Plans.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% of the average daily net assets of Class A Shares, or to purchase either
Class B or Class C Shares and have the entire initial purchase amount invested
in the Portfolio with the investment thereafter subject to a CDSC and annual
12b-1 Plan expenses. Class B Shares are subject to a CDSC if the shares are
redeemed within six years of purchase, and Class C Shares are subject to a CDSC
if the shares are redeemed within 12 months of purchase. Class B and Class C
51
<PAGE>
Shares are each subject to annual 12b-1 Plan expenses of up to a maximum of 1%
(0.25% of which are service fees to be paid to the Distributor, dealers or
others for providing personal service and/or maintaining shareholder accounts)
of average daily net assets of the respective Class. Class B Shares will
automatically convert to Class A Shares at the end of approximately eight years
after purchase and, thereafter, be subject to annual 12b-1 Plan expenses of up
to a maximum of 0.30% of average daily net assets of such shares. Unlike Class B
Shares, Class C Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Portfolios, the Distributor and others will be paid, in
the case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See "PLANS under RULE 12B-1 FOR THE PORTFOLIO CLASSES."
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See "DETERMINING OFFERING PRICE AND NET ASSET
VALUE."
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the appropriate
Prospectus, and may include a series of purchases over a 13-month period under a
Letter of Intention signed by the purchaser. See "SPECIAL PURCHASE FEATURES -
CLASS A SHARES," below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, for initial purchases of Class A Shares
of $1,000,000 or more, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected.
52
<PAGE>
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies (see "CONTINGENT DEFERRED SALES CHARGE
FOR CERTAIN REDEMPTIONS OF CLASS A SHARES PURCHASED AT NET ASSET VALUE" under
"REDEMPTION AND EXCHANGE") may be aggregated with those of the Class A Shares of
the Portfolio. Financial advisers also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of the Portfolio, even if those shares are later exchanged for shares of
another Delaware Investments fund. In the event of an exchange of the shares,
the "net asset value of such shares at the time of redemption" will be the net
asset value of the shares that were acquired in the exchange. See "WAIVER OF
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES AND CLASS C SHARES under
REDEMPTION AND EXCHANGE" for the Portfolio Classes for a list of the instances
in which the CDSC is waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the
Portfolio. See "AUTOMATIC CONVERSION OF CLASS B SHARES" under "CLASSES OF
SHARES" in the appropriate Prospectus. Such conversion will constitute a
tax-free exchange for federal income tax purposes. See "TAXES." Investors are
reminded that the Class A Shares into which Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
53
<PAGE>
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Portfolio shares. The Distributor currently
compensates dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 5% of the dollar
amount purchased. In addition, from time to time, upon written notice to all of
its dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for the Portfolio to
sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See "REDEMPTION AND EXCHANGE."
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 18th day or next
business day of March, June, September and December (each, a "Conversion Date").
If the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of the Portfolio acquired through a reinvestment of
dividends will convert to the corresponding Class A Shares of that fund (or, in
the case of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve
Consultant Class) pro-rata with Class B Shares of that fund not acquired through
dividend reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See "TAXES."
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Portfolio shares. The Distributor currently
compensates dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, Class C Shares are subject to annual 12b-1
Plan expenses and, if redeemed within 12 months of purchase, a CDSC.
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Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See "REDEMPTION AND EXCHANGE."
Plans Under Rule 12b-1
Pursuant to Rule 12b-1 under the 1940 Act, Pooled Trust, Inc. has
adopted a separate plan for each of Class A Shares, the Class B Shares and the
Class C Shares of The Real Estate Investment Trust Portfolio (the "Plans"). Each
Plan permits the relevant Portfolio to pay for certain distribution, promotional
and related expenses involved in the marketing of only the Class to which the
Plan applies.
The Plans permit the Portfolio, pursuant to the Distribution Agreement,
to pay out of the assets of Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B Shares and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Portfolio may make payments out of the assets of Class
A Shares, Class B Shares and Class C Shares directly to other unaffiliated
parties, such as banks, who either aid in the distribution of shares of, or
provide services to, such classes.
The maximum aggregate fee payable by the Portfolio under the Plans, and
the Portfolio's Distribution Agreement, is on an annual basis up to 0.30% of
Class A Shares' average daily net assets for the year of Class A Shares, and up
to 1% (0.25% of which are service fees to be paid to the Distributor, dealers
and others for providing personal service and/or maintaining shareholder
accounts) of each of Class B Shares' and Class C Shares' average daily net
assets for the year. Pooled Trust, Inc.'s Board of Directors may reduce these
amounts at any time. Pursuant to Board action, the maximum aggregate fee payable
by Class A Shares is 0.25%.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A Shares, Class B Shares and Class C Shares would be borne by such persons
without any reimbursement from such Classes. Subject to seeking best price and
execution, the Classes may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreement, as amended, have been
approved by the Board of Directors of Pooled Trust, Inc., including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
of Pooled Trust, Inc. and who have no direct or indirect financial interest in
the Plans by vote cast in person at a meeting duly called for the purpose of
voting on the Plans and such Agreement. Continuation of the Plans and the
Distribution Agreement, as amended, must be approved annually by the Board of
Directors in the same manner, as specified above.
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Each year, the directors must determine whether continuation of the
Plans are in the best interest of shareholders of, respectively, the Class A
Shares, Class B Shares and Class C Shares and that there is a reasonable
likelihood of the Plan relating to a Class providing a benefit to the Classes.
The Plans and the Distribution Agreement, as amended, may be terminated at any
time without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
relevant Class. Any amendment materially increasing the maximum percentage
payable under the Plans must likewise be approved by a majority vote of the
outstanding voting securities of the relevant Class, as well as by a majority
vote of those directors who are not "interested persons." With respect to the
Class A Share Plan, any material increase in the maximum percentage payable
thereunder must also be approved by a majority of the outstanding voting
securities of the Class B Shares. Also, any other material amendment to the
Plans must be approved by a majority vote of the directors including a majority
of the noninterested directors of Pooled Trust, Inc. having no interest in the
Plans. In addition, in order for the Plans to remain effective, the selection
and nomination of directors who are not "interested persons" of Pooled Trust,
Inc. must be effected by the directors who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must provide written reports
at least quarterly to the Board of Directors for their review.
For the fiscal year ended October 31, 1998, payments from REIT Fund A
Class, B Class and C Class amounted to $18,831, $71,406 and $40,555,
respectively. Such amounts were used for the following purposes:
REIT Fund REIT Fund REIT Fund
A Class B Class C Class
------- ------- -------
Advertising --- --- ---
Annual/Semi-Annual Reports $55 --- ---
Broker Trails $18,636 $17,012 $7,681
Broker Sales Charges --- $27,030 $22,397
Dealer Service Expenses --- --- ---
Interest on Broker Sales Charges --- $22,954 $1,689
Commissions to Wholesalers --- $4,310 $8,788
Promotional-Broker Meetings --- $100 ---
Promotional-Other $10 --- ---
Prospectus Printing $130 --- ---
Telephone --- --- ---
Wholesaler Expenses --- --- ---
Other --- --- ---
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of shares of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an additional
payment of up to 0.25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
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Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Portfolio may be purchased at net asset value
under the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the investment adviser, any affiliate, any of the funds in the Delaware
Investments family, certain of their agents and registered representatives and
employees of authorized investment dealers and by employee benefit plans for
such entities. Individual purchases, including those in retirement accounts,
must be for accounts in the name of the individual or a qualifying family
member. Class A Shares may also be purchased at net asset value by current and
former officers, directors and employees (and members of their families) of the
Dougherty Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the investment adviser or any of its affiliates may
purchase Class A Shares at net asset value. Moreover, purchases may be effected
at net asset value for the benefit of the clients of brokers, dealers and
registered investment advisers affiliated with a broker or dealer, if such
broker, dealer or investment adviser has entered into an agreement with the
Distributor providing specifically for the purchase of Class A Shares in
connection with special investment products, such as wrap accounts or similar
fee based programs. Investors may be charged a fee when effecting transactions
in Class A Shares through a broker or agent that offers these special investment
products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of the Portfolio; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the investment adviser or its
affiliates; or (ii) is sponsored by an employer that has at any point after May
1, 1997 more than 100 employees while such plan has held Class A Shares of a
fund in the Delaware Investments family and such employer has properly
represented to Retirement Financial Services, Inc. in writing that it has the
requisite number of employees and received written confirmation back from
Retirement Financial Services, Inc. See "GROUP INVESTMENT PLANS" for information
regarding the applicability of the Limited CDSC.
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Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in the Delaware Investments family at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to the Portfolio
account in connection with loans originated from accounts previously maintained
by another investment firm will also be invested at net asset value.
Pooled Trust, Inc. must be notified in advance that the trade qualifies
for purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See "COMBINED
PURCHASES PRIVILEGE," below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends.
See "INVESTING BY EXCHANGE."
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See "CLASS A
SHARES," above.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under " REDEMPTION AND EXCHANGE --
WAIVER OF LIMITED CONTINGENT DEFERRED SALES CHARGE - CLASS A SHARES" under,
apply to redemptions by participants in Allied Plans except in the case of
exchanges between eligible Delaware Investments and non-Delaware Investments
fund shares. When eligible Delaware Investments fund shares are exchanged into
eligible non-Delaware Investments fund shares, the Limited CDSC will be imposed
at the time of the exchange, unless the joint venture agreement specifies that
the amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See "CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A
SHARES PURCHASED AT NET ASSET VALUE" under "REDEMPTION AND EXCHANGE."
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Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Pooled Trust, Inc. which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Portfolio and of any class
of any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC other than shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a Delaware Investments fund which
carried a front-end sales charge, CDSC or Limited CDSC) previously purchased and
still held as of the date of their Letter of Intention toward the completion of
such Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of the Portfolio and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Portfolio, as well as shares of any other class of any of the
other Delaware Investments funds (except shares of any Delaware Investments fund
which do not carry a front-end sales charge, CDSC or Limited CDSC, other than
shares of Delaware Group Premium Fund, Inc. beneficially owned in connection
with the ownership of variable insurance products, unless they were acquired
through an exchange from a Delaware Investments fund which carried a front-end
sales charge, CDSC or Limited CDSC). In addition, assets held by investment
advisory clients of the investment adviser or its affiliates in a stable value
account may be combined with other Delaware Investments fund holdings.
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The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Portfolio,
as well as shares of any other class of any of the other Delaware Investments
funds which offer such classes (except shares of any Delaware Investments fund
which do not carry a front-end sales charge, CDSC or Limited CDSC, other than
shares of Delaware Group Premium Fund, Inc. beneficially owned in connection
with the ownership of variable insurance products, unless they were acquired
through an exchange from a Delaware Investments fund which carried a front-end
sales charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or shares of any other
of the classes described in the previous sentence with a value of $40,000 and
subsequently purchases $10,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $10,000 purchase would currently be 4.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of the Portfolio (and of Institutional Class
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of that Portfolio or in
Class A Shares of any of the other funds in the Delaware Investments family,
subject to applicable eligibility and minimum purchase requirements, in states
where shares of such other funds may be sold, at net asset value without the
payment of a front-end sales charge. This privilege does not extend to Class A
Shares where the redemption of the shares triggered the payment of a Limited
CDSC. Persons investing redemption proceeds from direct investments in mutual
funds in the Delaware Investments family offered without a front-end sales
charge will be required to pay the applicable sales charge when purchasing Class
A Shares. The reinvestment privilege does not extend to a redemption of Class B
or C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to the Portfolio in which the investor does not then have an account
will be treated like all other initial purchases of the Portfolio's shares.
Consequently, an investor should obtain and read carefully the prospectus for
the fund in which the investment is intended to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Portfolio's shareholder servicing agent, about
the applicability of the Limited CDSC (see "CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN REDEMPTIONS OF CLASS A SHARES PURCHASED AT NET ASSET VALUE" under
"REDEMPTION AND EXCHANGE") in connection with the features described above.
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Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares described in the Prospectus, based on total
plan assets. If a company has more than one plan investing in the Delaware
Investments family of funds, then the total amount invested in all plans would
be used in determining the applicable front-end sales charge reduction upon each
purchase, both initial and subsequent, upon notification to the Portfolio in
which the investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Investments investment accounts
if they so notify the Portfolio in which they are investing in connection with
each purchase. See "RETIREMENT PLANS" under "INVESTMENTS PLANS" for information
about retirement plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See "CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A SHARES
PURCHASED AT NET ASSET VALUE" under "REDEMPTION AND EXCHANGE".
Institutional Class
The Institutional Class of the Portfolio is available for purchase only
by: (a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the investment adviser or its affiliates and securities dealer
firms with a selling agreement with the Distributor; (c) institutional advisory
accounts of the investment adviser or its affiliates and those having client
relationships with Delaware Investment Advisers, an affiliate of the investment
adviser, or its other affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts; (d) a bank, trust
company and similar financial institution investing for its own account or for
the account of its trust customers for whom such financial institution is
exercising investment discretion in purchasing shares of the Class, except where
the investment is part of a program that requires payment of the financial
institution of a Rule 12b-1 Plan fee; and (e) registered investment advisers
investing on behalf of clients that consist solely of institutions and high
net-worth individuals having at least $1,000,000 entrusted to the adviser for
investment purposes, but only if the adviser is not affiliated or associated
with a broker or dealer and derives compensation for its services exclusively
from its clients for such advisory services.
Shares of the Institutional Class are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
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INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective A,
B or C Class in which an investor has an account (based on the net asset value
in effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of Institutional Class are
reinvested in the accounts of the holders of such shares (based on the net asset
value in effect on the reinvestment date). A confirmation of each dividend
payment from net investment income will be mailed to shareholders quarterly. A
confirmation of any distributions from realized securities profits will be
mailed to shareholders in the first quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Class in which shares are being purchased. Such purchases, which must meet the
minimum subsequent purchase requirements set forth in the Prospectuses and this
Part B, are made for Class A Shares at the public offering price, and for Class
B Shares, Class C Shares and Institutional Class at the net asset value, at the
end of the day of receipt. A reinvestment plan may be terminated at any time.
This plan does not assure a profit nor protect against depreciation in a
declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Portfolio, in states where their shares may be sold. Such investments will
be at net asset value at the close of business on the reinvestment date without
any front-end sales charge or service fee. The shareholder must notify the
Transfer Agent in writing and must have established an account in the fund into
which the dividends and/or distributions are to be invested. Any reinvestment
directed to the Portfolio in which the investor does not then have an account
will be treated like all other initial purchases of the Portfolio's shares.
Consequently, an investor should obtain and read carefully the prospectus for
the fund in which the investment is intended to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the
Portfolio, provided an account has been established. Dividends from Class A
Shares may not be directed to Class B Shares or Class C Shares. Dividends from
Class B Shares may only be directed to other Class B Shares and dividends from
Class C Shares may only be directed to other Class C Shares.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of the Portfolio. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in the Portfolio's Prospectus. See "REDEMPTION AND EXCHANGE" for more
complete information concerning your exchange privileges.
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Holders of Class A Shares of the Portfolio may exchange all or part of
their shares for certain of the shares of other funds in the Delaware
Investments family, including other Class A Shares, but may not exchange their
Class A Shares for Class B Shares or Class C Shares of the Portfolio or of any
other fund in the Delaware Investments family. Holders of Class B Shares of the
Portfolio are permitted to exchange all or part of their Class B Shares only
into Class B Shares of other Delaware Investments funds. Similarly, holders of
Class C Shares of the Portfolio are permitted to exchange all or part of their
Class C Shares only into Class C Shares of other Delaware Investments funds.
Class B Shares of the Portfolio and Class C Shares of the Portfolio acquired by
exchange will continue to carry the CDSC and, in the case of Class B Shares, the
automatic conversion schedule of the fund from which the exchange is made. The
holding period of Class B Shares of the Portfolio acquired by exchange will be
added to that of the shares that were exchanged for purposes of determining the
time of the automatic conversion into Class A Shares of the Portfolio.
Permissible exchanges into Class A Shares of the Portfolio will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Portfolio will be made without the imposition of
a CDSC by the fund from which the exchange is being made at the time of the
exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Portfolio
to accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit into
their Portfolio account. This type of investment will be handled in either of
the following ways. (1) If the shareholder's bank is a member of the National
Automated Clearing House Association ("NACHA"), the amount of the investment
will be electronically deducted from his or her account by Electronic Fund
Transfer ("EFT"). The shareholder's checking account will reflect a debit each
month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the Portfolio from the federal government or its agencies
on behalf of a shareholder may be credited to the shareholder's account after
such payments should have been terminated by reason of death or otherwise. Any
such payments are subject to reclamation by the federal government or its
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agencies. Similarly, under certain circumstances, investments from private
sources may be subject to reclamation by the transmitting bank. In the event of
a reclamation, the Portfolio may liquidate sufficient shares from a
shareholder's account to reimburse the government or the private source. In the
event there are insufficient shares in the shareholder's account, the
shareholder is expected to reimburse the Portfolio.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Portfolio accounts. Either Portfolio will
accept these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact Pooled
Trust, Inc. for proper instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Class A, B and C
Shares Shares by phone using MoneyLine (SM) On Demand. When you authorize the
Portfolio to accept such requests from you or your investment dealer, funds will
be withdrawn from (for share purchases) your predesignated bank account. Your
request will be processed the same day if you call prior to 4 p.m., Eastern
time. There is a $25 minimum and $50,000 maximum limit for MoneyLine (SM) On
Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your
Portfolio account, you must have your signature guaranteed. The Portfolio does
not charge a fee for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Class A
Shares, Class B Shares and C Shares through regular liquidations of shares in
their accounts in other mutual funds in the Delaware Investments family.
Shareholders of the Class A, B and C Shares may elect to invest in one or more
of the other mutual funds in Delaware Investments family through the Wealth
Builder Option. If in connection with the election of the Wealth Builder Option,
you wish to open a new account to receive the automatic investment, such new
account must meet the minimum initial purchase requirements described in the
prospectus of the fund that you select. All investments under this option are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Class A, B and C Shares Prospectus. The investment will be made on the 20th day
of each month (or, if the fund selected is not open that day, the next business
day) at the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See "REDEMPTION AND EXCHANGE" for a brief summary of the tax
consequences of exchanges. Shareholders can terminate their participation in
Wealth Builder at any time by giving written notice to the fund from which
exchanges are made.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under "INVESTING BY EXCHANGE." Also see
"BUYING CLASS A SHARES AT NET ASSET VALUE." The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of the Portfolio and of other funds in
the Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to the Transfer Agent to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
See "INSTITUTIONAL CLASS," above, for additional information on any of the plans
and Delaware's retirement services, call the Shareholder Service Center.
Retirement Plans
An investment in the REIT Fund may be suitable for tax-deferred
retirement plans. Delaware Investments offers a full spectrum of retirement
plans, including the 401(k) Defined Contribution Plan, Individual Retirement
Account ("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See "WAIVER OF CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES AND
CLASS C SHARES" under "REDEMPTION AND EXCHANGE" for a list of the instances in
which the CDSC is waived.
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Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the investment adviser and others that
provide services to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See "INSTITUTIONAL CLASS," above. For additional information on any of
the plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
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in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
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date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Portfolio.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
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Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see "CONTINGENT DEFERRED SALES
CHARGE - CLASS B SHARES AND CLASS C SHARES."
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectus.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectus.
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Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Portfolio. Although investors may use
their own plan, there is available a Delaware Investments 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Purchases under the Plan may
be combined for purposes of computing the reduced front-end sales charge
applicable to Class A Shares as set forth in the table in the Prospectus.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
The Real Estate Investment Trust Portfolio Class of The Real Estate Investment
Trust Portfolio and all other Portfolios
Orders for purchases of shares of a Portfolio are effected at the net
asset value of that Portfolio next calculated after receipt of the order by
Pooled Trust, Inc. or, as applicable, Foundation Funds and Federal Funds wire by
the Portfolio's Custodian Bank, plus in the case of The International Mid-Cap
Sub Portfolio, The Emerging Markets Portfolio, The Global Equity Portfolio and
The International Small-Cap Portfolio, any applicable purchase reimbursement fee
equal to 0.60%, 0.75%, 0.40% and 0.55%, respectively, of the dollar amount
invested. In the case of The International Mid-Cap Sub Portfolio, in certain
circumstances, orders for the purchase of shares placed by or at the direction
of DIA Ltd. on behalf of its institutional separate account clients will be
effected at the net asset value of The International Mid-Cap Sub Portfolio next
calculated after receipt of the order and satisfactory assurances regarding
payment of the purchase price. The purchase price may be paid either in cash
upon settlement of a corresponding sale of client securities held outside of the
Portfolio through an in-kind transfer, through an alternative method arranged
through the client's custodian, or any other method reasonably acceptable to
Pooled Trust, Inc.
Net asset value is computed at the close of regular trading on the New
York Stock Exchange, generally 4 p.m., Eastern time, on days when the New York
Stock Exchange is open and an order to purchase or sell shares of a Portfolio
has been received or is on hand, having been received since the last previous
computation of net asset value. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year except days when the following
holidays are observed: New Year's Day, Martin Luther King, Jr.'s Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. When the New York Stock Exchange is closed, Pooled
Trust, Inc. and Foundation Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
Class A Shares, Class B Shares and C Shares and Institutional Class Shares of
The Real Estate Investment Trust Portfolio
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Portfolio in which shares are being purchased after
receipt of the order by Pooled Trust, Inc., its agent or certain other
authorized persons. See "DISTRIBUTION AND SERVICE" under "INVESTMENT MANAGEMENT
AGREEMENTS AND SUB-ADVISORY AGREEMENTS." Orders for purchases of Class B Shares,
Class C Shares and the Institutional Class are effected at the net asset value
per share next calculated after receipt of the order by the Portfolio, its agent
or certain other authorized persons. Selling dealers are responsible for
transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable front-end sales charges. Offering price and net
asset value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open. The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except days when the following holidays are observed: New
Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, Pooled Trust, Inc. will generally be closed,
pricing calculations will not be made and purchase and redemption orders will
not be processed.
Each Class will bear, pro-rata, all of the common expenses of the
Portfolio. The net asset values of all outstanding shares of each Class will be
computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Portfolio represented by the value of shares
of that Class. All income earned and expenses incurred by the Portfolio will be
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borne on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in the Portfolio represented by the value of shares of such
Classes, except that the Class A, Class B and Class C Shares alone will bear the
12b-1 Plan expenses payable under their respective Plans. Due to the specific
distribution expenses and other costs that would be allocable to each Class, the
dividends paid to each Class of The Real Estate Investment Trust Portfolio may
vary. However, the net asset value per share of each Class is expected to be
equivalent.
* * *
The net asset value per share of each Portfolio is determined by
dividing the total market value of the Portfolio's investments and other assets,
less any liabilities, by the total outstanding shares of the Portfolio.
Securities listed on a U.S. securities exchange for which market quotations are
available are valued at the last quoted sale price on the day the valuation is
made. Price information on listed securities is taken from the exchange where
the security is primarily traded. Securities listed on a foreign exchange are
valued at the last quoted sale price available before the time when net assets
are valued. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at a
price that is considered to best represent fair value within a range not in
excess of the current ask prices nor less than the current bid prices. Domestic
over-the-counter equities, domestic equity securities that are not traded and
U.S. government securities (and those of its agencies and instrumentalities) are
priced at the mean of the bid and ask price.
Bonds and other fixed-income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market. Net asset value includes interest on fixed-income
securities, which is accrued daily. In addition, bonds and other fixed-income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed to reflect the fair market value of such
securities. The prices provided by a pricing service are determined without
regard to bid or last sale prices but take into account institutional size
trading in similar groups of securities and any developments related to the
specific securities. Securities not priced in this manner are valued at the most
recent quoted mean price or, when stock exchange valuations are used, at the
latest quoted sale price on the day of valuation. If there is no such reported
sale, the latest quoted mean price will be used. Securities with remaining
maturities of 60 days or less are valued at amortized cost, if it approximates
market value. In the event that amortized cost does not approximate market
value, market prices as determined above will be used.
Exchange-traded options are valued at the last reported sales price or,
if no sales are reported, at the mean between the last reported bid and ask
prices. Non-exchange traded options are valued at fair value using a
mathematical model. Futures contracts are valued at their daily quoted
settlement price. The value of other assets and securities for which no
quotations are readily available (including restricted securities) are
determined in good faith at fair value using methods determined by the Board of
Directors or Trustees, as applicable.
The securities in which The International Equity Portfolio, The
International Mid-Cap Sub Portfolio, The Labor Select International Equity
Portfolio, The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The Emerging Markets Portfolio, The International Small-Cap Portfolio
and The Global Equity Portfolio (as well as The Real Estate Investment Trust
Portfolios, The High-Yield Bond Portfolio, The Diversified Core Fixed Income
Portfolio The Asset Allocation Portfolio, The Small-Cap Growth Equity Portfolio
and The Core Equity Portfolio, to the limited extent described in the
Prospectus) may invest from time to time may be listed primarily on foreign
exchanges which trade on days when the New York Stock Exchange is closed (such
as holidays or Saturday). As a result, the net asset value of those Portfolios
may be significantly affected by such trading on days when shareholders have no
access to the Portfolios.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the mean between the bid and ask prices of such currencies
against the U.S. dollar as provided by an independent pricing service or any
major bank, including the Custodian Banks. Forward foreign currency contracts
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are valued at the mean price of the contract. Interpolated values will be
derived when the settlement date of the contract is on an interim period for
which quotations are not available. Foreign securities and the prices of foreign
securities denominated in foreign currencies are translated into U.S. dollars at
the mean between the bid and offer quotations of such currencies based on rates
in effect as of the close of the London Stock Exchange.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares of The Real Estate Investment Trust Portfolio, the
offering price per share, is included in the financial statements for the
Portfolios which are incorporated by reference into this Part B.
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REDEMPTION AND EXCHANGE
The following supplements the disclosure provided in the Prospectuses.
The Real Estate Investment Trust Portfolio Class of The Real Estate Investment
Trust Portfolio and all other Portfolios
Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Commission, (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for a Portfolio to dispose of securities owned by it, or fairly to determine the
value of its assets, and (iii) for such other periods as the Commission may
permit.
No charge is made by any Portfolio for redemptions, except that
shareholders that redeem shares of The International Mid-Cap Sub-Portfolio, The
Emerging Markets Portfolio, The Global Equity Portfolio and The International
Small-Cap Portfolio are assessed by the relevant Portfolio a redemption
reimbursement fee of 0.50%, 0.75%, 0.30% and 0.45%, respectively. Payment for
shares redeemed or repurchased may be made either in cash or in-kind, or partly
in cash and partly in-kind. If a redemption of shares is made in-kind, the
redemption reimbursement fee that is otherwise applicable will not be assessed.
Any portfolio securities paid or distributed in-kind would be valued as
described in "DETERMINING OFFERING PRICE AND NET ASSET VALUE." Subsequent sales
by an investor receiving a distribution in-kind could result in the payment of
brokerage commissions. Payment for shares redeemed ordinarily will be made
within three business days, but in no case later than seven days, after receipt
of a redemption request in good order. See "REDEMPTION OF SHARES" in the related
Prospectus for special redemption procedures and requirements that may be
applicable to shareholders in The International Equity Portfolio, The Labor
Select International Equity Portfolio, The International Small-Cap Portfolio,
The Global Fixed Income Portfolio, The International Fixed Income Portfolio and
The Global Equity Portfolio. Under certain circumstances, eligible investors who
have an existing investment counseling relationship with Delaware Investment
Advisers or Delaware International will not be subject to Pooled Trust, Inc.'s
in-kind redemption requirements until such time as
Pooled Trust, Inc. or Foundation Funds, as applicable, receives
appropriate regulatory approvals to permit such redemptions for the account of
such investors.
Pooled Trust, Inc. and Foundation Funds has elected to be governed by
Rule 18f-1 under the 1940 Act pursuant to which Pooled Trust, Inc. is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of each Portfolio during any 90-day period for any one shareholder.
The value of a Portfolio's investments is subject to changing market
prices. Redemption proceeds may be more or less than the shareholder's cost
depending upon the market value of the Portfolio's securities. Thus, a
shareholder redeeming shares of a Portfolio may, if such shareholder is subject
to federal income tax, sustain either a gain or loss, depending upon the price
paid and the price received for such shares.
Small Accounts
Due to the relatively higher cost of maintaining small accounts, Pooled
Trust, Inc. and Foundation Funds reserves the right to redeem Portfolio shares
in any of its accounts at the then-current net asset value if as a result of
redemption or transfer a shareholder's investment in a Portfolio has a value of
less than $500,000. However, before Pooled Trust, Inc. redeems such shares and
sends the proceeds to the shareholder, the shareholder will be notified in
writing that the value of the shares in the account is less than $500,000 and
will be allowed 90 days from that date of notice to make an additional
investment to meet the required minimum. Any redemption in an inactive account
established with a minimum investment may trigger mandatory redemption.
* * *
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Pooled Trust, Inc. and Foundation Funds has available certain
redemption privileges, as described below. They are unavailable to shareholders
of The International Equity Portfolio, The Labor Select International Equity
Portfolio, The International Small-Cap Portfolio, The Global Fixed Income
Portfolio, The International Fixed Income Portfolio and The Global Equity
Portfolio whose redemptions trigger the special in-kind redemption procedures.
See the related Prospectus. The Portfolios reserve the right to suspend or
terminate these expedited payment procedures at any time in the future.
Expedited Telephone Redemptions
Shareholders wishing to redeem shares for which certificates have not
been issued may call Pooled Trust, Inc. at (800-231-8002) prior to 4 p.m.,
Eastern time, and have the proceeds mailed to them at the record address.
Redemptions involving The Asset Allocation Portfolio will be forwarded to
Foundation Funds. Checks payable to the shareholder(s) of record will normally
be mailed three business days, but no later than seven days, after receipt of
the redemption request.
In addition, redemption proceeds can be transferred to your
predesignated bank account by wire or by check by calling Pooled Trust, Inc., as
described above. The Telephone Redemption Option on the Account Registration
Form must have been elected by the shareholder and filed with Pooled Trust, Inc.
before the request is received. Payment will be made by wire or check to the
bank account designated on the authorization form as follows:
1. Payment By Wire: Request that Federal Funds be wired to the bank account
designated on the Account Registration Form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is no charge for this service. If the proceeds are wired to the
shareholder's account at a bank which is not a member of the Federal Reserve
System, there could be a delay in the crediting of the Portfolio to the
shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account designated on
the Account Registration Form. Redemption proceeds will normally be mailed three
business days, but no later than seven days, from the date of the telephone
request. This procedure will take longer than the Payment by Wire option (1
above) because of the extra time necessary for the mailing and clearing of the
check after the bank receives it. If expedited payment under these procedures
could adversely affect a Portfolio, Pooled Trust, Inc. or as applicable,
Foundation Funds may take up to seven days to pay the shareholder.
To reduce the risk of attempted fraudulent use of the telephone
redemption procedure, payment will be made only to the bank account designated
on the Account Registration Form. If a shareholder wishes to change the bank
account designated for such redemption, a written request in accordance with the
instructions set forth in the Prospectus will be required.
Exchange Privilege
Shares of each Portfolio may be exchanged for shares of any other
Portfolio or for the institutional classes of the other funds in the Delaware
Investments family. Exchange requests should be sent to Delaware Pooled Trust,
Inc., One Commerce Square, 2005 Market Street, Philadelphia, PA 19103 Attn:
Client Services. Exchanges involving The Asset Allocation Portfolio will be
forwarded to Foundation Funds.
Any such exchange will be calculated on the basis of the respective net
asset values of the shares involved and will be subject to the minimum
investment requirements noted above. There is no sales commission or charge of
any kind, except for the special purchase and redemption reimbursement fees for
exchanges involving shares of The International Mid-Cap Sub Portfolio, The
Emerging Markets Portfolio, The Global Equity Portfolio and The International
Small-Cap Portfolio. See "EXCHANGE PRIVILEGE" under "SHAREHOLDER SERVICES" in
the related Prospectus. The shares of a Portfolio into which an exchange is
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made, if necessary, must be authorized for sale in the state in which the
investor is domiciled. Before making an exchange, a shareholder should consider
the investment objectives of the Portfolio to be purchased.
Exchange requests may be made either by mail, FAX message or by
telephone. Telephone exchanges will be accepted only if the certificates for the
shares to be exchanged are held by Pooled Trust, Inc. or, as applicable,
Foundation Funds for the account of the shareholder and the registration of the
two accounts will be identical. Requests for exchanges received prior to 4 p.m.,
Eastern time, for the Portfolios will be processed as of the close of business
on the same day. Requests received after this time will be processed on the next
business day. Exchanges may also be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Directors or
Trustees, as applicable, to assure that such exchanges do not disadvantage a
Portfolio and its shareholders. Exchanges into and out of The International
Equity Portfolio, The Labor Select International Equity Portfolio, The Global
Fixed Income Portfolio, The International Fixed Income Portfolio, The
International Small-Cap Portfolio and The Global Equity Portfolio shall be
subject to the special purchase and redemption procedures identified in sections
of the related Prospectus entitled Purchase of Shares and Redemption of Shares.
For federal income tax purposes, an exchange between Portfolios is a
taxable event for shareholders subject to federal income tax, and, accordingly,
a gain or loss may be realized. Pooled Trust, Inc. and Foundation Funds reserves
the right to suspend or terminate or amend the terms of the exchange privilege
upon 60 days' written notice to client shareholders.
* * *
Neither Pooled Trust, Inc., Foundation Funds, the Portfolios nor the
Portfolios' transfer agent, Delaware Service Company, Inc., is responsible for
any losses incurred in acting upon written or telephone instructions for
redemption or exchange of Portfolio shares which are reasonably believed to be
genuine. With respect to such telephone transactions, Pooled Trust, Inc. or, as
applicable, Foundation Funds will ensure that reasonable procedures are used to
confirm that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as if it does not, Pooled
Trust, Inc., Foundation Funds or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone.
Class A Shares, Class B Shares and Class C Shares and Institutional Class Shares
of The Real Estate Investment Trust Portfolio
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
the Portfolio and all exchanges of shares constitute taxable events. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Portfolio receives your request in good
order, subject, in the case of a redemption, to any applicable CDSC or Limited
CDSC. For example, redemption or exchange requests received in good order after
the time the offering price and net asset value of shares are determined will be
processed on the next business day. A shareholder submitting a redemption
request may indicate that he or she wishes to receive redemption proceeds of a
specific dollar amount. In the case of such a request, and in the case of
certain redemptions from retirement plan accounts, the Portfolio will redeem the
number of shares necessary to deduct the applicable CDSC in the case of Class B
Shares and Class C Shares, and, if applicable, the Limited CDSC in the case of
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Class A Shares and tender to the shareholder the requested amount, assuming the
shareholder holds enough shares in his or her account for the redemption to be
processed in this manner. Otherwise, the amount tendered to the shareholder upon
redemption will be reduced by the amount of the applicable CDSC or Limited CDSC.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. The
Portfolio may suspend, terminate, or amend the terms of the exchange privilege
upon 60 days' written notice to shareholders.
In addition to redemption of Portfolio shares, the Distributor, acting
as agent of the Portfolio, offers to repurchase Portfolio shares from
broker/dealers acting on behalf of shareholders. The redemption or repurchase
price, which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order by
the Portfolio, its agent, or certain authorized persons, subject to applicable
CDSC or Limited CDSC. This is computed and effective at the time the offering
price and net asset value are determined. See "DETERMINING OFFERING PRICE AND
NET ASSET VALUE." The Portfolio and the Distributor end their business days at 5
p.m., Eastern time. This offer is discretionary and may be completely withdrawn
without further notice by the Distributor.
Orders for the repurchase of Portfolio shares which are submitted to
the Distributor prior to the close of its business day will be executed at the
net asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Portfolio or certain other authorized persons (see
"DISTRIBUTION AND SERVICE" under "INVESTMENT MANAGEMENT AGREEMENTS AND
SUB-ADVISORY AGREEMENTS"); provided, however, that each commitment to mail or
wire redemption proceeds by a certain time, as described below, is modified by
the qualifications described in the next paragraph.
The Portfolio will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. The Portfolio will honor redemption requests as to shares for which a
check was tendered as payment, but the Portfolio will not mail or wire the
proceeds until it is reasonably satisfied that the purchase check has cleared,
which may take up to 15 days from the purchase date. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. The Portfolio
reserves the right to reject a written or telephone redemption request or delay
payment of redemption proceeds if there has been a recent change to the
shareholder's address of record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Portfolio will automatically redeem from the shareholder's account the shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Portfolio or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
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which disposal by the Portfolio of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Portfolio fairly to value
its assets, or in the event that the SEC has provided for such suspension for
the protection of shareholders, the Portfolio may postpone payment or suspend
the right of redemption or repurchase. In such case, the shareholder may
withdraw the request for redemption or leave it standing as a request for
redemption at the net asset value next determined after the suspension has been
terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Pooled
Trust, Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which the Portfolio is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Portfolio during any
90-day period for any one shareholder.
The value of the Portfolio's investments is subject to changing market
prices. Thus, a shareholder reselling shares to the Portfolio may sustain either
a gain or loss, depending upon the price paid and the price received for such
shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See "CONTINGENT DEFERRED SALES
CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A SHARES PURCHASED AT NET ASSET VALUE,"
below. Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during the fifth
year following purchase; and (iv) 1% if shares are redeemed during the sixth
year following purchase and (v) 0% thereafter. Class C Shares are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. See
"CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES AND CLASS C SHARES" under
"PURCHASING SHARES." Except for the applicable CDSC or Limited CDSC and, with
respect to the expedited payment by wire described below for which, in the case
of the Class A, B and C Shares, there is currently a $7.50 bank wiring cost,
neither the Portfolio nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from the Portfolio, the Portfolio's CDSC schedule may be higher
than the CDSC schedule relating to the New Shares acquired as a result of the
exchange. For purposes of computing the CDSC that may be payable upon a
disposition of the New Shares, the period of time that an investor held the
Original Shares is added to the period of time that an investor held the New
Shares. With respect to Class B Shares, the automatic conversion schedule of the
Original Shares may be longer than that of the New Shares. Consequently, an
investment in New Shares by exchange may subject an investor to the higher 12b-1
fees applicable to Class B Shares of the Portfolio for a longer period of time
than if the investment in New Shares were made directly.
Written Redemption
You can write to the Portfolio at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Portfolio require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). The Portfolio reserves the
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right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Portfolio may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to the Portfolio (at 1818 Market Street,
Philadelphia, PA 19103) to request an exchange of any or all of your shares into
another mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Portfolio in which you have your
account in writing that you do not wish to have such services available with
respect to your account. The Portfolio reserves the right to modify, terminate
or suspend these procedures upon 60 days' written notice to shareholders. It may
be difficult to reach the Portfolio by telephone during periods when market or
economic conditions lead to an unusually large volume of telephone requests.
Neither the Portfolio nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Portfolio shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Portfolio will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Portfolio or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent transactions. Telephone instructions received by
the Class A, B and C Shares are generally tape recorded, and a written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which your shares
are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. First Union National Bank's fee
(currently $7.50) will be deducted from Class A, B and C Shares redemption
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proceeds. If you ask for a check, it will normally be mailed the next business
day after receipt of your redemption request to your predesignated bank account.
There are no separate fees for this redemption method, but the mail time may
delay getting funds into your bank account. Simply call the Shareholder Service
Center prior to the time the offering price and net asset value are determined,
as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of the Portfolio, as described above.
Telephone exchanges may be subject to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Portfolio
reserve the right to record exchange instructions received by telephone and to
reject exchange requests at any time in the future.
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Class A, B and
C Shares by phone using MoneyLine (SM) On Demand. When you authorize the
Portfolio to accept such requests from you or your investment dealer, funds will
be deposited to (for share redemptions) your predesignated bank account. Your
request will be processed the same day if you call prior to 4 p.m., Eastern
time. There is a $25 minimum and $50,000 maximum limit for MoneyLine (SM) On
Demand transactions. See "MONEYLINE (SM) ON DEMAND" under "INVESTMENT PLANS."
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Portfolio will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. The Portfolio reserves the right to
temporarily or permanently terminate the exchange privilege or reject any
specific purchase order for any person whose transactions seem to follow a
timing pattern who: (i) makes an exchange request out of the Portfolio within
two weeks of an earlier exchange request out of the Portfolio, or (ii) makes
more than two exchanges out of the Portfolio per calendar quarter, or (iii)
exchanges shares equal in value to at least $5 million, or more than 1/4 of 1%
of the Portfolio's net assets. Accounts under common ownership or control,
including accounts administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be aggregated for purposes of the
exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Decatur Income Fund, (2) Decatur Total Return Fund, (3) Delaware Balanced Fund,
(4) Limited-Term Government Fund, (5) USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. The Portfolio reserves the
right to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a time pattern (as described above).
The Portfolio also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the investment
adviser's judgment, the Portfolio would be unable to invest effectively in
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accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A shareholder's purchase exchanges may be
restricted or refused if the Portfolio receives or anticipates simultaneous
orders affecting significant portions of the Portfolio's assets. In particular,
a pattern of exchanges that coincide with a "market timing" strategy may be
disruptive to the Portfolio and therefore may be refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Portfolios do not recommend
any specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for the Portfolio's prototype
retirement plans. Shares purchased with the initial investment and through
reinvestment of cash dividends and realized securities profits distributions
will be credited to the shareholder's account and sufficient full and fractional
shares will be redeemed at the net asset value calculated on the third business
day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the
investment adviser must be terminated before a Systematic Withdrawal Plan with
respect to such shares can take effect, except if the shareholder is a
participant in one of our retirement plans or is investing in Delaware
Investments funds which do not carry a sales charge. Redemptions of Class A
Shares pursuant to a Systematic Withdrawal Plan may be subject to a Limited CDSC
if the purchase was made at net asset value and a dealer's commission has been
paid on that purchase. The applicable CDSC for Class B Shares and Class C Shares
redeemed via a Systematic Withdrawal Plan will be waived if, on the date that
the Plan is established, the annual amount selected to be withdrawn is less than
12% of the account balance. If the annual amount selected to be withdrawn
exceeds 12% of the account balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the Plan will be subject to the
applicable CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment will be those
not subject to a CDSC because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. The 12%
annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See "WAIVER OF CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES AND CLASS
C SHARES," below.
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<PAGE>
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Portfolio reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Portfolio
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Portfolio account, you must have your signature guaranteed. The Portfolio does
not charge a fee for any this service; however, your bank may charge a fee. This
service is not available for retirement plans.
The Systematic Withdrawal Plan is not available for the Institutional
Class. Shareholders should consult with their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of the Portfolio or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
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Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Portfolio's right to liquidate a shareholder's account if the aggregate
net asset value of the shares held in the account is less than the
then-effective minimum account size; (ii) distributions to participants from a
retirement plan qualified under section 401(a) or 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), or due to death of a participant in such
a plan; (iii) redemptions pursuant to the direction of a participant or
beneficiary of a retirement plan qualified under section 401(a) or 401(k) of the
Code with respect to that retirement plan; (iv) periodic distributions from an
IRA, SIMPLE IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death,
disability, or attainment of age 59 1/2, and IRA distributions qualifying under
Section 72(t) of the Internal Revenue Code; (v) returns of excess contributions
to an IRA; (vi) distributions by other employee benefit plans to pay benefits;
(vii) distributions described in (ii), (iv), and (vi) above pursuant to a
systematic withdrawal plan; and (viii) redemptions by the classes of
shareholders who are permitted to purchase shares at net asset value, regardless
of the size of the purchase (see "BUYING CLASS A SHARES AT NET ASSET VALUE"
under "PURCHASING SHARES").
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Portfolio's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) returns of excess contributions to an IRA, SIMPLE
IRA, SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to Minors
Acts or trust accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section 72 of the
Code) of all registered owners occurring after the purchase of the shares being
redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Portfolio's right to liquidate
a shareholder's account if the aggregate net asset value of the shares held in
the account is less than the then-effective minimum account size; (ii) returns
of excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of all registered owners of the
account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
* * *
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<PAGE>
In addition, the CDSC will be waived on Class B Shares and Class C
Shares redeemed in accordance with a Systematic Withdrawal Plan if the annual
amount selected to be withdrawn under the Plan does not exceed 12% of the value
of the account on the date that the Systematic Withdrawal Plan was established
or modified.
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DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Each Portfolio has qualified or intends to qualify, and each that has
qualified intends to continue to qualify, as a regulated investment company
under Subchapter M of the Code. As such, a Portfolio will not be subject to
federal income tax, or to any excise tax, to the extent its earnings are
distributed as provided in the Code and it satisfies other requirements relating
to the sources of its income and diversification of its assets.
The policy of Pooled Trust, Inc. and Foundation Funds, as applicable,
is to distribute substantially all of each Portfolio's net investment income and
any net realized capital gains in the amount and at the times that will avoid
any federal income or excise taxes. All dividends and capital gains
distributions of accounts in REIT Fund Institutional Class shall be
automatically reinvested in the Class. For all other Portfolios and Classes of
The Real Estate Investment Trust Portfolio, shareholders may elect to receive
dividends and capital gains distributions in cash, otherwise, all such dividends
and distributions will be automatically reinvested in the Portfolios. The
amounts of any dividend or capital gains distributions cannot be predicted.
All dividends out of net investment income, together with distributions
from short-term capital gains, will be taxable to those shareholders who are
subject to income taxes as ordinary income. (These distributions may be eligible
for the dividends-received deductions for corporations.) Any net long-term
capital gains distributed to those shareholders who are subject to income tax
will be taxable as such, regardless of the length of time a shareholder has
owned their shares.
For the fiscal year ended October 31, 1998, the percentage of dividends
paid by the following Portfolios qualified for the dividends-received deduction:
The Large-Cap Value Equity Portfolio 74%
The Real Estate Investment Trust Portfolio 100%
The Core Equity Portfolio 100%
The Mid-Cap Growth Equity Portfolio 8%
The Mid-Cap Value Equity Portfolio 100%
The Small-Cap Value Equity Portfolio N/A
The Small-Cap Growth Equity Portfolio 1%
The Real Estate Investment Trust Portfolio II 100%
The Global Equity Portfolio 94%
The International Equity Portfolio 100%
The Labor Select International Equity Portfolio 100%
The Emerging Markets Portfolio 100%
The Intermediate Fixed Income Portfolio none
The Aggregate Fixed Income Portfolio none
The High-Yield Bond Portfolio 3 %
The Diversified Core Fixed Income Portfolio none
The Global Fixed Income Portfolio none
The International Fixed Income Portfolio none
The Asset Allocation Portfolio N/A
The International Mid-Cap Sub Portfolio N/A
The International Small-Cap Portfolio N/A
The Balanced Portfolio N/A
The Equity Income Portfolio N/A
The Select Equity Portfolio N/A
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Undistributed net investment income is included in the Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore on
the "ex-dividend" date, the net asset value per share excludes the dividend
(i.e., is reduced by the per share amount of the dividend). Dividends paid
shortly after the purchase of shares by an investor, although in effect a return
of capital, are taxable to shareholders who are subject to tax.
Each Portfolio is treated as a separate entity (and hence as a separate
"regulated investment company") for federal tax purposes. Any net capital gains
recognized by a Portfolio are distributed to its investors without need to
offset (for federal income tax purposes) such gains against any net capital
losses of another Portfolio.
Each year, Pooled Trust, Inc. or, as applicable, Foundation Funds will
mail information to investors on the amount and tax status of each Portfolio's
dividends and distributions. Shareholders should consult their own tax advisers
regarding specific questions as to federal, state or local taxes.
Each class of shares of The Real Estate Investment Trust Portfolio will
share proportionately in the investment income and expenses of the Portfolio,
except that Class A Shares, Class B Shares and Class C Shares alone will incur
distribution fees under their respective 12b-1 plans.
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<PAGE>
TAXES
The following supplements the tax disclosure provided in the
Prospectuses.
Under the Taxpayer Relief Act of 1997, as revised by the Internal
Revenue Service Act of 1998 (the "1998 Act") and the Omnibus Consolidated and
Emergency Supplemental Appropriations Act, a Portfolio is required to track its
sales of portfolio securities and to report its capital gain distributions to
you according to the following categories of holding periods:
"Mid-term capital gains" or "28 percent rate gain": securities sold by a
Portfolio after July 28, 1997 that were held more than one year but not
more than 18 months. These gains will be taxable to individual investors
at a maximum rate of 28%. This category of gains applied only to gains and
distributions in 1997.
"1997 Act long-term capital gains" or "20 percent rate gain": securities
sold between May 7, 1997 and July 28, 1997 that were held for more than 12
months, and securities sold by a Portfolio after July 28, 1997 that were
held for more than 18 months. As revised by the 1998 Act, this rate
applies to securities held for more than 12 months and sold in tax years
beginning after December 1, 1997. These gains will be taxable to
individual investors at a maximum rate of 20% for investors in the 28% or
higher federal income tax brackets, and at a maximum rate of 10% for
investors in the 15% federal income tax bracket. The Omnibus Consolidated
and Emergency Supplemental Appropriations Act passed in October of 1998
included technical corrections to the 1998 Act. The effect of this
correction is that essentially all capital gain distributions paid to
shareholders during 1998 will be taxed at a maximum rate of 20%.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject to
tax at higher rate brackets, qualified five-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than five years. Taxpayers subject to tax at a higher rate brackets
may also make an election for shares held on January 1, 2001 to recognize
gain on their shares in order to qualify such shares as qualified
five-year property. These gains will be taxable to individual investors at
a maximum rate of 18% for investors in the 28% or higher federal income
tax brackets, and at a maximum rate of 8% for investors in the 15% federal
income tax bracket when sold after the five-year holding period.
A portion of each Portfolio's dividends may qualify for the
dividends-received deduction for corporations provided in the federal income tax
law. The portion of dividends paid by a Portfolio that so qualifies will be
designated each year in a notice mailed to a Portfolio's shareholders, and
cannot exceed the gross amount of dividends received by a Portfolio from
domestic (U.S.) corporations that would have qualified for the
dividends-received deduction in the hands of a Portfolio if the Portfolio was a
regular corporation. The availability of the dividends-received deduction is
subject to certain holding period and debt financing restrictions imposed under
the Code on the corporation claiming the deduction. Under the 1997 Act, the
amount that a Portfolio may designate as eligible for the dividends-received
deduction will be reduced or eliminated if the shares on which the dividends
earned by a Portfolio were debt-financed or held by a Portfolio for less than a
46-day period during a 90-day period beginning 45 days before the ex-dividend
date and ending 45 days after the ex-dividend date. Similarly, if your Portfolio
shares are debt-financed or held by you for less than a 46-day period during a
90-day period beginning 45 days before the ex-dividend date and ending 45 days
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<PAGE>
after the ex-dividend date, then the dividends-received deduction for Portfolio
dividends on your shares may also be reduced or eliminated. Even if designated
as dividends eligible for the dividends-received deduction, all dividends
(including any deducted portion) must be included in your alternative minimum
taxable income calculation.
Shareholders will be notified annually by Pooled Trust, Inc. or
Foundation Funds, as applicable, as to the federal income tax status of
dividends and distributions paid by their Portfolio.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. Because shareholders' state
and local taxes may be different than the federal taxes described above,
shareholders should consult their own tax advisers. Each year Pooled Trust, Inc.
or Foundation Funds, as applicable, will mail to you information on the amount
and tax status of each Portfolio's dividends and distribution.
See also "OTHER TAX REQUIREMENTS" under "ACCOUNTING AND TAX ISSUES" in
this Part B.
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Futures Contracts and Stock Options
(The Mid-Cap Growth Equity Portfolio, The Real Estate Investment Trust
Portfolios, The Emerging Markets Portfolio, The Global Equity Portfolio, The
Balanced Portfolio, The Equity Income Portfolio, The Select Equity Portfolio,
The International Small-Cap Portfolio, The Diversified Core Fixed Income
Portfolio, The Asset Allocation Portfolio, The Small-Cap Value Equity Portfolio,
The Small-Cap Growth Equity Portfolio and The Core Equity Portfolio)
The Mid-Cap Growth Equity Portfolio's, The Real Estate Investment Trust
Portfolios', The Emerging Markets Portfolio's, The Global Equity Portfolio's,
The Diversified Core Fixed Income Portfolio's, The Asset Allocation Portfolio's,
The Small-Cap Value Equity Portfolio's, The Small-Cap Growth Equity Portfolio's,
The Balanced Portfolio's, The Equity Income Portfolio's, The Select Equity
Portfolio's, The International Small-Cap Portfolio's and The Core Equity
Portfolio's transactions in options and futures contracts will be subject to
special tax rules that may affect the amount, timing and character of
distributions to shareholders. For example, certain positions held by a
Portfolio on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out) on such day, and any gain or loss associated
with such positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by a Portfolio that substantially diminish
its risk of loss with respect to other positions in a Portfolio will constitute
"straddles," which are subject to special tax rules that may cause deferral of
the Portfolio's losses, adjustments in the holding periods of Portfolio
securities and conversion of short-term into long-term capital losses. Certain
tax elections exist for straddles which could alter the effects of these rules.
The Portfolios will limit their activities in options and futures contracts to
the extent necessary to meet the requirements of Subchapter M of the Code.
Forward Currency Contracts
(The International Equity Portfolio, The International Mid-Cap Sub Portfolio,
The Labor Select International Equity Portfolio, The Real Estate Investment
Trust Portfolios, The Global Fixed Income Portfolio, The Emerging Markets
Portfolio, The International Fixed Income Portfolio, The Global Equity
Portfolio, The Diversified Core Fixed Income Portfolio, The Asset Allocation
Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth Equity
Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The Select
Equity Portfolio, The International Small-Cap Portfolio and The Core Equity
Portfolio)
The International Equity Portfolio, The International Mid-Cap Sub
Portfolio, The Labor Select International Equity Portfolio, The Real Estate
Investment Trust Portfolios, The Global Fixed Income Portfolio, The
International Fixed Income Portfolio, The Emerging Markets Portfolio, The Global
Equity Portfolio, The Diversified Core Fixed Income Portfolio, The Asset
Allocation Portfolio, The Small-Cap Value Equity Portfolio, The Small-Cap Growth
Equity Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio, The International Small-Cap Portfolio and The Core
Equity Portfolio will be required for federal income tax purposes to recognize
any gains and losses on forward currency contracts as of the end of each taxable
year as well as those actually realized during the year. In most cases, any such
gain or loss recognized with respect to a forward currency contract is
considered to be ordinary income or loss. Furthermore, forward currency futures
contracts which are intended to hedge against a change in the value of
securities held by these Portfolios may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.
Special tax considerations also apply with respect to foreign
investments of these Portfolios. For example, certain foreign exchange gains and
losses (including exchange gains and losses on forward currency contracts)
realized by the Portfolio will be treated as ordinary income or losses.
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State and Local Taxes
Shares of Pooled Trust, Inc. are exempt from Pennsylvania county
personal property tax.
INVESTMENT MANAGEMENT AGREEMENTS AND SUB-ADVISORY AGREEMENTS
Delaware Management Company ("Delaware"), One Commerce Square,
Philadelphia, PA 19103, furnishes investment management services to The
Large-Cap Value Equity, The Mid-Cap Growth Equity, The Intermediate Fixed
Income, The Aggregate Fixed Income, The Mid-Cap Value Equity, The Real Estate
Investment Trust, The High-Yield Bond, The Diversified Core Fixed Income and The
Asset Allocation, The Small-Cap Growth Equity, The Core Equity, The Balanced,
The Equity Income, The Select Equity and The Small-Cap Value Equity Portfolios,
subject to the supervision and direction of Board of Directors or Trustees of
Pooled Trust, Inc. or, as applicable, Foundation Funds. Delaware International
Advisers Ltd. ("Delaware International"), Third Floor, 80 Cheapside, London,
England EC2V 6EE, furnishes similar services to The International Equity, The
International Mid-Cap Sub Portfolio, The Labor Select International Equity, The
Global Fixed Income, The International Fixed Income, The Emerging Markets, The
Global Equity and The International Small-Cap Portfolios, and provides
sub-advisory services to The Diversified Core Fixed Income Portfolio subject to
the supervision and direction of Pooled Trust, Inc.'s Board of Directors.
Lincoln Investment Management, Inc. ("Lincoln") serves as sub-adviser to
Delaware with respect to The Real Estate Investment Trust Portfolios. Lincoln's
address is 200 E. Berry Street, Fort Wayne, Indiana 46802.
Delaware and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On October 31, 1998, Delaware and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $42 billion in assets in
the various institutional or separately managed (approximately $24,854,600,000)
and investment company ($17,780,970,000) accounts.
Lincoln (formerly Lincoln National Investment Management Company) was
incorporated in 1930. As of October 31, 1998, Lincoln had approximately $39.8
billion in assets under management.
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The following table contains the dates of the Investment Management
Agreements for the Portfolios as well as the dates that they were approved by
shareholders.
<TABLE>
<CAPTION>
Portfolio Date of Agreement Date Approved by Shareholders
<S> <C> <C>
The Large-Cap Value Equity Portfolio April 15, 1999 April 13, 1999
The Mid-Cap Growth Equity Portfolio April 15, 1999 April 13, 1999
The International Fixed Income Portfolio April 15, 1999 April 13, 1999
The International Equity Portfolio April 15, 1999 April 13, 1999
The Global Fixed Income Portfolio April 15, 1999 April 13, 1999
The Intermediate Fixed Income Portfolio April 15, 1999 April 13, 1999
The Mid-Cap Value Equity Portfolio April 15, 1999 April 13, 1999
The Labor Select International Equity Portfolio April 15, 1999 April 13, 1999
The Real Estate Investment Trust Portfolio April 15, 1999 April 13, 1999
The High-Yield Bond Portfolio April 15, 1999 April 13, 1999
The Emerging Markets Portfolio April 15, 1999 April 13, 1999
The Global Equity Portfolio April 15, 1999 April 13, 1999
The Real Estate Investment Trust Portfolio II April 15, 1999 April 13, 1999
The Aggregate Fixed Income Portfolio April 15, 1999 April 13, 1999
The Diversified Core Fixed Income Portfolio April 15, 1999 April 13, 1999
The Core Equity Portfolio April 15, 1999 April 13, 1999
The Small-Cap Growth Equity Portfolio April 15, 1999 April 13, 1999
The Small-Cap Value Equity Portfolio March 1, 1999 March 1, 1999
The Balanced Portfolio June 29, 1999 June 29, 1999*
The Equity Income Portfolio June 29, 1999 June 29, 1999*
The Select Equity Portfolio June 29, 1999 June 29, 1999*
The International Small-Cap Portfolio June 29, 1999 **
The International Mid-Cap Sub Portfolio December 23, 1998 **
The Asset Allocation Portfolio August 31, 1998 **
</TABLE>
*Date approved by the initial shareholder
**Will be approved by the initial shareholder prior to commencement of
operations.
The Sub-Advisory Agreements between Delaware and Lincoln for The Real
Estate Investment Trust Portfolios are each dated April 15, 1999 and were
approved by shareholders on April 13, 1999. The Sub-Advisory Agreement between
Delaware and Delaware International for The Diversified Core Fixed Income
Portfolio is dated April 15, 1999 and was approved by shareholders on April 13,
1999.
Each Portfolio's Investment Management Agreement has an initial term of
two years and may be renewed after its initial term only so long as such renewal
and continuance are specifically approved at least annually by the Board of
Directors or Trustees, as applicable, or by vote of a majority of the
outstanding voting securities of the Portfolio, and only if the terms of the
renewal thereof have been approved by the vote of a majority of the directors or
trustees of Pooled Trust, Inc. or Foundation Funds who are not parties thereto
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Each Agreement is terminable without
penalty on 60 days' notice by the directors of Pooled Trust, Inc., the trustees
of Foundation Funds or by the investment adviser. Each Agreement will terminate
automatically in the event of its assignment.
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As compensation for the services to be rendered under their advisory
agreements, Delaware or, as relevant, Delaware International is entitled to an
advisory fee calculated by applying a quarterly rate, based on the following
annual percentage rates, to the Portfolio's average daily net assets for the
quarter:
Portfolio Rate
The Large-Cap Value Equity Portfolio 0.55%
The Mid-Cap Growth Equity Portfolio 0.75%
The International Equity Portfolio 0.75%
The International Mid-Cap Sub Portfolio 0.75%
The Mid-Cap Value Equity Portfolio 0.75%
The Labor Select International Equity Portfolio 0.75%
The Real Estate Investment Trust Portfolio 0.75%(1)
The Real Estate Investment Trust Portfolio II 0.75%(1)
The Intermediate Fixed Income Portfolio 0.40%
The Aggregate Fixed Income Portfolio 0.40%
The Global Fixed Income Portfolio 0.50%
The International Fixed Income Portfolio 0.50%
The High-Yield Bond Portfolio 0.45%
The Emerging Markets Portfolio 1.00%(2)
The Global Equity Portfolio 0.75%(2)
The Diversified Core Fixed Income Portfolio 0.43%(2)
The Asset Allocation Portfolio 0.05%
The Small-Cap Growth Equity Portfolio 0.75%
The Core Equity Portfolio 0.55%
The Small-Cap Value Equity Portfolio 0.75%
The Balanced Portfolio 0.55%
The Equity Income Portfolio 0.55%
The Select Equity Portfolio 1.00%
The International Small-Cap Portfolio 1.00%
(1) Delaware has entered into a sub-advisory agreement with Lincoln with
respect to The Real Estate Investment Trust Portfolios. As compensation
for its services as sub-adviser to Delaware, Lincoln is entitled to
receive a sub-advisory fee equal to 30% of the investment management fee
under Delaware's Investment Management Agreement with Pooled Trust, Inc.
on behalf of the Portfolio.
(2) Delaware has entered into sub-advisory agreements with Delaware
International with respect to The Global Equity Portfolio and The
Diversified Core Fixed Income Portfolio. As compensation for its services
as sub-adviser to Delaware, Delaware International is entitled to receive
sub-advisory fees equal to 50% of the investment management fees under
Delaware's Investment Management Agreement with Pooled Trust, Inc. on
behalf of The Global Equity Portfolio. With respect to The Diversified
Core Fixed Income Portfolio, as compensation for Delaware International's
services as sub-adviser to Delaware, Delaware International is entitled to
receive sub-advisory fees from Delaware an amount equal to the management
fee paid to Delaware times a ratio; the numerator of which is the average
daily net assets represented by foreign assets and the denominator of
which is the average daily net assets of The Diversified Core Fixed Income
Portfolio, such amount to be calculated at the same time and measured over
the same period as the management fee.
92
<PAGE>
93
<PAGE>
Delaware, or as applicable Delaware International, has elected
voluntarily to waive that portion, if any of the annual investment advisory fees
payable by a particular Portfolio and (except with respect to The International
Mid-Cap Sub Portfolio) to pay a Portfolio for its expenses to the extent
necessary to ensure that the expenses of that Portfolio (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses) did not exceed, on
an annualized basis, the following percentages of average daily net assets from
the commencement of operations through October 31, 1999 (unless otherwise noted)
:
Portfolio
The Large-Cap Value Equity Portfolio 0.68%
The Mid-Cap Growth Equity Portfolio 0.93%
The International Equity Portfolio 0.96%
The Mid-Cap Value Equity Portfolio 0.89%
The Labor Select International Equity Portfolio 0.96%
The Real Estate Investment Trust Portfolio 0.95%(1)
The Real Estate Investment Trust Portfolio II 0.86%
The Intermediate Fixed Income Portfolio 0.53%
The Aggregate Fixed Income Portfolio 0.53%
The Global Fixed Income Portfolio 0.60%(2)
The International Fixed Income Portfolio 0.60%(3)
The High-Yield Bond Portfolio 0.59%
The Emerging Markets Portfolio 1.55%
The Global Equity Portfolio 0.96%
The Diversified Core Fixed Income Portfolio 0.57%
The Asset Allocation Portfolio 0.15%
The Small-Cap Growth Equity Portfolio 0.89%
The Core Equity Portfolio 0.68%
The Small-Cap Value Equity Portfolio 0.89%
The International Mid-Cap Sub Portfolio 0.85%
The Balanced Portfolio 0.68%
The Equity Income Portfolio 0.68%
The Select Equity Portfolio 1.20%
The International Small-Cap Portfolio 1.20%
(1) With respect to REIT Fund A Class, REIT Fund B Class, REIT Fund C Class and
REIT Fund Institutional Class and the Real Estate Investment Trust
Portfolio Class of The Real Estate Investment Trust Portfolio, Delaware has
elected voluntarily to waive that portion, if any, of the annual Investment
Advisory Fee payable by such classes and to reimburse each class for its
expenses to the extent necessary to ensure that the expenses of each class
(exclusive of applicable 12b-1 plan expenses, taxes, interest, brokerage
commissions, extraordinary expenses) do not exceed, as a percentage of
average net assets, on an annualized basis, 0.95% during the period
November 11, 1998 through October 31, 1999. From commencement of operations
of the classes through November 11, 1998, expenses were capped at 0.86%.
(2) Delaware International voluntarily elected to waive that portion, if any,
of its annual investment advisory fees and to pay The Global Fixed Income
Portfolio for its expenses to the extent necessary to ensure that the
expenses of that Portfolio (exclusive of taxes, interest, brokerage
commissions and extraordinary expenses) did not exceed, on an annualized
basis, 0.62% as a percentage of average net assets for the period from the
commencement of the public offering for the Portfolio through October 31,
1994. Such waiver was modified effective November 1, 1994 to provide that
such expenses of the Portfolio do not exceed, on an annualized basis, 0.60%
through October 31, 1999.
(3) Delaware International voluntarily elected to waive that portion, if any,
of its annual investment advisory fees and to pay The International Fixed
Income Portfolio for its respective expenses to the extent necessary to
ensure that the expenses of that Portfolio (exclusive of taxes, interest,
brokerage commissions and extraordinary expenses) did not exceed, on an
annualized basis, 0.62% as a percentage of average net assets for the
period from the commencement of the public offering for the Portfolio
through April 30, 1994. Such waiver for The International Fixed Income
Portfolio was modified effective May 1, 1994 to provide that such expenses
of the Portfolio do not exceed, on an annual basis, 0.60% through October
31, 1999.
94
<PAGE>
Investment management fees incurred for the last three fiscal years
with respect to each Portfolio follows:
<TABLE>
<CAPTION>
Portfolio October 31, 1998 October 31, 1997 October 31, 1996
<S> <C> <C> <C>
The Large-Cap Value Equity Portfolio $522,423 earned $441,785 earned $343,114 earned
484,387 paid $433,247 paid $328,126 paid
$38,036 waived $8,538 waived $14,988 waived
The Mid-Cap Growth Portfolio $46,880 earned $156,524 earned $214,315 earned
-0- paid $64,669 paid $185,753 paid
$46,880 waived $91,855 waived $28,562 waived
The International Equity Portfolio $4,214,740 paid $3,119,494 paid $1,632,036 paid
The Global Fixed Income Portfolio $2,649,961 earned $1,591,678 earned $762,870 earned
$2,527,013 paid $1,425,392 paid $661,220 paid
$122,948 waived $166,286 waived $101,650 waived
The Labor Select International Equity $658,651 earned $291,778 earned $100,144 earned
Portfolio(1) $613,775 paid $222,760 paid $50,055 paid
$44,876 waived $69,018 waived $50,089 waived
The Real Estate Investment Trust Portfolio(2) $543,001 earned $354,157 earned $153,313 earned
$424,875 paid $273,770 paid $127,250 paid
$118,126 waived $80,387 waived $26,063 waived
The Intermediate Fixed Income Portfolio(3) $119,736 earned $84,846 earned $19,389 earned
$-0- paid $18,659 paid $-0- paid
$199,736 waived $66,187 waived $19,389 waived
The High-Yield Bond Portfolio(4) $80,874 earned $27,213 earned N/A
$51,914 paid $13,551 paid
$28,960 waived $13,662 waived
The International Fixed Income Portfolio(5) $292,924 earned $61,031 earned N/A
$251,150 paid $29,230 paid
$41,774 waived $31,801 waived
The Emerging Markets Portfolio(6) $431,051 earned $89,760 earned N/A
$380,298 paid $54,085 paid
$50,753 $35,675 waived
The Global Equity Portfolio(7) $23,131 earned $941 earned N/A
$23,131 earned $941 earned
The Mid-Cap Value Equity Portfolio(8) $18,902 earned N/A N/A
$6,388 paid
$12,514 waived
The Aggregate Fixed Income Portfolio(8) $6,901 earned N/A N/A
$-0- paid
$6,901 waived
The Diversified Core Fixed Income Portfolio(8) $11,289 earned N/A N/A
$-0- paid
$11,289 waived
The Core Equity Portfolio(9) $1,360 earned N/A N/A
$-0- paid
$1,360 waived
The Small-Cap Growth Equity Portfolio(9) $2,815 earned N/A N/A
$-0- paid
$12,815
The Small-Cap Value Equity Portfolio(10) N/A N/A N/A
The Asset Allocation Portfolio(10) N/A N/A N/A
The International Mid-Cap Sub Portfolio(10) N/A N/A N/A
The Balanced Portfolio(10) N/A N/A N/A
The Equity Income Portfolio(10) N/A N/A N/A
The Select Equity Portfolio(10) N/A N/A N/A
The International Small-Cap Portfolio(10) N/A N/A N/A
(1) Commenced operations on December 19, 1995.
(2) Commenced operations on December 6, 1995.
(3) Commenced operations on March 12, 1996.
(4) Commenced operations on December 2, 1996.
(5) Commenced operations on April 11, 1997.
(6) Commenced operations on April 14, 1997.
(7) Commenced operations on October 15, 1997.
(8) Commenced operations on December 29, 1997.
(9) Commenced operations on September 15, 1998.
(10) Has not commended operations as of the date of this Part B.
</TABLE>
95
<PAGE>
On October 31, 1998, the total net assets of Pooled Trust, Inc. were
$1,769,284,150 broken down as follows:
The Large-Cap Value Equity Portfolio $117,858,330
The Mid-Cap Growth Equity Portfolio $4,879,498
The International Equity Portfolio $616,228,981
The Global Fixed Income Portfolio $660,740,708
The Labor Select International Equity Portfolio $103,350,327
The Real Estate Investment Trust Portfolio $70,888,256
The Real Estate Investment Trust Portfolio II $5,762,546
The Intermediate Fixed Income Portfolio $30,210,729
The High-Yield Bond Portfolio $20,705,567
The Emerging Markets Portfolio $34,030,343
The Global Equity Portfolio $3,092,554
The International Fixed Income Portfolio $87,996,539
The Diversified Core Fixed Income $3,215,869
The Limited-Term Maturity Portfolio $21,000
The Core Equity Portfolio $2,111,771
The Mid-Cap Value Equity Portfolio $2,724,084
The Small-Cap Growth Equity Portfolio $3,317,805
The Aggregate Fixed Income Portfolio $2,149,243
Delaware and Delaware International are indirect, wholly owned
subsidiaries of Delaware Management Holdings, Inc. ("DMH").
Except for the expenses borne by the investment advisers under their
respective Investment Management Agreements and the distributor under the
Distribution Agreements, each Portfolio is responsible for all of its own
expenses. Among others, these expenses include each Portfolio's proportionate
share of rent and certain other administrative expenses; the investment
management fees; transfer and dividend disbursing agent fees and costs;
custodian expenses; federal and state securities registration fees; proxy costs;
and the costs of preparing prospectuses and reports sent to shareholders.
96
<PAGE>
Distribution and Service
The Distributor is located at 1818 Market Street, Philadelphia, PA
19103 and serves as the national distributor for each Portfolio under separate
Distribution Agreements dated as follows:
The Large-Cap Value Equity Portfolio April 3, 1995
The Mid-Cap Growth Equity Portfolio April 3, 1995
The Intermediate Fixed Income Portfolio April 3, 1995
The International Equity Portfolio April 3, 1995
The Global Fixed Income Portfolio April 3, 1995
The International Fixed Income Portfolio April 3, 1995
The Real Estate Investment Trust Portfolio November 29, 1995
The Mid-Cap Value Equity Portfolio November 29, 1995
The Labor Select International Equity Portfolio November 29, 1995
The High-Yield Bond Portfolio November 29, 1995
The Emerging Markets Portfolio April 14, 1997
The Global Equity Portfolio October 14, 1997
The Real Estate Investment Trust Portfolio II October 14, 1997
The International Mid-Cap Sub Portfolio December 23, 1998
The Aggregate Fixed Income Portfolio December 24, 1997
The Diversified Core Fixed Income Portfolio December 24, 1997
The Asset Allocation Portfolio August 31, 1998
The Small-Cap Growth Equity Portfolio August 31, 1998
The Core Equity Portfolio August 31, 1998
The Small-Cap Value Equity Portfolio March 1, 1999
The Balanced Portfolio June 29, 1999
The Equity Income Portfolio June 29, 1999
The Select Equity Portfolio June 29, 1999
The International Small-Cap Portfolio June 29, 1999
The Distributor is an affiliate of the investment advisers and bears
all of the costs of promotion and distribution.
Delaware Service Company, Inc., an affiliate of Delaware, is Pooled
Trust, Inc.'s shareholder servicing, dividend disbursing and transfer agent for
each Portfolio pursuant to an Amended and Restated Shareholders Services
Agreement dated June 29, 1999. Delaware Service Company, Inc. also provides
accounting services to the Portfolio pursuant to the terms of a separate Fund
Accounting Agreement. Delaware Service Company, Inc.'s principal business
address is 1818 Market Street, Philadelphia, PA 19103. It is also an indirect,
wholly owned subsidiary of DMH.
The Portfolios have authorized one or more brokers to accept on its
behalf purchase and redemption orders in addition to the Transfer Agent. Such
brokers are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Portfolios. For purposes of pricing, a
Portfolio will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
97
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Pooled Trust, Inc. and Foundation Funds are
managed under the direction of its Board of Directors or Trustees, as
applicable.
As of May 31, 1999, no one account held 25% or more of the outstanding
shares of any of Pooled Trust, Inc.'s Portfolios or Foundation Funds'
portfolios. As of May 31, 1999, the directors and officers of Pooled Trust,
Inc., as a group, owned less than 1% of the outstanding shares of The Real
Estate Investment Trust Portfolio; they did not hold shares of any of the other
Portfolios. As of May 31, 1999, the trustees and officers of Foundation Funds
did not hold any shares of the Portfolios.
As of May 31, 1999, management believes the following accounts held of
record 5% or more of the outstanding shares of a Portfolio. Management has no
knowledge of beneficial ownership.
Delaware Pooled Trust, Inc.
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
The Large-Cap Value Northern Trust Company 1,509,525.950 16.82%
Equity Portfolio PHH Group 22-30049
P.O. Box 92956
Chicago, IL 60675-2956
Mac & Co. 1,416,397.850 15.79%
A/C CLRF5051922
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Mac & Co. 554,114.840 6.17%
A/C LNFF033902
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
State of Georgia Employees' 511,372.550 5.70%
Deferred Compensation Group Trust
200 Piedmont Avenue
Suite 1016 West
Atlanta, GA 30334-9010
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
The Mid-Cap Growth Crestar Bank 265,017.830 31.77%
Equity Portfolio Cust the College of William and Mary
Attn: William Copand Jr.
P.O. Box 8795 Private Funds Office
Williamsburg, VA 23187-8795
NCSC Staff Pension Plan 208,518.940 24.99%
Defined Benefit
8403 Colesville Rd. Ste 1200
Silver Spring, MD 20910-6322
The Mid-Cap Growth The City of Groton 160,598.230 19.25%
Equity Portfolio 295 Meridian Street
Groton, CT 06340-4040
Philadelphia Association of Zeta Psi 114,717.540 13.75%
Fraternity U/T/A E W Weil
613 Kirsch Avenue
Wayne, PA 19087-2902
The Intermediate Byrd & Co 408,758.580 22.91%
Fixed Income Portfolio c/o First Union National Bank
Mutual Funds Div. Processing PA4905
530 Walnut Street
Philadelphia, PA 19106-3620
The City of Groton 388,962.570 21.80%
295 Meridian Street
Groton, CT 06340-4040
</TABLE>
99
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Crestar Bank 345,525.630 19.36%
Cust The College of William and Mary
Attn: William Copand Jr
P.O. Box 8795 Private Funds Office
Williamsburg, VA 23187-8795
Fleet National Bank Trustee 164,123.200 9.19%
FBO International Terminal
Operating Pension
Attn: 50502918
P.O. Box 92800
Rochester, NY 14692-8900
Philadelphia Association of Zeta Psi 153,596.970 8.60%
Fraternity U/T/A E W Weil
613 Kirsch Avenue
Wayne, PA 19087-2902
Iron Workers #28 Pension Fund 119,483.930 6.69%
501 E. Franklin Street, Suite 206
Richmond, VA 23219-2330
The International The Salvation Army 3,447,013.090 8.14%
Equity Portfolio A Georgia Corporation
Board Designated
Territorial Financial Secretary
1424 Northeast Expressway
Atlanta, GA 30329-2088
The Salvation Army 3,393,114.890 8.01%
Eastern Territory
440 West Nyack Rd
West Nyack, NY 10994-1739
Norwest Bank Minnesota NA Cust. 3,139,453.580 7.41%
FBO Father Flanagan's FDN FD
P.O. Box 1533
Minneapolis, MN 55480-1533
</TABLE>
100
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
The Global Fixed Income Portfolio Public School Retirement System of the City 6,989,811.630 11.43%
of St. Louis
One Mercantile Center
Suite 2607
St. Louis, MO 63101-1643
Banker's Trust Co. 4,565,394.280 7.46%
FBO SLU Delaware Fund
Attn: Julie Druhe
500 Washington Ave.
St Louis, MO 63101-1261
Saxon and Company 4,559,531.090 7.45%
FBO Western Pennsylvania Teamsters
& Employers Pension Fund
A/C 10-01-002-1043205
P.O. Box 7780-1888
Philadelphia, PA 19183-0001
Bost and Co. 4,215,999.430 6.89%
A/C RTCF9526002
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
WA Suburban Sanitary Commission 3,358,002.290 5.49%
Employees Retirement Plan
14501 Sweitzer Ln
Laurel, MD 20707-5902
The International Montgomery County Public Schools 1,918,293.610 19.80%
Fixed Income Portfolio Employee's Pension & Retirement System
850 Hungerford Dr. Rm 154
Rockville, MD 20850-1718
Adventist Health System Sunbelt 1,915,794.090 19.77%
Healthcare Corp.- Core
111 N. Orlando Ave.
Winter Park, FL 32789
</TABLE>
101
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Comerica Bank Trustee 1,379,032.370 14.23%
Oakwood Pension Plan
P.O. Box 75000 M/C #3446
Detroit, MI 48275-0001
El Paso Firemen & Policemen's 1,266,644.940 13.07%
Pension Fund Policemen's Division
8201 Lockheed Drive Ste. 229
El Paso, TX 79925-2558
City of Brockton 1,164,435.260 12.01%
Contributory Retirement System
50 School Street
Brockton, MA 02301-4031
El Paso Firemen & Policemen's 791,653.090 8.17%
Pension Fund Policemen's Division
8201 Lockheed Drive Ste. 229
El Paso, TX 79925-2558
The Bank of New York ITF 783,496.330 8.08%
Unisource Group Trust 12/29/97
One Wall Street 12th Fl.
New York, NY 10005-2500
The Mid-Cap Lincoln National Life Insurance Company 358,455.880 99.99%
Value Equity Portfolio 1300 S. Clinton Street
Fort Wayne, IN 46802-3506
The Labor Select Maritime Association ILA 2,121,068.440 25.72%
International Equity Pension Fund
Portfolio 11550 Fuqua St Ste 425
Houston, TX 77034-4597
The Labor Select Operating Engineers 1,060,698.680 12.86%
International Equity LCL 101 Pension Fund
Portfolio 301 E. Armour Blvd. Suite 203
Kansas City, MO 64111-1259
Carpenters' Pension Fund of 805,119.100 9.76%
Western Pennsylvania
495 Mansfield Avenue
Pittsburgh, PA 15205-4376
</TABLE>
102
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Twin City Floor Covering Industry 650,646.490 7.89%
Zenith Adminstrators
7645 Metro Blvd
Minneapolis, MN 55439-3060
Local 25 SEIU and Participating Employers 583,943.300 7.08%
Pension Trust
111 West Jackson Blvd Suite 2102
Chicago, IL 60604-3503
Inlandboatmen's Union of the 469,032.110 5.68%
Pacific National Pension Plan
1220 SW Morrison Street, Suite 300
Portland, OR 97205-2222
Keystone District Council of Carpenters 431,509.860 5.23%
Pension Fund
524 S. 22nd Street
Harrisburg, PA 17104
Illinois Trust Company 390,161.280 5.15%
Cust. Plumbers & Steamfitters
Local 137 Pension TR Int'l Portfolio
P.O. Box 4042
Kalamazoo, MI 49003-4042
The High-Yield The Bank of New York ITF 756,721.350 31.04%
Bond Portfolio Unisource Group Trust 12/29/97
One Wall Street 12th Fl.
New York, NY 10005-2500
Schwartz 1996 Charitable Remainder Unitrust 387,995.840 15.91%
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062-4564
</TABLE>
103
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
The High-Yield Chicago Trust Co. 387,019.420 15.87%
Bond Portfolio FBO Lincoln National Corp.
Employees Retirement Plan
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201
The Northern Trust Company TTEE for 236,869.210 9.71%
Jack Miller Family Trust #4B
FBO Sheri Ring
c/o Northern Trust Co.
50 S. LaSalle Street
Chicago, IL 60603-1006
Melhorn & Co. FBO Shopmen's 200,336.350 8.21%
Iron Workers' Union #502 Pension Fund
c/o PNC Bank
1600 Market Street
Lower Level 2
Philadelphia, PA 19103-7240
Mac & Co LCWF 07802802 189,906.040 7.79%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15320-3198
Trust Four Hundred Thirty 139,436.000 5.71%
U/A/D 4/2/94
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062-4564
Trust Seven Hundred Thirty 139,436.000 5.71%
U/A/D 4/2/94
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062-4564
The Emerging Conagra Master Pension Trust 1,715,881.890 28.76%
Markets Portfolio One Conagra Drive
Omaha, NE 68102-5094
</TABLE>
104
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
The Emerging Burlington Northern Santa Fe 1,048,476.100 17.57%
Markets Portfolio Retirement Plan
Attn: Blaine A. Mineman
1700 E. Golf Rd.
Schaumburg, IL 60173-5084
Norwest Bank Minnesota NA Cust 925,928.260 15.52%
FBO Father Flanagan's Foundation Fund
#25332800
P.O. Box 1533
Minneapolis, MN 55480-1533
Mac & Co 602,240.900 10.09%
A/C COFF8583922
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Chicago Trust Company 562,257.760 9.42%
FBO Lincoln National Corp.
Employees Retirement Trust
1000 N. Water St. TR 4
Milwaukee, WI 53202
M.J. Murdock Charitable Trust 304,705.220 5.10%
703 Broadway, Suite 710
Vancouver, WA 98660-3308
The Global Lincoln National Life Insurance Company 366,910.330 99.99%
Equity Portfolio 1300 S. Clinton Street
Fort Wayne, IN 46802-3518
REIT Fund A Class Charles Schwab & Co., Inc. 403,244.750 23.36%
Special Custody Account for the Excl.
Benefits of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
REIT Fund B Class MLPF&S For the Sole 259,716.770 22.41%
Benefit of its Customers
Attn: Fund Administration-SEC#97SR7
4800 Deer Lake Drive E 2nd Fl.
Jacksonville, FL 32246-6484
</TABLE>
105
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
REIT Fund C Class MLPF&S For the Sole 24,888.810 9.65%
Benefit of its Customers
Attn: Fund Administration-SEC#97SR9
4800 Deer Lake Drive E 2nd Fl.
Jacksonville, FL 32246-6484
REIT Fund RS DMC Employee Profit Sharing Plan 111,057.350 77.89%
Institutional Class Delaware Management Company
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
Chase Manhattan Bank C/F 31,515.180 22.10%
Delaware Group Foundation Funds-
Income Portfolio
Attn: Marisol Gordan-Global Inv. Serv.
3 Metrotech Center, 8th Floor
Brooklyn, NY 11201-3800
REIT Lincoln National Life Insurance Company 1,256,958.350 57.12%
Portfolio Class 1300 S. Clinton Street
Fort Wayne, IN 46802-3518
American States Insurance Company 625,797.400 28.43%
500 N. Meridian Street
Indianapolis, IN 46802-1275
Lincoln National Life Insurance Company 317,782.330 14.44%
1300 S. Clinton Street
Fort Wayne, IN 46802-3518
The Real Estate The Philadelphia Orchestra Association 131,435.140 38.94%
Investment 1420 Locust Street Ste 400
Trust Portfolio II Philadelphia, PA 19102-4297
Lincoln National Life Insurance Company 130,253.930 38.59%
1300 S. Clinton Street
Fort Wayne, IN 46802-3518
</TABLE>
106
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
City of Groton 75,832.330 22.46%
295 Merdian Street
Groton, CT 06340-4040
The Aggregate Fixed NCSC Staff Pension Plan 407,327.810 53.58%
Income Portfolio Defined Benefit
8403 Colesville Road, Suite 1200
Silver Spring, MD 20910-6322
Lincoln National Life Insurance Company 241,287.210 31.74%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
NCSC Contract Employees Pension Plan 65,536.620 8.62%
Defined Contribution
8403 Colesville Road, Suite 1200
Silver Spring, MD 20910-6322
TTEES of Medical Rehabilitation, Inc. 46,026.220 6.05%
Profit Sharing Plan
FBO Ronald Zimmerman M.D.
4412 Penn Avenue
Pittsburgh, PA 15224-1312
The Diversified Core Lincoln National Life Insurance Company 394,786.900 99.99%
Fixed Income Portfolio 1300 S. Clinton Street
Fort Wayne, IN 46802-3506
The Small-Cap Growth Equity Portfolio Lincoln National Life Insurance Company 353,775.160 81.21%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
</TABLE>
107
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Our Sunday Visitor, Inc. 81,808.450 18.78%
200 Noll Plaza
Huntington, IN 46750-4304
The Core Equity Portfolio Lincoln National Life Insurance Company 235,909.430 82.52%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
TTEES of Medical Rehabilitation, Inc. 49,966.020 17.47%
Profit Sharing Plan
FBO Ronald Zimmerman M.D.
4412 Penn Avenue
Pittsburgh, PA 15224-1312
The Small-Cap Value Equity Portfolio Lincoln National Life Insurance Company 235,294.120 99.99%
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
Delaware Group
Foundation Funds
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
Income Portfolio A Class DMTC RS 401(k) 1,937,841.980 94.38%
Hoag Memorial Hospital Savings Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Income Portfolio B Class NFSC FEBO #OKS-998419 13,769.830 22.61%
NFSC/FMTC IRA Rollover
FBO Jonathan J. Williams
1122 Sinclair Way
Roseville, CA 95747-5814
A.G. Edwards and Sons Inc. C/F 12,551.880 20.61%
E Allen Northway
Rollover IRA Account
5308 Dixon Drive
Godfrey, IL 62035-1422
</TABLE>
108
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
NFSC FEBO #OKS-467138 7,918.380 13.00%
NFSC/FMTC IRA Rollover
FBO Judith Ann Bianco
5012 Alan Court
Carmichael, CA 95608-0916
Prudential Securities, Inc., FBO 4,579.180 7.52%
Mr. Arthur L. Harbin
IRA Rollover Dtd. 6/23/98
725 W. 104th Street
Los Angeles, CA 90044-4405
Prudential Securities, Inc., FBO 3,432.430 5.63%
Mrs. Jamesetta M. Brazile
IRA Dtd. 10/1/98
3523 S. Redondo Blvd.
Los Angeles, CA 90016-5222
Income Portfolio C Class David L. Stoner & 3,386.010 16.29%
Janice F. Stoner JTWROS
3207 Bowman Rd.
Landisville, PA 17538-1830
H. Dale Zimmermann 2,292.990 11.03%
Norma J. Zimmermann JTWROS
775 Stone Hill Road
Shoemakersville, PA 19555-9046
DMTC Custodian for the IRA of 2,020.500 9.72%
Barbara J. Turner
485 Martic Heights Drive
Holtwood, PA 17532-9683
Ruby D. Miller 1,948.230 9.37%
6451 County Road 407
Millersburg, OH 44654
RS DMTC 401K Plan 1,935.330 9.31%
Shore Line Construction, Inc.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
</TABLE>
109
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Donaldson Lufkin Jenrette 1,752.780 8.43%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
DMTC Custodian for the IRA of 1,521.750 7.32%
Amos A. Bricker
2754 Mount Pleasant Road
Mount Joy, PA 17552-8728
Income Portfolio Delaware Management Business TR-DIA 6,106.010 98.12%
Institutional Class Attn: Joseph Hastings
1818 Market Street, 16th Floor
Philadelphia, PA 19103-3691
Balanced Portfolio A Class RS DMTC 401(k) 1,637,808.550 78.05%
Hoag Memorial Hospital Savings Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Balanced Portfolio B Class Attn: Mutual Funds 9,186.050 8.02%
BHC Securities Inc.
FAO 45021199
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7084
Sara A. Anthony 8,775.970 7.67%
RR 3 Box 137
Kunkletown, PA 18058-9521
Prudential Securities, Inc. FBO 6,640.930 5.80%
Janine Gimpelman Sokolov
Barbara J. Brigham Co-Execs
Est. Irving Sokolov
3000-58 Stevens St.
Oceanside, NY 11572-2039
DMTC C/F The Rollover IRA 5,749.530 5.02%
of Claire Joanne Schnurr
112211 James Ct.
Chaska, MN 55318-1508
</TABLE>
110
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Balanced Portfolio C Class Elaine J. Avery 11,124.130 13.00%
1789 E. 91 St.
Brooklyn, NY 11236-5405
DMTC C/F The Rollover IRA of 8,070.260 9.43%
Joan F. Sylvander
1757 E. 26th St.
Brooklyn, NY 11229-2405
DMTC C/F The Rollover IRA of 6,490.230 7.58%
Catherine A. Horch
133 Henry St., Apt. 8
Brooklyn, NY 11201-2250
DMTC C/F The Rollover IRA of 5,582.890 6.52%
Josephine Benfatti
2017 Kimball St.
Brooklyn, NY 11234-5021
Paul K. Graybill & Grace H. Graybill 5,011.350 5.85%
Ten Ent
4 Bomberger Road
Lititz, PA 17543-9510
NFSC FEBO #BQD-907103 4,427.250 5.17%
NFSC/FMTC IRA
FBO Carol W. Andrews
65 Newton Ave.
Norwalk, CT 06851-3009
Balanced Portfolio Delaware Management Business TR-DIA 6,039.470 96.76%
Institutional Class Attn: Joseph Hastings
1818 Market Street, 16th Fl.
Philadelphia, PA 19103-3691
</TABLE>
111
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Growth Portfolio A Class RS DMTC 401(k) Plan 914,751.680 69.31%
Hoag Memorial Hospital Savings Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 116,524.870 8.82%
Bottcher America Corp.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Growth Portfolio B Class DMTC C/F the Rollover IRA of 18,462.030 12.20 %
Louis E. Meador
1301 Camden Place
Lawrenceville, GA 30043-5206
DMTC C/F the Beneficiary IRA of 12,279.350 8.11%
Jeanne Milner
300 Turner Road
Concord, GA 30206-2611
NSFC FEBO # BQ5-959685 9,061.320 5.99%
NFSC/FMTC IRA
FBO Joseph Morten Elkins
10602 Gray Fox Way
Savannah, GA 31406-4416
NSFC FEBO # BQ5-00540 8,636.340 5.71%
Carolyn W. Shay
9 North Marsh Rd.
Savannah, GA 31410-1036
Growth Portfolio C Class Benuel A. Stoltzfus 8,209.260 18.90%
Regina Stoltzfus JTWROS
255 California Road
Morgantown, PA 19543-9444
RS DMTC 401(k) Plan 5,004.160 11.52%
L.L. Baumunk & Son
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
</TABLE>
112
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C>
Richard K. Morford 3,380.850 7.78%
1109 Tall Pines Court
Petoskey, MI 49770-3200
RS DMTC 401 (k) Plan 2,991.860 6.89%
American Independent Insurance Co.
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 2,658.610 6.12%
Warren S. Kumick, M.D., 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 2,343.030 5.39%
GENFED Federal Credit Union
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
Growth Portfolio Institutional Delaware Management Business TR-DIA 5,962.100 93.31%
Attn: Joseph Hastings
1818 Market Street, 16th Fl.
Philadelphia, PA 19103-3638
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers, (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH, Delaware and Delaware International are now
indirect, wholly owned subsidiaries, and subject to the ultimate control, of
Lincoln National. Lincoln National, with headquarters in Fort Wayne, Indiana, is
a diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
113
<PAGE>
Certain officers and directors of Pooled Trust, Inc. and Foundation
Funds hold identical positions in each of the other funds in the Delaware
Investments family. Directors or Trustees, as applicable, and principal officers
of Pooled Trust, Inc. and Foundation Funds are noted below along with their ages
and their business experience for the past five years. Unless otherwise noted,
the address of each officer and director/trustee is One Commerce Square,
Philadelphia, PA 19103.
115
<PAGE>
*Wayne A. Stork (61) Chairman, Director and/or Trustee of Pooled
Trust, Inc. and Foundation Funds and the other
31 investment companies In the Delaware
Investments family
Chairman and Director of Delaware Management
Holdings, Inc.
Prior to January 1, 1999, Mr. Stork was Director
of Delaware Capital Management, Inc.; Chairman,
President and Chief Executive Officer and
Director/Trustee of DMH Corp., Delaware
Distributors, Inc. and Founders Holdings, Inc.;
Chairman, President, Chief Executive Officer,
Chief Investment Officer and Director/Trustee of
Delaware Management Company, Inc. and Delaware
Management Business Trust; Chairman, President,
Chief Executive Officer and Chief Investment
Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Chairman,
Chief Executive Officer and Chief Investment
Officer of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Chairman
and Chief Executive Officer of Delaware
International Advisers Ltd.; Chairman, Chief
Executive Officer and Director of Delaware
International Holdings Ltd.; Chief Executive
Officer of Delaware Management Holdings, Inc.;
President and Chief Executive Officer of Delvoy,
Inc.; Chairman of Delaware Distributors, L.P.;
Director of Delaware Service Company, Inc. and
Retirement Financial Services, Inc.
In addition, during the five years prior to
January 1, 1999, Mr. Stork has served in various
executive capacities at different times within
the Delaware organization.
116
<PAGE>
*David K. Downes (59) President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and
Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and the other 31 investment
companies in the Delaware Investments family.
President and Director of Delaware Management
Company, Inc.
President of Delaware Management Company (a
series of Delaware Management Business Trust)
President, Chief Executive Officer and Director
of Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer and
Director of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware
International Holdings Ltd.
Chairman and Director of Delaware Management
Trust Company and Retirement Financial Services,
Inc.
Executive Vice President, Chief Operating
Officer, Chief Financial Officer of Delaware
Management Holdings, Inc., Founders CBO
Corporation, Delaware Investment Advisers (a
series of Delaware Management Business Trust) and
Delaware Distributors, L.P.
Executive Vice President, Chief Financial
Officer, Chief Administrative Officer and Trustee
of Delaware Management Business Trust
Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Director of
DMH Corp., Delaware Distributors, Inc., Founders
Holdings, Inc. and Delvoy, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served
in various executive capacities at different
times within the Delaware organization.
Richard G. Unruh, Jr. (59) Executive Vice President/Chief Investment
Officer/Equity of Pooled Trust, Inc., Foundation
Funds and the other 31 investment companies in
the Delaware Investments family.
Chief Executive Officer/Chief Investment
Officer/DIA Equity of Delaware Investment
Advisers (a series of Delaware Management
Business Trust)
Executive Vice President and Trustee of Delaware
Management Business Trust
Executive Vice President/Chief Investment
Officer/DMC Equity of Delaware Management Company
(a series of Delaware Management Business Trust).
Executive Vice President of Delaware Management
Holdings, Inc. and Delaware Capital Management.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served
in various executive capacities at different
times within the Delaware organization.
- ----------------------
* Director/Trustee affiliated with the Portfolio's investment manager and
considered an "interested person" as defined in the 1940 Act.
117
<PAGE>
Richard J. Flannery (41) Executive Vice President and General Counsel of
Pooled Trust, Inc., Foundation Funds, the other
31 investment companies in the Delaware
Investments family, Delaware Management Holdings,
Inc., Delaware Distributors, L.P., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management
Business Trust and Founders CBO Corporation
Executive Vice President/General Counsel and
Director of Delaware International Holdings Ltd.,
Founders Holdings, Inc., Delvoy, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware
Service Company, Inc. Delaware Capital
Management, Inc., Retirement Financial Services,
Inc., Delaware Distributors, Inc., Delaware
Management Business Trust
Executive Vice President and Trustee of Delaware
Management Business Trust.
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has
served in various executive capacities at
different times within the Delaware organization.
Walter P. Babich (71) Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and the other 31 investment
companies in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of
Irwin & Leighton and from 1988 to 1991, he was a
partner of I&L Investors.
John H. Durham (61) Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and 17 other investment
companies in the Delaware Investments family
Partner, Complete Care Services
120 Gibraltar Road, Horsham, PA 19044
Mr. Durham served as Chairman of the Board of
each fund in the Delaware Investments family from
1986 to 1991; President of each fund from 1977 to
1990; and Chief Executive Officer of each fund
from 1984 to 1990. Prior to 1992, with respect to
Delaware Management Holdings, Inc., Delaware
Management Company, Delaware Distributors, Inc.
and Delaware Service Company, Inc., Mr. Durham
served as a director and in various executive
capacities at different times.
118
<PAGE>
Anthony D. Knerr (60) Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and the other 31 investment
companies in the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr &
Associates
From 1982 to 1988, Mr. Knerr was Executive Vice
President/Finance and Treasurer of Columbia
University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The
Publishing Group, Inc., New York, from 1988 to
1990. Mr. Knerr founded The Publishing Group,
Inc. in 1988.
Ann R. Leven (58) Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and the other 31 investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and
Chief Fiscal Officer of the Smithsonian
Institution, Washington, DC, and from 1975 to
1992, she was Adjunct Professor of Columbia
Business School.
Thomas F. Madison (63) Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and the other 31 investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis,
Minnesota 55402
President and Chief Executive Officer, MLM
Partners, Inc.
Mr. Madison has also been Chairman of the Board
of Communications Holdings, Inc. since 1996. From
February to September 1994, Mr. Madison served as
Vice Chairman--Office of the CEO of The Minnesota
Mutual Life Insurance Company and from 1988 to
1993, he was President of U.S. WEST
Communications--Markets.
Charles E. Peck (73) Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and the other 31 investment
companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and
Chief Executive Officer of The Ryland Group,
Inc., Columbia, MD.
119
<PAGE>
Jan L. Yeomans (50) Director and/or Trustee of Pooled Trust, Inc.,
Foundation Funds and 31 other investment
companies in the Delaware Investments family
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of
Benefit Funds and Financial Markets for the 3M
Corporation; Manager of Benefit Fund Investments
for the 3M Corporation, 1985-1987; Manager of
Pension Funds for the 3M Corporation, 1983-1985;
Consultant -- Investment Technology Group of
Chase Econometrics, 1982-1983; Consultant for
Data Resources, 1980-1982; Programmer for the
Federal Reserve Bank of Chicago, 1970-1974.
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of
Pooled Trust, Inc., Foundation Funds and the
other 31 investment companies in the Delaware
Investments family.
Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Capital
Management, Inc., Delaware International Holdings
Ltd., Delvoy, Inc., Retirement Financial
Services, Inc., Founders Holdings, Inc. and
Delaware Management Business Trust
Executive Vice President/Chief Financial
Officer/Treasurer of Delaware Management Trust
Company
Senior Vice President/Assistant Treasurer of
Founders CBO Corporation
During the past five years, Mr. Hastings has
served in various executive capacities at
different times within the Delaware organization.
120
<PAGE>
Michael P. Bishof (36) Senior Vice President/Treasurer of Pooled Trust,
Inc., Foundation Funds and the other 31
investment companies in the Delaware Investments
family.
Senior Vice President/Investment Accounting of
Delaware Service Company, Inc. and Delaware
Capital Management, Inc.
Senior Vice President and Treasurer/Investment
Accounting of Delaware Distributors, L.P.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management
Business Trust), Delaware International Holdings,
Inc. and Founders Holdings, Inc.
Senior Vice President and Assistant Treasurer of
Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr.
Bishof was a Vice President for Bankers Trust,
New York, NY from 1994 to 1995, a Vice President
for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice
President for Equitable Capital Management
Corporation, New York, NY from 1987 to 1993.
George E. Deming (57) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc. of the other 32 investment companies
in the Delaware Investments family, Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware
Investment Advisers (a series of Delaware
Management Business Trust).
Before joining Delaware Investments in 1978, Mr.
Deming was responsible for portfolio management
and institutional sales at White Weld & Co., Inc.
He is a member of the Financial Analysts of
Philadelphia. During the past five years, Mr.
Deming has served in various capacities at
different times within the Delaware organization.
Gerald S. Frey (53) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc., of the other 32 investment companies
in the Delaware Investments family, Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware
Investment Advisers (a series of Delaware
Management Business Trust)
Before joining Delaware Investments in 1996, Mr.
Frey was a Senior Director with Morgan Grenfell
Capital Management, New York, NY from 1986 to
1995.
121
<PAGE>
Gary A. Reed (44) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc., of the 32 other investment companies
in the Delaware Investments family, Delaware
Investment Advisers (a series of Delaware
Management Business Trust), Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Capital Management, Inc.
During the past five years, Mr. Reed has served
in such capacities within the Delaware
organization.
Gerald T. Nichols (41) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc., of the 32 other investment companies
in the Delaware Investments family, Delaware
Investment Advisers (a series of Delaware
Management Business Trust) and Delaware
Management Company (a series of Delaware
Management Business Trust)
Vice President/Senior Portfolio Manager of
Founders Holdings, Inc.
Treasurer/Assistant Secretary and Director of
Founders CBO Corporation.
During the past five years, Mr. Nichols has
served in various capacities at different times
within the Delaware organization.
Paul A. Matlack (39) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc., of the 32 other investment companies
in the Delaware Investments family, Delaware
Investment Advisers (a series of Delaware
Management Business Trust) and Delaware
Management Company (a series of Delaware
Management Business Trust)
Vice President/Senior Portfolio Manager of
Founders Holdings, Inc.
President and Director of Founders CBO
Corporation.
During the past five years, Mr. Matlack has
served in various capacities at different times
within the Delaware organization.
122
<PAGE>
Roger A. Early (45) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc. and the 32 other investment companies
in the Delaware Investments family, Delaware
Investment Advisers (a series of Delaware
Management Business Trust) and Delaware
Management Company (a series of Delaware
Management Business Trust)
Before joining Delaware Investments, Mr. Early
was a portfolio manager for Federated Investment
Counseling's fixed-income group, with over $1
billion in assets.
Frank X. Morris (37) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc., the other 32 investment companies in
the Delaware Investments family, Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware
Investment Advisers (a series of Delaware
Management Business Trust)
Before joining Delaware Investments in 1997, he
served as vice president and director of equity
research at PNC Asset Management. Mr. Morris is
president of the Financial Analysis Society of
Philadelphia and is a member of the Association
of Investment Management and Research and the
National Association of Petroleum Investment
Analysts.
J. Paul Dokas (38) Vice President/Portfolio Manager of Pooled Trust,
Inc. and Foundation Funds and the other 31
investment companies in the Delaware Investments
family, Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware
Management Company (a series of Delaware
Management Business Trust)
Before joining Delaware Investments in 1997, he
was a Director of Trust Investments for Bell
Atlantic Corporation in Philadelphia.
John B. Fields (54) Senior Vice President/Senior Portfolio Manager of
Pooled Trust, Inc. and the other 32 investment
companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware
Investment Advisers (a series of Delaware
Management Business Trust)
Trustee of Delaware Management Business Trust.
During the past five years, Mr. Fields has
served in various capacities at different times
within the Delaware organization.
Robert Arnold (35) Vice President/Portfolio Manager of Pooled Trust,
Inc., 32 other investment companies in the
Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware
Capital Management, Inc.
During the past five years, Mr. Arnold has served
in various capacities at different times within
the Delaware organization.
123
<PAGE>
Timothy J. Connors(45) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc. and the other 32 investment companies
in the Delaware Investments family, Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware
Investment Advisers (a series of series of
Delaware Management Business Trust).
Before joining Delaware Investments in 1997, Mr.
Conners served as a Principal at Miller, Anderson
& Sherrerd, where he managed equity accounts,
conducted sector analysis and directed research.
He previously held positions at CoreStates
Investment Advisers and Fauquier National Bank.
Thomas J. Trotman(48) Vice President/Portfolio Manager of Pooled Trust,
Inc. and each of the other 32 investment
companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware
Investment Advisers (a series of series of
Delaware Management Business Trust).
Before joining Delaware Investments in 1995, Mr.
Trotman was Vice President and Director of
Investment Research at Independence Capital
Management. Before that, he held credit-related
positions at Marine Midland Bank, U.S. Steel
Corporation, and Amerada Hess.
Damon J. Andres(29) Vice President/Portfolio Manager of Pooled Trust,
Inc. and the other 32 investment companies in the
Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series
of series of Delaware Management Business Trust).
Before joining Delaware Investments in 1994, Mr.
Andres performed investment counseling services
as a Consulting Associate with Cambridge
Associates, Inc. in Arlington Virginia.
Christopher S. Beck (41) Vice President/Senior Portfolio Manager of Pooled
Trust, Inc. and the other 32 investment companies
in the Delaware Investments family, Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware
Investment Advisers (a series of Delaware
Management Business Trust)
Before joining Delaware Investments in 1997, Mr.
Beck managed the Small Cap Fund for two years at
Pitcairn Trust Company. Prior to 1995, he was
Director of Research at Cypress Capital
Management in Wilmington and Chief Investment
Officer of the University of Delaware Endowment
Fund.
124
<PAGE>
With respect to Pooled Trust, Inc., the following is a compensation
table listing for each director entitled to receive compensation, the aggregate
compensation received from Pooled Trust, Inc. and the total compensation
received from all Delaware Investments funds for the fiscal year ended October
31, 1998 and an estimate of annual benefits to be received upon retirement under
the Delaware Investments Retirement Plan for Directors/Trustees as of October
31, 1998. Only the independent directors of Pooled Trust, Inc. receive
compensation from Pooled Trust, Inc.
<TABLE>
<CAPTION>
Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Annual from
Compensation Accrued Benefits Delaware
from Pooled as Part of Upon Investment
Name Trust, Inc. Portfolio Expenses Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
W. Thacher Longstreth(3) $3,729 None $38,000 $60,384
Ann R. Leven $4,207 None $38,000 $66,499
Walter P. Babich $4,127 None $38,000 $65,384
Anthony D. Knerr $4,127 None $38,000 $65,384
Charles E. Peck $3,729 None $38,000 $60,384
Thomas F. Madison $3,898 None $38,000 $62,467
John H. Durham(4) $2,221 None $31,180 $25,935
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family
for which he or she serves as a director or trustee for a period equal to
the lesser of the number of years that such person served as a director or
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer
that is paid to directors/trustees of each investment company at the time
of such person's retirement. If an eligible director/trustee retired as of
the periods noted above for Pooled Trust, Inc. and Foundation Funds, he or
she would be entitled to annual payments totaling the amounts noted above,
in the aggregate, from all of the investment companies in the Delaware
Investments family for which he or she served as director or trustee, based
on the number of investment companies in the Delaware Investments family as
of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a director
or trustee for all 33 investment companies in Delaware Investments, plus
$3,145 for each Board Meeting attended. John H. Durham currently receives a
total annual retainer fee of $31,180 for serving as a director or trustee
for 19 investment companies in Delaware Investments, plus $1,810 for each
Board Meeting attended. Ann R. Leven, Thomas F. Madison, and Anthony D.
Knerr serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.
(3) W. Thacher Longstreth retired from the Board of Directors of Pooled Trust,
Inc. on April 13, 1999. Jan L. Yeomans joined the Board of Directors of
Pooled Trust, Inc. on April 13, 1999.
(4) John H. Durham joined the Board of Directors/Trustees of 19 investment
companies in Delaware Investments on April 16, 1998.
125
<PAGE>
With respect to Foundation Funds, the following is a compensation table
listing for each trustee entitled to receive compensation, the aggregate
compensation expected to be received from Foundation Funds during its fiscal
year ended September 30, 1999 and the total compensation expected to be received
from all funds in the Delaware Investments family during the Trust's fiscal year
and an estimate of annual benefits to be received upon retirement under the
Delaware Group Retirement Plan for Directors/Trustees during the Trust's fiscal
year. Only the independent directors of Foundation Funds receive compensation
from the Trust.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Annual from
expected to be Accrued Benefits Delaware
received from as Part Upon Investment
Name the Trust of the Trust Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
W. Thacher Longstreth(3) $132 None $38,000 $31,720
Ann R. Leven $572 None $38,000 $66,126
Walter P. Babich $466 None $38,000 $59,066
Anthony D. Knerr $570 None $38,000 $65,126
Charles E. Peck $568 None $38,000 $63,042
Thomas F. Madison $570 None $38,000 $65,126
John H. Durham(4) $464 None $31,180 $49,984
Jan L. Yeomans(5) $532 None $38,000 $34,715
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family
for which he or she serves as a director or trustee for a period equal to
the lesser of the number of years that such person served as a director or
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer
that is paid to directors/trustees of each investment company at the time
of such person's retirement. If an eligible director/trustee retired as of
the periods noted above for Pooled Trust, Inc. and Foundation Funds, he or
she would be entitled to annual payments totaling the amounts noted above,
in the aggregate, from all of the investment companies in the Delaware
Investments family for which he or she served as director or trustee, based
on the number of investment companies in the Delaware Investments family as
of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a director
or trustee for all 33 investment companies in Delaware Investments, plus
$3,145 for each Board Meeting attended. John H. Durham currently receives a
total annual retainer fee of $31,180 for serving as a director or trustee
for 19 investment companies in Delaware Investments, plus $1,810 for each
Board Meeting attended. Ann R. Leven, Thomas F. Madison, and Anthony D.
Knerr serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.
(3) W. Thacher Longstreth retired from the Board of Trustees of Foundation
Funds on March 17, 1999. The compensation shown in the table is the amount
Mr. Longstreth received from October 1, 1998 through March 17, 1999.
(4) John H. Durham joined the Board of Directors/Trustees of 19 investment
companies in Delaware Investments on April 16, 1998.
(5) Jan L. Yeomans joined the Board of Trustees of Foundation Funds on March
17, 1999. The compensation shown is the amount Ms. Yeomans is expected to
receive from March 17, 1999 through September 30, 1999.
126
<PAGE>
GENERAL INFORMATION
Delaware furnishes investment management services to The Large-Cap
Value Equity, The Mid-Cap Growth Equity, The Intermediate Fixed Income, The
Aggregate Fixed Income, The Mid-Cap Value Equity, The Small Cap Value Equity,
The Real Estate Investment Trust, The High-Yield Bond, The Diversified Core
Fixed Income, The Asset Allocation, The Small-Cap Growth Equity, The Balanced,
The Select Equity, The Equity Income and The Core Equity Portfolios. Delaware
International furnishes similar services to The International Equity, The
International Mid-Cap Sub, The Labor Select International Equity, The Global
Fixed Income, The International Fixed Income, The Emerging Markets, The
International Small-Cap Portfolio and The Global Equity Portfolios and also
serves as sub-adviser to The Diversified Core Fixed Income Portfolio. Delaware
and Delaware International also provide investment management services to
certain of the other funds in the Delaware Investments family. While investment
decisions of the Portfolios are made independently from those of the other funds
and accounts, investment decisions for such other funds and accounts may be made
at the same time as investment decisions for the Portfolios.
Delaware or Delaware International also manages the investment options
for Delaware-Lincoln Choice Plus and Delaware Medallion (SM) III Variable
Annuities. Choice Plus is issued and distributed by Lincoln National Life
Insurance Company. Choice Plus offers a variety of different investment styles
managed by leading money managers. Medallion is issued by Allmerica Financial
Life Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers various investment
series ranging from domestic equity funds, international equity and bond funds
and domestic fixed income funds. Each investment series available through Choice
Plus and Medallion utilizes an investment strategy and discipline the same as or
similar to one of the Delaware Investments mutual funds available outside the
annuity. See "DELAWARE GROUP PREMIUM FUND, INC.", in "APPENDIX B."
Access persons and advisory persons of the Delaware Investments funds,
as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to Delaware, Delaware International or their affiliates, are permitted
to engage in personal securities transactions subject to the exceptions set
forth in Rule 17j-1 and the following general restrictions and procedures: (1)
certain blackout periods apply to personal securities transactions of those
persons; (2) transactions must receive advance clearance and must be completed
on the same day as the clearance is received; (3) certain persons are prohibited
from investing in initial public offerings of securities and other restrictions
apply to investments in private placements of securities; (4) opening positions
may only be closed-out at a profit after a 60-day holding period has elapsed;
and (5) the Compliance Officer must be informed periodically of all securities
transactions and duplicate copies of brokerage confirmations and account
statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for each Portfolio and for
the other mutual funds in the Delaware Investments family. The Distributor
received net commissions from REIT Fund on behalf of Class A Shares, after
reallowances to dealers, as follows:
REIT Fund
Class A Shares
---------------------------------------------------------------
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers to Distributor
10/31/98 $254,157 $211,644 $42,513
10/31/97 N/A N/A N/A
10/31/96 N/A N/A N/A
127
<PAGE>
CDSC Payments
The Distributor received no aggregate Limited CDSC payments with
respect to Class A Shares of REIT Fund for fiscal year ended October 31, 1998.
The Distributor received aggregate CDSC payments in the amount of $7,643.30 with
respect to Class B Shares of REIT Fund for fiscal year ended October 31, 1998.
The Distributor received CDSC payments in the amount of $291.26 with respect to
Class C Shares of REIT Fund for fiscal year ended October 31, 1998.
The Transfer Agent, an affiliate of Delaware and Delaware
International, acts as shareholder servicing, dividend disbursing and transfer
agent for the Portfolios and for the other mutual funds in the Delaware
Investments family. The Transfer Agent's compensation for providing services to
the Portfolios of Pooled Trust, Inc. (other than The Real Estate Investment
Trust Portfolio effective October 14, 1997) is $25,000 annually. The Transfer
Agent will bill, and Pooled Trust, Inc. (in the case of The International
Mid-Cap Sub Portfolio, Delaware International) will pay, such compensation
monthly allocated among the current Portfolios (other than The Real Estate
Investment Trust Portfolio) based on the relative percentage of assets of each
Portfolio at the time of billing and adjusted appropriately to reflect the
length of time a particular Portfolio is in operation during any billing period.
The Transfer Agent is paid a fee by The Real Estate Investment Trust Portfolio
for providing these services consisting of an annual per account charge of $5.50
plus transaction charges for particular services according to a schedule. The
Transfer Agent is paid a fee by The Asset Allocation Portfolio for providing
these services consisting of an annual per account charge of $11.00 plus
transaction charges for particular services according to a schedule.
Compensation is fixed each year and approved by the Board of Directors/Trustees,
including a majority of the disinterested directors. The Transfer Agent also
provides accounting services to the Portfolios. Those services include
performing all functions related to calculating each Portfolio's net asset value
and providing all financial reporting services, regulatory compliance testing
and other related accounting services. For its services, the Transfer Agent is
paid a fee based on total assets of all funds in the Delaware Investments family
for which it provides such accounting services. Such fee is equal to 0.25%
multiplied by the total amount of assets in the complex for which the Transfer
Agent furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate complex assets exceed $10
billion. The fees are charged to the Portfolio, including the Portfolios, on an
aggregate pro-rata basis. The asset-based fee payable to the Transfer Agent is
subject to a minimum fee calculated by determining the total number of
investment portfolios and associated classes.
The Asset Allocation, The Small-Cap Growth Equity Portfolio, The Core
Equity Portfolio, The Balanced Portfolio, The Equity Income Portfolio, The
Select Equity Portfolio and The International Small-Cap Portfolio reserves the
right to operate in a "master-feeder" structure, that is, to invest its assets
in another mutual fund with the same investment objective and substantially
similar investment policies as those of the respective Portfolio. Each Portfolio
has no present intention to operate in a master-feeder structure; however,
should the Board of Directors or Trustees approve the implementation of a
master-feeder structure for a Portfolio, shareholders will be notified prior to
the implementation of the new structure.
Lincoln National Corporation Employees' Retirement Trust (the "Trust")
made an investment in The Emerging Markets Portfolio, which could result in the
Trust owning approximately 100% of the outstanding shares of The Emerging
Markets Portfolio. Subject to certain limited exceptions, there are no
limitations on the Trust's ability to redeem its shares of the Portfolio and it
may elect to do so at any time.
128
<PAGE>
Lincoln National Life Insurance Company ("LNLIC") made an investment in
each of The Global Equity Portfolio, The Real Estate Investment Trust Portfolio,
The Real Estate Investment Trust Portfolio II, The Diversified Core Fixed Income
Portfolio, The Aggregate Fixed Income Portfolio, The Small-Cap Growth Equity
Portfolio, The Core Equity Portfolio, The Mid-Cap Value Equity Portfolio and The
Small-Cap Value Portfolio, and will make an investment in each of The Asset
Allocation Portfolio, The Select Equity Portfolio and The International
Small-Cap Portfolio, which could result in LNLIC owning approximately 100% of
the outstanding shares of the respective Portfolios. Subject to certain limited
exceptions, are no limitations on LNLIC's ability to redeem its shares of any
Portfolio and it may elect to do so at any time.
The investment adviser and its affiliates own the name "Delaware
Group." Under certain circumstances, including the termination of Pooled Trust,
Inc.'s or Foundation Funds' advisory relationship with the investment adviser or
its distribution relationship with the Distributor, the investment adviser and
its affiliates could cause Pooled Trust, Inc. or Foundation Funds to delete the
words "Delaware Group" from Pooled Trust, Inc.'s or Foundation Funds' names.
Custody Arrangements
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 serves as custodian for each Portfolio. As custodian, Chase maintains a
separate account or accounts for a Portfolio; receives, holds and releases
portfolio securities on account of a Portfolio; receives and disburses money on
behalf of a Portfolio; and collects and receives income and other payments and
distributions on account of a Portfolio's portfolio securities.
With respect to foreign securities, Chase makes arrangements with
subcustodians who were approved by the directors/trustees of Pooled Trust, Inc.
or, as applicable, Foundation Funds in accordance with Rule 17f-5 of the 1940
Act. In the selection of foreign subcustodians, the directors consider a number
of factors, including, but not limited to, the reliability and financial
stability of the institution, the ability of the institution to provide
efficiently the custodial services required for the Portfolios, and the
reputation of the institutions in the particular country or region.
Capitalization
Pooled Trust, Inc. has a present authorized capitalization of two
billion shares of capital stock with a $.01 par value per share. The Board of
Directors has allocated fifty million shares to each Portfolio.
Foundation Funds currently consists four portfolios of shares.
Foundation Funds has an unlimited authorized number of shares of beneficial
interest with no par value allocated to each of its portfolios.
While all shares have equal voting rights on matters affecting Pooled
Trust, Inc. or Foundation Funds, as applicable, each Portfolio would vote
separately on any matter which affects only that Portfolio, such as any change
in its own investment objective and policy or action to dissolve a Portfolio and
as otherwise prescribed by the 1940 Act. Shares of each Portfolio have a
priority in that Portfolios' assets, and in gains on and income from the
portfolio of that Portfolio. Shares have no preemptive rights, are fully
transferable and, when issued, are fully paid and nonassessable.
Effective December 24, 1997, the name of The Defensive Equity
Small/Mid-Cap Portfolio was changed to The Mid-Cap Value Equity Portfolio, the
name of The Fixed Income Portfolio was changed to The Intermediate Fixed Income
Portfolio and the name of The Defensive Equity Portfolio was changed to The
Large-Cap Value Equity Portfolio. Effective October 7, 1998, the name of The
Aggressive Growth Portfolio was changed to The Mid-Cap Growth Equity Portfolio.
Effective March 1, 1999, the name of The Growth and Income Portfolio was changed
to The Core Equity Portfolio.
Noncumulative Voting
Portfolio shares of Pooled Trust have noncumulative voting rights which
means that the holders of more than 50% of the shares of Pooled Trust, Inc.
voting for the election of directors can elect all the directors if they choose
to do so, and, in such event, the holders of the remaining shares will not be
able to elect any directors.
129
<PAGE>
Portfolio shares of Foundation Funds have noncumulative voting rights
which means that the holders of more than 50% of the shares of Foundation Funds
voting for the election of trustees can elect all the trustees if they choose to
do so, and, in such event, the holders of the remaining shares will not be able
to elect any trustees.
EURO
Several European countries are participating in the European Economic
and Monetary Union, which established a common European currency for
participating countries. This currency is commonly known as the "Euro." Each
participating country replaced its previous currency with the Euro on January 1,
1999. Additional European countries may elect to participate after that date. In
addition, full implementation of the Euro will extend over a period of several
years. Initial implementation of the Euro occurred on January 1, 1999 without
disruption of services provided to the Portfolios. The Portfolio's service
providers cooperated over the implementation weekend and following weeks to
reconcile their records and procedures. Going forward, if a Portfolio is
invested in securities of participating countries or countries that elect to
participate at a later date, it could be adversely affected if the computer
systems used by its applicable service providers are not properly prepared to
handle the implementation of this single currency through completion of the
process or the adoption of the Euro by additional countries in the future.
This Statement of Additional Information does not include all of the
information contained in the Registration Statement which is on file with the
Securities and Exchange Commission.
PERFORMANCE INFORMATION
From time to time, Pooled Trust, Inc. may state each Portfolio's total
return and each Portfolio class' total return in advertisements and other types
of literature. Any statements of total return performance data will be
accompanied by information on the Portfolio's or the Portfolio class' average
annual total rate of return over the most recent one-, five-, and ten-year
periods or life-of-portfolio, as relevant. Pooled Trust, Inc. may also advertise
aggregate and average total return information of each Portfolio and Portfolio
class over additional periods of time.
Average annual total rate of return for each Portfolio and Portfolio
class is based on a hypothetical $1,000 investment that includes capital
appreciation and depreciation during the stated periods. The following formula
will be used for the actual computations:
P(1 + T)n = ERV
Where: P = a hypothetical initial purchase order of $1,000, after
deduction of the maximum front-end sales charge in the
case of REIT Fund A Class of The Real Estate
Investment Trust Portfolio;
T = average annual total return; n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period,
after deduction of the applicable CDSC, if
any, in the case of REIT Fund B Class and
REIT Fund C Class of The Real Estate
Investment Trust Portfolio.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes that all
distributions are reinvested at net asset value.
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<PAGE>
The performance, as shown below, is the average annual total return
quotations for the Portfolios operating for at least one year as of October 31,
1998. Securities prices fluctuated during the period covered and the past
results should not be considered as representative of future performance.
Average Annual Total Return(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1 year ended 3 years ended 5 years ended
10/31/98 10/31/98 10/31/98 Life of Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Large-Cap Value Equity Portfolio 13.50% 21.55% 18.36% 18.39%
(Inception 2/3/92)
- ------------------------------------------------------------------------------------------------------------------------------
The International Equity Portfolio 4.96% 11.30% 9.85% 10.83%
(Inception 2/4/92)
- ------------------------------------------------------------------------------------------------------------------------------
The Mid-Cap Growth Equity Portfolio 1.47% 10.59% 10.17% 9.39%
(Inception 2/27/92)
- ------------------------------------------------------------------------------------------------------------------------------
The Global Fixed Income Portfolio 6.28% 9.31% 9.37% 10.81%
(Inception 11/30/92)
- ------------------------------------------------------------------------------------------------------------------------------
The Labor Select International Equity Portfolio 6.18% N/A N/A 13.91%
(Inception 12/19/95)
- ------------------------------------------------------------------------------------------------------------------------------
The Intermediate Fixed Income Portfolio 7.06% N/A N/A 6.92%
(Inception 3/12/96)
- ------------------------------------------------------------------------------------------------------------------------------
The High Yield Bond Portfolio 0.30% N/A N/A 9.16%
(Inception 12/2/96)
- ------------------------------------------------------------------------------------------------------------------------------
The International Fixed Income Portfolio 5.96% N/A N/A 8.46%
(Inception 4/11/97)
- ------------------------------------------------------------------------------------------------------------------------------
The Emerging Markets Portfolio (35.30%) N/A N/A (28.52%)
(Inception 4/14/97)
- ------------------------------------------------------------------------------------------------------------------------------
The Global Equity Portfolio 8.31% N/A N/A 3.30%
(Inception 10/15/97)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and
payment, performance would have been affected negatively.
The total return for REIT Fund A Class of The Real Estate Investment
Trust Portfolio at offer reflects the maximum front-end sales charge of 5.75%
paid on the purchase of shares. The total return for REIT Fund A Class at net
asset value (NAV) does not reflect the payment of any front-end sales charge.
The Limited CDSC, applicable only to certain redemptions of those shares, is not
deducted from any computation of total return. The Portfolio may also present
total return information for The Real Estate Investment Trust Portfolio that
does not reflect the deduction of the maximum front-end sales charge with
respect to REIT Fund A Class. Securities prices fluctuated during the period
covered and the past results should not be considered as representative of
future performance.
131
<PAGE>
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio Class (2)
1 year ended 10/31/98 (10.73%)
Period 12/6/95(3)
through10/31/98 18.80%
(1) Certain expenses of the Portfolio have been waived and paid by the
investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) The Real Estate Investment Trust Portfolio class commenced operations
on November 4, 1997. Pursuant to applicable regulation, total return
shown for the class prior to commencement of operations is that of the
original (and then only) class of shares offered by The Real Estate
Investment Trust Portfolio. That original class has been redesignated
REIT Fund A Class. Like The Real Estate Investment Trust Portfolio
class, the original class, prior to its redesignation, did not carry a
front-end sales charge and was not subject to Rule 12b-1 distribution
expenses.
(3) Date of initial sale of the original class (now REIT Fund A Class).
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
REIT Fund REIT Fund
A Class(2) A Class(2)
(at Offer) (at NAV)
1 year ended
10/31/98 (16.09%) (10.98%)
Period
12/6/95(3)
through 16.29% 18.69%
10/31/98
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) The total return presented above is based upon the performance of the
original (and then only) class of shares offered by The Real Estate
Investment Trust Portfolio, which did not carry a front-end sales
charge and was not subject to Rule 12b-1 distribution expenses. That
original class has been redesignated REIT Fund A Class. Effective
November 4, 1997, a front-end sales charge of 5.75% was imposed on
sales of those shares and effective November 11, 1997, a 12b-1
distribution fee of up to 0.30% has been assessed annually. All
performance numbers for REIT Fund A Class (at Offer) are calculated
giving effect to the sales charge. For periods prior to November 11,
1997, no adjustment has been made to reflect the effect of 12b-1
payments. Performance on and after November 11, 1997 includes the
effect of such 12b-1 payments. REIT Fund A Class is subject to other
expenses (at a higher rate than applicable to the original class) which
may affect performance of the Class.
(3) Date of initial sale of the original class (now REIT Fund A Class).
132
<PAGE>
Pooled Trust, Inc. may also quote each Portfolio's current yield,
calculated as described below, in advertisements and investor communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula:
a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends;
d = the maximum offering price per share on the last day
of the period.
The above formula will be used in calculating quotations of yield,
based on specific 30-day periods identified in advertising by a Portfolio. Yield
quotations are based on the Portfolio's net asset value on the last day of the
period and will fluctuate depending on the period covered. The 30-day yields for
The Global Fixed Income Portfolio and The Intermediate Fixed Income Portfolio as
of October 31, 1998 were 4.35% and 5.34%, respectively. Each yield reflects the
waiver and reimbursement commitment by its investment adviser.
Investors should note that income earned and dividends paid by The
Intermediate Fixed Income Portfolio, The Global Fixed Income Portfolio, The
International Fixed Income Portfolio, The High-Yield Bond Portfolio, The
Aggregate Fixed Income Portfolio and The Diversified Core Fixed Income Portfolio
will also vary depending upon fluctuation in interest rates and performance of
each Portfolio.
The net asset value of these seven Portfolios will fluctuate in value
inversely to movements in interest rates and, therefore, will tend to rise when
interest rates fall and fall when interest rates rise. Likewise, the net asset
value for these Portfolios will vary from day to day depending upon fluctuation
in the prices of the securities held by each Portfolio. Thus, investors should
consider net asset value fluctuation as well as yield in making an investment
decision.
Each Portfolio's total return performance will be computed by adding
all reinvested income and realized securities profits distributions plus the
change in net asset value during a specific period and dividing by the net asset
value at the beginning of the period. The computation will not reflect the
impact of any income taxes payable by shareholders (who are subject to such tax)
on the reinvested distributions included in the calculation. Portfolio shares
are sold without a sales charge, except for REIT Fund A Class, REIT Fund B Class
and REIT Fund C Class of The Real Estate Investment Trust Portfolio. Because
security prices fluctuate, past performance should not be considered as a
representation of the results which may be realized from an investment in the
Portfolios in the future.
133
<PAGE>
Pooled Trust, Inc. may promote the total return performance of The Real
Estate Investment Trust Portfolio II by comparison to the original class (prior
to its redesignation as REIT Fund A Class) of The Real Estate Investment Trust
Portfolio.
From time to time, each Portfolio may also quote its actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Portfolio may be compared to data
prepared by Lipper Analytical Services, Inc., Morningstar, Inc., or to the S&P
500 Index, the Dow Jones Industrial Average, the Morgan Stanley Capital
International (MSCI), Europe, Australia and Far East (EAFE) Index, the MSCI
Emerging Markets Free Index, or the Salomon Brothers World Government Bond
Index. Performance also may be compared to data prepared by Lipper Analytical
Services, Inc., Morningstar, Inc. or the performance of unmanaged indices
compiled or maintained by statistical research firms such as Lehman Brothers or
Salomon Brothers, Inc.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well as
unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative purposes. Generally, the indices
selected will be representative of the types of securities in which a Portfolio
may invest and the assumptions that were used in calculating the blended
performance will be described.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Portfolio's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 500 and
the Dow Jones Industrial Average are industry-accepted unmanaged indices of
generally-conservative securities used for measuring general market performance.
Similarly, the MSCI EAFE Index, the MSCI Emerging Markets Free Index, and the
Salomon Brothers World Government Bond Index are industry-accepted unmanaged
indices of equity securities in developed countries and global debt securities,
respectively, used for measuring general market performance. The total return
performance reported for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charges or other fees. A direct investment in an
unmanaged index is not possible.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
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<PAGE>
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current industry rate and yield
information on all industry available fixed-income securities, as reported
weekly by The Bond Buyer, may also be used in preparing comparative
illustrations.
A Portfolio may also promote its yield and/or total return performance
and use comparative performance information computed by and available from
certain industry and general market research and publications, such as Lipper
Analytical Services, Inc. and Morningstar, Inc.
The performance of multiple indices compiled and maintained by
statistical research firms, such as Morgan Stanley, Salomon Brothers and Lehman
Brothers, may be combined to create a blended performance result for comparative
purposes. Generally, the indices selected will be representative of the types of
securities in which a Portfolio may invest and the assumptions that were used in
calculating the blended performance will be described.
Wellesley Group Inc. is an investment management consulting firm
specializing in investment and market research for endowments and pension plans.
Wellesley Group will be maintaining, on behalf of Pooled Trust, Inc., peer group
comparison composites for each Portfolio. The peer group composites will be
constructed by selecting publicly-offered mutual funds that have investment
objectives that are similar to those maintained by each Portfolio. Wellesley
Group will also be preparing performance analyses of actual Portfolio
performance, and benchmark index exhibits, for inclusion in client quarterly
review packages.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. A Portfolio may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Portfolio. A Portfolio may also compare performance to that of other
compilations or indices that may be developed and made available in the future.
A Portfolio may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Portfolio (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments or global or international investments),
economic and political conditions, the relationship between sectors of the
economy and the economy as a whole, the effects of inflation and historical
performance of various asset classes, including but not limited to, stocks,
bonds and Treasury bills. From time to time advertisements, sales literature,
communications to shareholders or other materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Portfolio), as well as the views as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Portfolio. In addition, selected indices may be used to
illustrate historic performance of selected asset classes. The Portfolio may
also include in advertisements, sales literature, communications to shareholders
or other materials, charts, graphs or drawings which illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, domestic and international stocks, and/or bonds, treasury bills
and shares of a Portfolio. In addition, advertisements, sales literature,
communications to shareholders or other materials may include a discussion of
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certain attributes or benefits to be derived by an investment in the Portfolio
and/or other mutual funds, shareholder profiles and hypothetical investor
scenarios, timely information on financial management, tax and retirement
planning (such as information on Roth IRAs and Education IRAs) and investment
alternative to certificates of deposit and other financial instruments. Such
sales literature, communications to shareholders or other materials may include
symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
Materials may refer to the CUSIP numbers of a Portfolio and may
illustrate how to find the listings of a Portfolio in newspapers and
periodicals. Materials may also include discussions of other Portfolios,
products, and services.
A Portfolio may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Portfolio may compare these
measures to those of other funds. Measures of volatility seek to compare the
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate how valid a comparative benchmark may
be. Measures of volatility and correlation may be calculated using averages of
historical data. A Portfolio may advertise its current interest rate
sensitivity, duration, weighted average maturity or similar maturity
characteristics. Advertisements and sales materials relating to a Portfolio may
include information regarding the background and experience of its portfolio
managers.
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The following tables are an example, for purposes of illustration only,
of cumulative total return performance for the Portfolios operating as of
October 31, 1998. For these purposes, the calculations assume the reinvestment
of any capital gains distributions and income dividends paid during the
indicated periods.
Cumulative Total Return (1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months 1 year 3 years 5 years
ended ended ended ended ended ended Life of
10/31/98 10/31/98 10/31/98 10/31/98 10/31/98 10/31/98 Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Large Cap Value Equity Portfolio (1.42%) (4.28%) 5.66% 13.50% 79.60% 132.24% 212.22%
(Inception 2/3/92)
- ------------------------------------------------------------------------------------------------------------------------------------
The International Equity Portfolio (5.40%) (5.73%) 3.37% 4.96% 37.89% 59.98% 100.01%
(Inception 2/4/92)
- ------------------------------------------------------------------------------------------------------------------------------------
The Mid-Cap Growth Equity Portfolio (7.67%) (11.08%) 2.76% 1.47% 35.26% 62.32% 82.10%
(Inception 2/27/92)
- ------------------------------------------------------------------------------------------------------------------------------------
The Global Fixed Income Portfolio 6.42% 6.32% 7.02% 6.28% 30.63% 56.50% 83.62%
(Inception 11/30/92)
- ------------------------------------------------------------------------------------------------------------------------------------
The Labor Select International Equity Portfolio (7.15%) (6.82%) 3.31% 6.18% N/A N/A 45.31%
(Inception 12/19/95)
- ------------------------------------------------------------------------------------------------------------------------------------
The Intermediate Fixed Income Portfolio 2.35% 4.07% 4.76% 7.06% N/A N/A 19.32%
(Inception 3/12/96)
- ------------------------------------------------------------------------------------------------------------------------------------
The High Yield Bond Portfolio (9.77%) (7.33%) (4.01%) 0.30% N/A N/A 18.28%
(Inception 12/2/96)
- ------------------------------------------------------------------------------------------------------------------------------------
The International Fixed Income Portfolio 8.14% 7.28% 8.03% 5.96% N/A N/A 13.49%
(Inception 4/11/97)
- ------------------------------------------------------------------------------------------------------------------------------------
The Emerging Markets Portfolio (20.00%) (38.33%) (29.98%) (35.30%) N/A N/A (40.48%)
(Inception 4/14/97)
- ------------------------------------------------------------------------------------------------------------------------------------
The Global Equity Portfolio (3.97%) (5.01%) 4.18% 8.31% N/A N/A 3.47%
(Inception 10/15/97)
- ------------------------------------------------------------------------------------------------------------------------------------
The Real Estate Investment Trust Portfolio II (6.75%) (12.86%) (14.94%) N/A N/A N/A (12.27%)
(Inception 11/4/97)
- ------------------------------------------------------------------------------------------------------------------------------------
The Mid-Cap Value Equity Portfolio (7.10%) (17.35%) (8.75%) N/A N/A N/A (9.18%)
(Inception 12/29/97)
- ------------------------------------------------------------------------------------------------------------------------------------
The Aggregate Fixed Income Portfolio 3.28% 5.18% 6.04% N/A N/A N/A 7.41%
(Inception 12/29/97)
- ------------------------------------------------------------------------------------------------------------------------------------
The Diversified Core Fixed Income Portfolio (0.44%) 2.36% 5.56% N/A N/A N/A 7.18%
(Inception 12/29/97)
- ------------------------------------------------------------------------------------------------------------------------------------
The Core Equity Portfolio N/A N/A N/A N/A N/A N/A 5.53%
(Inception 9/15/98)
- ------------------------------------------------------------------------------------------------------------------------------------
The Small-Cap Growth Equity Portfolio N/A N/A N/A N/A N/A N/A 10.59%
(Inception 9/15/98)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and
payment, performance would have been affected negatively.
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The cumulative total return for Class A Shares of The Real Estate
Investment Trust Portfolio at offer reflects the maximum front-end sales charge
of 5.75% paid on the purchase of shares. The cumulative total return for Class B
and C Shares of the Real Estate Investment Trust Portfolio including CDSC
reflects the deduction of the applicable CDSC that would be paid if the shares
were redeemed at October 31, 1998. The cumulative total return for Class B and C
Shares excluding CDSC assumes the shares were not redeemed at October 31, 1998
and therefore does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
Cumulative Total Return(1)
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio Class (2)
3 months ended 10/31/98 (6.39%)
6 months ended 10/31/98 (12.32%)
9 months ended 10/31/98 (14.30%)
1 year ended 10/31/98 (10.73%)
Period 12/6/95(3) through 10/31/98 64.94%
(1) Certain expenses of the Portfolio have been waived and paid by the
investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) The Real Estate Investment Trust Portfolio class commenced operations
on November 4, 1997. Pursuant to applicable regulation, total return
shown for the class prior to commencement of operations is that of the
original (and then only) class of shares offered by The Real Estate
Investment Trust Portfolio. That original class has been redesignated
REIT Fund A Class. Like The Real Estate Investment Trust Portfolio
class, the original class, prior to its redesignation, did not carry a
front-end sales charge and was not subject to Rule 12b-1 distribution
expenses.
(3) Date of initial sale of the original class (now REIT Fund A Class).
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Cumulative Total Return(1)
The Real Estate Investment Trust Portfolio
REIT Fund REIT Fund
A Class Institutional
(at Offer)(2) Class (3)
3 months ended 10/31/98 (11.83%) (6.39%)
6 months ended 10/31/98 (17.51)(5) (12.32%)
9 months ended 10/31/98 (19.34%) (14.30%)
1 year ended 10/31/98 (16.09%) N/A
Period 12/6/95(4) through 10/31/98 55.02% N/A
Period 11/11/97(3) through10/31/98 N/A 64.94%
(1) Certain expenses of the Portfolio have been waived and paid by the
investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) The total return presented above is based upon the performance of the
original (and then only) class of shares offered by The Real Estate
Investment Trust Portfolio, which did not carry a front-end sales
charge and was not subject to Rule 12b-1 distribution expenses. That
original class has been redesignated REIT Fund A Class. Effective
November 4, 1997, a front-end sales charge of 5.75% was imposed on
sales of those shares and effective November 11, 1997, a 12b-1
distribution fee of up to 0.30% has been assessed annually. All
performance numbers for REIT Fund A Class (at Offer) are calculated
giving effect to the sales charge. For periods prior to November 11,
1997, no adjustment has been made to reflect the effect of 12b-1
payments. Performance on and after November 11, 1997 includes the
effect of such 12b-1 payments. REIT Fund A Class is subject to other
expenses (at a higher rate than applicable to the original class) which
may affect performance of the Class.
(3) REIT Fund Institutional Class commenced operations on November 11,
1997.
(4) Date of initial sale of the original class (now REIT Fund A Class).
(5) Cumulative total return at net asset value was 1.68% for the six months
ended October 31, 1998.
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Cumulative Total Return
The Real Estate Investment Trust Portfolio(1)
<TABLE>
<CAPTION>
REIT Fund REIT Fund REIT Fund REIT Fund
B Class B Class C Class C Class
(including (excluding (including (excluding
CDSC) CDSC) CDSC) CDSC)
<S> <C> <C> <C> <C>
3 months ended 10/31/98 (11.25%) (6.60%) (7.53%) (6.60%)
6 months ended 10/31/98 (17.03%) (12.71%) (13.57%) (12.71%)
9 months ended 10/31/98 (19.11%) (14.91%) (15.75%) (14.91%)
Period 11/11/97 (2) through 10/31/98 (15.31%) (11.31%) (12.11%) (11.31%)
</TABLE>
(1) Certain expenses of the Portfolio have been waived and paid by the
investment adviser. In the absence of such waiver and payment,
performance would have been affected negative
(2) Date of initial sale.
In addition, information will be provided that discusses the overriding
investment philosophies of Delaware and Delaware International and how those
philosophies impact each Portfolio in the strategies Pooled Trust, Inc. and
Foundation Funds employs in seeking respective Portfolio objectives. Since the
investment disciplines being employed for each Portfolio are based on the
disciplines and strategies employed by an affiliate of Delaware and Delaware
International to manage institutional separate accounts, investment strategies
and disciplines of these entities may also be discussed.
The Large-Cap Value Equity Portfolio's strategy relies on the
consistency, reliability and predictability of corporate dividends. Dividends
tend to rise over time, despite market conditions, and keep pace with rising
prices; they are paid out in "current" dollars. Just as important, current
dividend income can help lessen the effects of adverse market conditions. This
equity dividend discipline, coupled with the potential for capital gains, seeks
to provide investors with a consistently higher total-rate-of-return over time.
In implementing this strategy, the investment adviser seeks to buy securities
with a yield higher than the average of the S&P 500 Index. If a security held by
the Portfolio moves out of the acceptable yield range, it typically is sold.
This strict buy/sell discipline is instrumental in implementing The Large-Cap
Value Equity Portfolio strategy.
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FINANCIAL STATEMENTS
Ernst & Young LLP serves as independent auditors for Delaware Pooled
Trust, Inc. ("Pooled Trust, Inc.") and, in its capacity as such, audits the
financial statements contained in Pooled Trust, Inc.'s Annual Reports. The Real
Estate Investment Trust, The Real Estate Investment Trust Portfolio II, The
Large-Cap Value Equity (formerly known as The Defensive Equity), The Core Equity
(formerly known as the Growth and Income), The Mid-Cap Growth Equity (formerly
known as The Aggressive Growth), The Mid-Cap Value Equity (formerly known as The
Small/Mid-Cap Value Equity Portfolio), The Small-Cap Growth Equity, The
Intermediate Fixed Income (formerly known as The Fixed Income ), The Aggregate
Fixed Income, The High-Yield Bond, The Diversified Core Fixed Income, The Global
Equity, The International Equity, The Labor Select International Equity, The
Emerging Markets, The Global Fixed Income, and The International Fixed Income
Portfolios' Statements of Net Assets, Statements of Operations, Statements of
Changes in Net Assets, Financial Highlights and Notes to Financial Statements as
well as the reports of Ernst & Young LLP for the fiscal year ended October 31,
1998 are included in Pooled Trust, Inc.'s Annual Reports to shareholders. The
financial statements, financial highlights, the notes relating thereto and the
reports of Ernst & Young LLP listed above are incorporated by reference from the
Annual Reports into this Statement of Additional Information.
Ernst & Young LLP serves as the independent auditors for Delaware Group
Foundation Funds and, in its capacity as such, will audit the annual financial
statements of The Asset Allocation Portfolio.
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APPENDIX A--RATINGS
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
Excerpts from Fitch's description of its bond ratings: AAA--Bonds
considered to be investment grade and of the highest credit quality. The obligor
has an exceptionally strong ability to pay interest and repay principal, which
is unlikely to be affected by reasonably foreseeable events; AA--Bonds
considered to be investment grade and of very high credit quality. The obligor's
ability to pay interest and repay principal is very strong, although not quite
as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories
are not significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated F-1+; A--Bonds considered to be
investment grade and of high credit quality. The obligor's ability to pay
interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances that
bonds with higher ratings; BBB--Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings; BB--Bonds are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements; B--Bonds
are considered highly speculative. While bonds in this class are currently
meeting debt service requirements, the probability of continued timely payment
of principal and interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity throughout the life of
the issue; CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment; CC--Bonds are minimally
protected. Default in payment of interest and/or principal seems probable over
time; C--Bonds are in imminent default in payment of interest or principal; and
DDD, DD and D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
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Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the "AAA" category.
Commercial Paper
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
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APPENDIX B--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the investment
adviser believes have the potential for above average dividend increases over
time.
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
Small Cap Value Fund seeks capital appreciation by investing primarily
in common stocks whose market values appear low relative to their underlying
value or future potential.
DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Equity Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Growth and Income Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Blue Chip Fund seeks to achieve long-term capital appreciation. Current income
is a secondary objective. It seeks to achieve these objectives by investing
primarily in equity securities and any securities that are convertible into
equity securities. Social Awareness Fund seeks to achieve long-term capital
appreciation. It seeks to achieve this objective by investing primarily in
equity securities of medium- to large-sized companies expected to grow over time
that meet the Fund's "Social Criteria" strategy.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Corporate Bond Fund seeks to provide investors with total return by investing
primarily in corporate bonds. Extended Duration Bond Fund seeks to provide
investors with total return by investing primarily in corporate bonds
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities.
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Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital. Tax-Free New
Jersey Fund seeks a high level of current interest income exempt from federal
income tax and New Jersey state and local taxes, consistent with preservation of
capital. Tax-Free Ohio Fund seeks a high level of current interest income exempt
from federal income tax and Ohio state and local taxes, consistent with
preservation of capital.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Income Portfolio seeks a combination of current income and preservation of
capital with capital appreciation by investing primarily in a mix of fixed
income and domestic equity securities, including fixed income and domestic
equity Underlying Funds. Foundation Funds Balanced Portfolio seeks capital
appreciation with current income as a secondary objective by investing primarily
in domestic equity and fixed income securities, including domestic equity and
fixed income Underlying Funds. Foundation Funds Growth Portfolio seeks long-term
capital growth by investing primarily in equity securities, including equity
Underlying Funds, and, to a lesser extent, in fixed income securities, including
fixed-income Underlying Funds.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Equity Fund seeks to achieve
long-term total return by investing in global securities that provide the
potential for capital appreciation and income. Emerging Markets Fund seeks
long-term capital appreciation by investing primarily in equity securities of
issuers located or operating in emerging countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing
in companies of all sizes which have low dividend yields, strong balance sheets
and high expected earnings growth rates relative to their industry. Overseas
Equity Fund seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. New Pacific Fund seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.
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Delaware Group Premium Fund, Inc. offers various funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Growth and Income Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Delchester Series seeks as high a
current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide
a high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
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Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares to
be exempt from the Florida intangible personal property tax. Delaware-Voyageur
Tax-Free Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas intangible
personal property tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the Missouri personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free New Mexico Fund seeks to provide a high level of current income exempt
from federal income tax and the New Mexico personal income tax, consistent with
the preservation of capital. Delaware-Voyageur Tax-Free Oregon Insured Fund
seeks to provide a high level of current income exempt from federal income tax
and the Oregon personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Washington Insured Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund seeks to provide a
high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Idaho Fund seeks to provide a high level of current
income exempt from federal income tax and the Idaho personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Minnesota High
Yield Municipal Bond Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level
of current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
Growth Stock Fund has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. Tax-Efficient Equity Fund seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend income.
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free North Dakota Fund seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
147
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For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in the Portfolio's prospectus(es).
