<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 333-38801
File No. 811-8457
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
---
Post-Effective Amendment No. 8 X
---
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 9
---
DELAWARE GROUP FOUNDATION FUNDS
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
--------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-1255
Eric E. Miller, Esquire, 1818 Market Street, Philadelphia, PA 19103
-------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: December 27, 1999
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
____ on (date) pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
X on December 27, 1999 pursuant to paragraph (a)(2) of Rule 485
----
If appropriate:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 8 to Registration File No. 333-38801
includes the following:
1. Facing Page
2. Contents Page
3. Part A - Prospectuses*
4. Part B - Statement of Additional Information*
5. Part C - Other Information
6. Signatures
*The Prospectus and Statement of Additional Information dated June 29, 1999
describing The Asset Allocation Portfolio of the Registrant has not been
affected by this Post-Effective Amendment No. 8 to the Registration Statement
and remains current until such time in the future that the Registrant deems its
amendment necessary.
<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Delaware Group Foundation Funds
Class A * Class B * Class C
Prospectus
December , 1999
Asset Allocation Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Fund profiles page
Delaware Foundation Funds Income Portfolio
Delaware Foundation Funds Balanced Portfolio
Delaware Foundation Funds Growth Portfolio
How we manage the Funds page
Our investment strategies
The securities we typically invest in
The risks of investing in the Funds
Who manages the Funds page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Funds
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
<PAGE>
Profile: Delaware Foundation Funds Income Portfolio
What are the Fund's goals?
The Delaware Foundation Funds Income Portfolio seeks a combination of current
income and preservation of capital with capital appreciation. Although the Fund
will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in shares of selected Delaware Investments funds including
equity and fixed income funds. We may also invest in individual securities. We
use an active asset allocation approach in selecting investments for the Fund.
In striving to meet its objective, the Income Portfolio would typically have a
larger percentage of its assets allocated to fixed income funds and securities
(generally at least 45%) than to equity funds and securities (generally at least
20%). The Income Portfolio may allocate up to 10% to international funds and
securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund is subject to the same risks as the
underlying Delaware Investments funds that it invests in. Therefore, to the
extent that it invests in equity funds, it will be affected by declines in stock
prices. To the extent that it invests in fixed income funds, it will be affected
by changes in interest rates. If interest rates rise, the value of the bonds in
the portfolio will decline. The Fund's share value could decline as well.
Because the Fund may invest in as few as four different underlying funds or a
small number of securities, it is considered a non-diversified investment
company under the Investment Company Act of 1940 and may be subject to greater
risk than if it were diversified. However, the Delaware Investments funds
generally hold a broad mix of securities, which helps to lessen this risk. For a
more complete discussion of risk, please turn to "The risks of investing in the
Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors who are in the wealth preservation phase, generally with lower risk
tolerance.
o Investors in the pre-retirement/retirement phase, looking for an increase in
income.
o Investors who want a portfolio with broad diversification across various
types of securities and active asset allocation by a professional money
manager.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is capital appreciation.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has the Delaware Foundation Funds Income Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the return for the Fund's Class A shares for the past
calendar year as well as the average annual returns of all shares for the
one-year and lifetime periods. The Fund's past performance does not necessarily
indicate how it will perform in the future. The returns reflect expense
limitations. The returns would be lower without the expense limitation.
[GRAPHIC OMITTED: BAR CHART TOTAL RETURN (CLASS A)]
Class A total return
- -------
1998
- -------
0.00%
- -------
The Fund`s Class A had a 00.00% year-to-date return as of September 30, 1999.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 0.00% for the quarter ended ___________ 1998 and its lowest quarterly
return was 0.00% for the quarter ended _______________ 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns for the Fund shown in the table below do include the
sales charges.
<TABLE>
<CAPTION>
Average annual returns for the period ending 12/31/98
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A B (if redeemed)* C (if redeemed)* Lehman Brothers Aggregate
(Inception 12/31/97) (Inception 12/31/97) (Inception 12/31/97) Bond Index
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year
- ----------------------------------------------------------------------------------------------------------------------------
Lifetime
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's returns are compared to the performance of the Lehman Brothers
Aggregate Bond Index. You should remember that unlike the Fund, the index is
unmanaged and doesn't include the costs of operating a mutual fund, such as the
costs of buying, selling, and holding the securities. In addition, the Fund
invests in a variety of asset classes, not represented in the index, including
equity securities, international securities and high-yielding corporate bonds.
*If redeemed at end of period shown. If shares were not redeemed, the returns
for Class B would be 00.00% and 00.00%, respectively, for the one-year and
lifetime periods. Returns for Class C would be 00.00% and 00.00%, respectively,
for the one-year and lifetime periods.
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS A B C
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
- -----------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none none none
dividends
- -----------------------------------------------------------------------------------------------
Redemption fees none none none
- -----------------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.25% 0.25% 0.25%
- -----------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25%(4) 1.00% 1.00%
- -----------------------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
Total annual fund operating expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
Fee waivers and payments(5) (0.00%) (0.00%) (0.00%)
- -----------------------------------------------------------------------------------------------
Net expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
</TABLE>
The example below is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS(7) A B B C C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(if redeemed) (if redeemed)
- ---------------------------------------------------------------------------------------------------
1 year
- ---------------------------------------------------------------------------------------------------
3 years
- ---------------------------------------------------------------------------------------------------
5 years
- ---------------------------------------------------------------------------------------------------
10 years
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Just like the example above, the example below is based on a same hypothetical
investment of $10,000 with an annual 5% return over the time shown and the net
expenses of the Delaware Foundation Funds Income Portfolio noted above. However,
in the example below we have also included an estimation of the average
aggregate total operating expenses of the Delaware Investments funds described
on page ___. When the Delaware Foundation Funds Income Portfolio invests in any
of these funds, it absorbs a portion of their underlying expenses. This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS(7) A B B C C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(if redeemed) (if redeemed)
- ---------------------------------------------------------------------------------------------------
1 year
- ---------------------------------------------------------------------------------------------------
3 years
- ---------------------------------------------------------------------------------------------------
5 years
- ---------------------------------------------------------------------------------------------------
10 years
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees set the 12b-1 fee for Class A shares at 0.25%. The
maximum annual 12b-1 plan expenses permitted under the 12b-1 plan for Class
A shares are 0.30% of average daily net assets.
(5) The investment manager has contracted to waive fees and pay expenses through
September 30, 2000 in order to prevent total operating expenses (excluding
any 12b-1 expenses, taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.55% of average daily net assets.
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses were 0.00% for the first year and 0.00% for
years two through ten.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
<PAGE>
Profile: Delaware Foundation Funds Balanced Portfolio
What are the Fund's goals?
The Delaware Foundation Funds Balanced Portfolio seeks capital appreciation with
current income as a secondary objective. Although the Fund will strive to meet
its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in shares of selected Delaware Investments funds including
equity, fixed income and international funds. We may also invest in individual
securities. We use an active asset allocation approach in selecting investments
for the Fund.
The Fund has the flexibility to invest more in equity funds and securities or
more in fixed income funds and securities, depending on market conditions.
However, it will typically invest at least 25% in fixed income securities or
fixed income funds. The Fund will typically invest between 5% and 20% of its
assets in international funds and securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund is subject to the same risks as the
underlying Delaware Investments funds that it invests in. Therefore, to the
extent that it invests in equity funds, it will be affected by declines in stock
prices. To the extent that it invests in fixed income funds, it will be affected
by changes in interest rates. If interest rates rise, the value of the bonds in
the portfolio will decline. The Fund's share value could decline as well. To the
extent that it invests in international funds or securities, the Fund will be
affected by changes in currency exchange rates as well as political, economic
and regulatory conditions in the countries represented in its portfolio.
Because the Fund may invest in as few as four different underlying funds or a
small number of securities, it is considered a non-diversified investment
company under the Investment Company Act of 1940 and may be subject to greater
risk than if it were diversified. However, the Delaware Investments funds
generally hold a broad mix of securities, which helps to lessen this risk. For a
more complete discussion of risk, please turn to "The risks of investing in the
Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors who are in the wealth accumulation phase, generally with moderate
risk tolerance.
o Investors looking for the capital appreciation potential of the stock market
and the income potential of the bond market.
o Investors who would like a portfolio with broad diversification across various
types of securities and active asset allocation by a professional money
manager.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is high current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has the Delaware Foundation Funds Balanced Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the return for the Fund's Class A shares for the past
calendar year as well as the average annual returns of all shares for the
one-year and lifetime periods. The Fund's past performance does not necessarily
indicate how it will perform in the future. The returns reflect expense caps.
The returns would be lower without the expense caps.
[GRAPHIC OMITTED: BAR CHART TOTAL RETURN (CLASS A)]
Class A total return
- -------
1998
- -------
0.00%
- -------
The Fund`s Class A had a 00.00% year-to-date return as of September 30, 1999.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 0.00% for the quarter ended ___________ 1998 and its lowest quarterly
return was 0.00% for the quarter ended _______________ 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns for the Fund shown the table below do include the
sales charges.
<TABLE>
<CAPTION>
Average annual returns for the period ending 12/31/98
- -----------------------------------------------------------------------------------------------------------------------
CLASS A B (if redeemed)* C (if redeemed)* S&P 500 Index Lehman Brothers
(Inception (Inception (Inception Aggregate Bond Index
12/31/97) 12/31/97) 12/31/97)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year
- -----------------------------------------------------------------------------------------------------------------------
Lifetime
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's returns are compared to the performance of the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index. You should remember that unlike the Fund,
the indexes are unmanaged and don't reflect the actual costs of operating a
mutual fund, such as the costs of buying, selling, and holding securities.
Neither index is a perfect comparison to Delaware Foundation Funds Balanced
Portfolio since the S&P 500 does not include fixed-income securities and the
Lehman Brothers Aggregate Bond Index does not include stocks.
*If redeemed at end of period shown. If shares were not redeemed, the returns
for Class B would be 00.00% and 00.00%, respectively, for the one-year and
lifetime periods. Returns for Class C would be 00.00% and 00.00%, respectively,
for the one-year and lifetime periods.
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS A B C
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
- -----------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none none none
dividends
- -----------------------------------------------------------------------------------------------
Redemption fees none none none
- -----------------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.25% 0.25% 0.25%
- -----------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25%(4) 1.00% 1.00%
- -----------------------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
Total annual fund operating expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
Fee waivers and payments(5) (0.00%) (0.00%) (0.00%)
- -----------------------------------------------------------------------------------------------
Net expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
</TABLE>
The example below is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS(7) A B B C C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(if redeemed) (if redeemed)
- ---------------------------------------------------------------------------------------------------
1 year
- ---------------------------------------------------------------------------------------------------
3 years
- ---------------------------------------------------------------------------------------------------
5 years
- ---------------------------------------------------------------------------------------------------
10 years
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Just like the example above, the example below is based on a same hypothetical
investment of $10,000 with an annual 5% return over the time shown and the net
expenses of the Delaware Foundation Funds Balanced Portfolio noted above.
However, in the example below we have also included an estimation of the average
aggregate total operating expenses of the Delaware Investments funds described
on page ___. When the Delaware Foundation Funds Balanced Portfolio invests in
any of these funds, it absorbs a portion of their underlying expenses. This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS(7) A B B C C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(if redeemed) (if redeemed)
- ---------------------------------------------------------------------------------------------------
1 year
- ---------------------------------------------------------------------------------------------------
3 years
- ---------------------------------------------------------------------------------------------------
5 years
- ---------------------------------------------------------------------------------------------------
10 years
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees set the 12b-1 fee for Class A shares at 0.25%. The
maximum annual 12b-1 plan expenses permitted under the 12b-1 plan for Class
A shares are 0.30% of average daily net assets.
(5) The investment manager has contracted to waive fees and pay expenses through
September 30, 2000 in order to prevent total operating expenses (excluding
any 12b-1 expenses, taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.55% of average daily net assets.
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses were 0.00% for the first year and 0.00% for
years two through ten.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
<PAGE>
Profile: Delaware Foundation Funds Growth Portfolio
What are the Fund's goals?
The Delaware Foundation Funds Growth Portfolio seeks long-term capital growth.
Although the Fund will strive to meet its goals, there is no assurance that it
will.
What are the Fund's main investment strategies?
We invest primarily in shares of selected Delaware Investments funds including
equity funds and to a lesser extent, fixed income funds. We may also invest in
individual securities. We use an active asset allocation approach in selecting
investments for the Fund. In striving to meet its objective, the Fund will
typically invest more of its assets in equity funds and securities than in fixed
income funds and securities. Typically, the Fund will invest between 10% and 30%
of its assets in international funds or securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund is subject to the same risks as the
underlying Delaware Investments funds that it invests in. Therefore, to the
extent that it invests in equity funds, it will be affected by declines in stock
prices. To the extent that it invests in fixed income funds, it will be affected
by changes in interest rates. If interest rates rise, the value of the bonds in
the portfolio would decline. The value of Fund shares could decline as well. To
the extent that it invests in international funds or securities, the Fund will
be affected by changes in currency exchange rates as well as political, economic
and regulatory conditions in the countries represented in its portfolio.
Because the Fund may invest in as few as four different underlying funds or a
small number of securities, it is considered a non-diversified investment
company under the Investment Company Act of 1940 and may be subject to greater
risk than if it were diversified. However, because the underlying funds
generally hold a broad mix of securities, we do not believe this risk is
significant. For a more complete discussion of risk, please turn to "The risks
of investing in the Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors who are in the earlier stage of wealth accumulation, generally with
higher risk tolerance.
o Investors looking for the capital appreciation potential of the stock market
and who have no need for current income.
o Investors who would like a portfolio with broad diversification across various
types of securities and active asset allocation by a professional money
manager.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has the Delaware Foundation Funds Growth Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the return for the Fund's Class A shares for the past
calendar year as well as the average annual returns of all shares for the
one-year and lifetime periods. The Fund's past performance does not necessarily
indicate how it will perform in the future. The returns reflect expense caps.
The returns would be lower without the expense caps.
[GRAPHIC OMITTED: BAR CHART TOTAL RETURN (CLASS A)]
Class A total return
- ------
1998
- ------
0.00%
- ------
The Fund`s Class A had a 00.00% year-to-date return as of September 30, 1999.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 0.00% for the quarter ended ___________ 1998 and its lowest quarterly
return was 0.00% for the quarter ended _______________ 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns for the Fund shown the table below do include the
sales charges.
<TABLE>
<CAPTION>
Average annual returns for the period ending 12/31/98
- ------------------------------------------------------------------------------------------------------------------
CLASS A B (if redeemed)* C (if redeemed)* S&P 500 Index
(Inception 12/31/97) (Inception 12/31/97) (Inception 12/31/97)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year
- ------------------------------------------------------------------------------------------------------------------
Lifetime
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's returns are compared to the performance of the S&P 500 Index. You
should remember that unlike the Fund, the indexes are unmanaged and don't
reflect the actual costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities.
*If redeemed at end of period shown. If shares were not redeemed, the returns
for Class B would be 00.00% and 00.00%, respectively, for the one-year and
lifetime periods. Returns for Class C would be 00.00% and 00.00%, respectively,
for the one-year and lifetime periods.
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS A B C
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
- -----------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none none none
dividends
- -----------------------------------------------------------------------------------------------
Redemption fees none none none
- -----------------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.25% 0.25% 0.25%
- -----------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25%(4) 1.00% 1.00%
- -----------------------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
Total annual fund operating expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
Fee waivers and payments(5) (0.00%) (0.00%) (0.00%)
- -----------------------------------------------------------------------------------------------
Net expenses 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------
</TABLE>
The example below is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS(7) A B B C C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(if redeemed) (if redeemed)
- ---------------------------------------------------------------------------------------------------
1 year
- ---------------------------------------------------------------------------------------------------
3 years
- ---------------------------------------------------------------------------------------------------
5 years
- ---------------------------------------------------------------------------------------------------
10 years
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Just like the example above, the example below is based on a same hypothetical
investment of $10,000 with an annual 5% return over the time shown and the net
expenses of the Delaware Foundation Funds Growth Portfolio noted above. However,
in the example below we have also included an estimation of the average
aggregate total operating expenses of the Delaware Investments funds described
on page ___. When the Delaware Foundation Funds Growth Portfolio invests in any
of these funds, it absorbs a portion of their underlying expenses. This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS(7) A B B C C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(if redeemed) (if redeemed)
- ---------------------------------------------------------------------------------------------------
1 year
- ---------------------------------------------------------------------------------------------------
3 years
- ---------------------------------------------------------------------------------------------------
5 years
- ---------------------------------------------------------------------------------------------------
10 years
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees set the 12b-1 fee for Class A shares at 0.25%. The
maximum annual 12b-1 plan expenses permitted under the 12b-1 plan for Class
A shares are 0.30% of average daily net assets.
(5) The investment manager has contracted to waive fees and pay expenses through
September 30, 2000 in order to prevent total operating expenses (excluding
any 12b-1 expenses, taxes, interest, brokerage fees and extraordinary
expenses) from exceeding 0.55% of average daily net assets.
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses were 0.00% for the first year and 0.00% for
years two through ten.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
<PAGE>
Indirect expenses paid by the Delaware Foundation Funds
Because the Delaware Foundations Funds invest primarily in other Delaware
Investments funds, they will be shareholders of those funds. Like all
shareholders, the Delaware Foundation Funds will indirectly bear a proportionate
share of any management fees and other expenses of the funds it holds. These
fees, which are deducted from the underlying funds before their share prices are
calculated are in addition to the fees and expenses described in each Delaware
Foundation Fund profile. Depending on which funds are held in each Delaware
Foundation Fund portfolio, the fees will vary over time. However, in order to
give you an idea of what these fees might be, we have calculated an average
expense ratio for each Delaware Foundation Fund, based on the expense ratios of
the Delaware Investments funds for each of their most recent fiscal years and
the Foundation Funds' portfolio allocations as of September 30, 1999, all of
which is presented below. Based on these hypothetical calculations, the combined
average expense ratio of the Delaware Investments funds that is borne
indirectly by each of the Foundation Funds would have been as follows:
Income Portfolio _______%
Balanced Portfolio _________%
Growth Portfolio ___________%
Expenses will differ depending on how the Delaware Foundation Funds allocate
assets among the Delaware Investments funds.
<PAGE>
How we manage the Funds
Our investment strategies
In order to meet the changing needs of investors throughout their lives, the
Delaware Foundation Funds offer three different portfolios with varying levels
of income and growth potential and corresponding variations in risk. From the
most conservative (the Income Portfolio) to the moderate (the Balanced
Portfolio) to the most aggressive (the Growth Portfolio), each Fund relies on
active asset allocation and invests in a range of Delaware Investments mutual
funds as they strive to attain their objectives.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Each Delaware Foundation Fund is a type of mutual fund known as a fund-of-funds.
A fund-of-funds typically invests in other mutual funds rather than individual
securities. The potential benefits of such a strategy are three-fold:
1. An extra layer of diversification through shared ownership in the individual
securities held by the underlying funds;
2. Access to the investment expertise of multiple portfolio managers and
analysts who work on the individual underlying funds; and
3. A professional portfolio manager who makes asset allocation decisions
We offer the Delaware Foundation Funds because we determined that a
fund-of-funds was an efficient way to provide active asset allocation services
to meet the needs of investors at various stages of their life and wealth
accumulation efforts. Our active asset allocation strategy begins with an
evaluation of three key factors:
o the expected return of specific asset classes such as equities or fixed-income
securities,
o the expected volatility or degree to which returns have varied from one period
to the next; and
o the correlation of various asset classes, that is the degree to which two
asset classes move up or down together.
After using this information to determine how much of each Delaware Foundation
Fund will be allocated to a particular asset class, we then select specific
Delaware Investments funds for the portfolio. We have identified a select group
of funds that suit the allocation strategies of the Delaware Foundation Funds
and have grouped them into four broad asset classes.
The Delaware Investments funds we typically invest in are listed below in their
respective asset classes. Groupings are approximate and based on the core
strategy of each individual fund. Funds may be added or deleted from this list
without shareholder approval.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Delaware Investments funds available to the Delaware Foundation Funds
- ----------------------------------------------------------------------------------------------
<S> <C>
U.S. Equities
- ----------------------------------------------------------------------------------------------
Delaware Blue Chip Fund Delaware Select Growth Fund
- ----------------------------------------------------------------------------------------------
Delaware DelCap Fund Delaware Small Cap Value Fund
- ----------------------------------------------------------------------------------------------
Delaware Diversified Growth Fund Delaware Trend Fund
- ----------------------------------------------------------------------------------------------
Delaware Diversified Value Fund Delaware U.S. Growth Fund
Delaware REIT Fund
Delaware Select Equity Portfolio
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
International Equities
- ----------------------------------------------------------------------------------------------
Delaware Emerging Markets Fund Delaware International Small-Cap Fund
- ----------------------------------------------------------------------------------------------
Delaware International Equity Fund Delaware New Pacific Fund
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Fixed-Income Securities
- ----------------------------------------------------------------------------------------------
Delaware American Government Bond Fund Delaware Extended Duration Bond Fund.
- ----------------------------------------------------------------------------------------------
Delaware Delchester Fund Delaware Global Bond Fund
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
<S> <C>
Delaware Corporate Bond Fund Delaware Limited-Term Government Fund
- ----------------------------------------------------------------------------------------------
Delaware High-Yield Opportunities Fund
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Money Market Securities
- ----------------------------------------------------------------------------------------------
Delaware Cash Reserve Fund
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
Once we select appropriate investments for each Delaware Foundation Funds
portfolio, we continually monitor the market and economic environments, the
risk/reward profiles of each asset class and the performance of individual funds
and actively adjust each Delaware Foundation Funds portfolio striving to meet
its investment objective.
The Delaware Foundation Fund investment objectives are non-fundamental. This
means that the Board of Trustees may change the objective without obtaining
shareholder approval. If the objective were changed, we would notify
shareholders before the change became effective.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------------
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Equity Funds or Equity Securities 20% to 50% of Assets 35% to 65% of Assets 45% to 75% of Assets
May include Delaware Investments funds in the equity
asset class or individual equity securities. The Fund will generally The Fund will generally The Fund will generally
invest in at least four invest in at least four invest in at least four
individual mutual funds. individual mutual funds. individual mutual funds.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Blue Chip Fund Delaware Blue Chip Fund seeks long-term capital appreciation. Current income
is a secondary objective. It invests primarily in large ("blue chip")
companies.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Growth and Income Fund Delaware 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. It invests primarily in dividend-paying
stocks of large, well-established companies.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware DelCap Fund Delaware DelCap Fund seeks long-term capital growth. It invests primarily, in
common stocks and convertible securities of medium-sized companies believed
to have growth potential.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Diversified Growth Fund Delaware Diversified Growth Fund seeks capital appreciation. It invests
primarily in large companies believed to have the potential to grow faster
than the average company in the S&P 500 Index.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Diversified Value Fund Delaware Diversified Value Fund seeks capital appreciation with income as a
secondary objective. It invests primarily in dividend-paying stocks or
income-producing securities that are convertible into common stocks.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware REIT Fund Delaware REIT Fund seeks maximum long-term total return, with capital
appreciation as a secondary objective. It invests primarily in real estate
investment trusts (REITs) and other companies in the real estate industry.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Select Equity Portfolio Delaware Select Equity Portfolio seeks to provide maximum long-term capital
appreciation. It invests primarily in equity securities and will generally
hold between 20 and 30 different stocks that are also held by other funds in
the Delaware Investments family.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Select Growth Fund Delaware Select Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities of
companies of all sizes, that the Manager believes have the potential for high
earnings growth.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Small Cap Value Fund Delaware Small Cap Value Fund seeks capital appreciation. It invests
primarily in small-cap companies that are believed to be undervalued.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Trend Fund Delaware Trend Fund seeks capital appreciation by investing primarily in
securities of emerging or other growth-oriented companies. It focuses on
small companies that are believed to be responsive to changes in the
marketplace and that have the fundamental characteristics to support
continued growth.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware U.S. Growth Fund Delaware U.S. Growth Fund seeks maximum capital appreciation. It invests
primarily in large company growth stocks.
- ------------------------------------------------------ -----------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------------
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Fixed Income Securities 45% to 75% of Assets 25% to 55% of Assets 5% to 35% of Assets
May include Delaware Investments funds in the fixed
income asset class or individual fixed income
securities. The Fund will generally The Fund will generally The Fund will generally
invest in at least four invest in at least four invest in at least four
individual mutual funds. individual mutual funds. individual mutual funds.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware American Government Bond Fund Delaware American Government Bond Fund seeks high current income consistent
with safety of principal by investing primarily in debt obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
including mortgage-backed securities.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Corporate Bond Fund Delaware Corporate Bond Fund seeks to provide investors with total return. It
invests primarily in corporate bonds, typically those rated BBB and above by
a nationally recognized statistical ratings agency.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Extended Duration Bond Fund Delaware Extended Duration Bond Fund seeks to provide investors with total
return. It invests primarily in corporate bonds, typically those rated BBB
and above by a nationally recognized statistical ratings agency.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Delchester Fund Delaware Delchester Fund seeks as high a current income as is consistent with
providing reasonable safety. It invests primarily in high-yield, higher risk
corporate bonds, commonly known as "junk bonds."
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Global Bond Fund Delaware Global Bond Fund seeks current income consistent with preservation
of principal. It invests primarily in fixed-income securities that may also
provide the potential for capital appreciation. At least 65% of its assets
will be invested in three different countries, including the U.S.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Limited-Term Government Fund Delaware Limited-Term Government Fund seeks to provide a high stable level of
current income, while attempting to minimize fluctuations in principal and
provide maximum liquidity. It invests primarily in short and
intermediate-term fixed income securities issued or guaranteed by the U.S.
government as well as instruments backed by those securities.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware High-Yield Opportunities Fund Delaware High-Yield Opportunities Fund seeks to provide investors with total
return and, as a secondary objective, high current income. It invests
primarily in high-yield, higher risk corporate bonds, commonly known as "junk
bonds."
- ------------------------------------------------------ -----------------------------------------------------------------------------
- ------------------------------------------------------ -------------------------- ------------------------ -------------------------
Money Market Funds or Securities 0-35% of Assets 0-35% of Assets 0-35% of Assets
May include Delaware Cash Reserve, a money market
fund, individual money market securities or The Fund will generally The Fund will generally The Fund will generally
repurchase agreements. invest in at least four invest in at least four invest in at least four
individual mutual funds. individual mutual funds. individual mutual funds.
- ------------------------------------------------------ -------------------------- --------------------------- ----------------------
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Cash Reserve Delaware Cash Reserve seeks to provide maximum current income, while
preserving principal and maintaining liquidity. As a money market fund, it
invests in highly liquid money market instruments.
- ------------------------------------------------------ -----------------------------------------------------------------------------
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
International Equity Securities 0-10% of Assets 5% to 20% of Assets 10%-30% of Assets
May include Delaware Investments funds in the
international equity asset class or individual
international equity securities. The Fund will generally The Fund will generally The Fund will generally
invest in at least four invest in at least four invest in at least four
individual mutual funds. individual mutual funds. individual mutual funds.
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Emerging Markets Fund Delaware Emerging Markets Fund seeks long-term capital appreciation. It
invests primarily in companies located in under-developed, emerging market
countries.
- ------------------------------------------------------ -----------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------------
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Delaware International Equity Fund Delaware International Equity Fund seeks long-term growth without undue risk
to principal. It invests primarily in large companies located in developed
countries.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware International Small Cap Fund Delaware International Small Cap Fund seeks to achieve long-term capital
appreciation. It invests primarily in small companies located in foreign
countries.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware New Pacific Fund Delaware New Pacific Fund seeks to maximize long-term capital appreciation by
investing primarily in equity securities of companies that are domiciled in
or have their principal business activities in countries located in the
Pacific Basin.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Other Types of Securities which may be held
by the Delaware Foundation Funds.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer
and seller of securities in which the seller agrees The Delaware Foundation Funds may use overnight repurchase agreements to
to buy the securities back within a specified time invest cash prior to investing it in other funds or securities, or for
at the same price the buyer paid for them, plus an temporary defensive purposes.
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as equivalent
to cash.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Options and Futures: Options represent a right to
buy or sell a security or group of securities at an We might use options or futures to gain exposure to a particular market
agreed upon price at a future date. The purchaser of segment without purchasing individual funds or securities in that segment. We
an option may or may not choose to go through with might use this approach if we had excess cash that we wanted to invest
the transaction. quickly or to make an investment without disrupting one of the other Delaware
Investments funds.
Futures contracts are agreements for the purchase or
sale of a security or group of securities at a We might also use options or futures to neutralize the effect of potential
specified price, on a specified date. Unlike an price declines without selling securities.
option, a futures contract must be executed unless
it is sold before the settlement date. Use of these strategies can increase the operating costs of the Funds and can
lead to loss of principal.
Options and futures are generally considered
to be derivative securities.
- ------------------------------------------------------ -----------------------------------------------------------------------------
</TABLE>
Borrowing from banks
The Delaware Foundation Funds may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. Borrowing money could
result in the Funds being unable to meet their investment objectives.
Temporary defensive positions
The Delaware Foundation Funds are permitted to make temporary investments in
bonds, cash or cash equivalents and may allocate 100% of their net assets to
Delaware Cash Reserve in response to unfavorable market conditions. To the
extent a Fund engages in temporary defensive measures, it may be unable to
achieve its objective.
Portfolio turnover
Though we anticipate that each of the Delaware Foundation Funds will have an
annual portfolio turnover of less than 100%, some of the funds that the Delaware
Foundation Funds may invest in could have a turnover rate greater than 100%. A
turnover rate of 100% would occur if a fund sold and replaced securities valued
at 100% of its net assets within one year. High turnover rates in the individual
funds held by the Delaware Foundation Funds could result in higher expenses.
<PAGE>
More About the Delaware Foundation Funds
Guidelines for Purchasing and Redeeming Shares of Other Delaware Investments
Funds
Following is important information about how the Delaware Foundation Funds
operate, which you should consider when evaluating the Funds.
|X| Each Delaware Foundation Funds portfolio will invest in the institutional
class shares of approved Delaware Investments funds. When investing in
Delaware Cash Reserve, Class A will be used. This means the Foundation
Funds will pay no sales charges or 12b-1 distribution fees on the shares
that they purchase.
|X| Each Foundation Funds portfolio will indirectly bear a share of fees and
expenses that apply to the Institutional Classes of the Delaware
Investments Funds they hold. For more information about this, see x.
|X| Any performance reported for the Delaware Foundation Funds will include
the impact of all fund expenses whether they are related to the Foundation
Funds or the underlying funds they invest in.
|X| We have adopted Asset Allocation Guidelines for our purchase and sale of
other Delaware Investments funds. If the manager of the Foundation Funds
anticipates that a purchase or redemption will disrupt the investment
strategies of another fund, the manager will confer with the portfolio
managers of that fund to determine how to minimize adverse affects on both
funds. Such steps might include staggering the timing and amounts of the
transactions. As a result, the Foundation Funds might not be able to
purchase or redeem shares of other Delaware Investments funds in the exact
manner they would like to. This could decrease the total return or
increase the volatility of each Foundation Fund.
|X| Because many Delaware Investments funds are managed independently by
different individuals or investment teams, there is no overall
coordination of purchases and sales of individual securities. Therefore,
it is possible that one of the funds held by a Delaware Foundation Funds
portfolio or the Delaware Foundation Funds themselves might be acquiring
securities at the same time another is selling them. This could increase
transaction costs.
<PAGE>
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Funds you should
carefully evaluate the risks. An investment in the Funds typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Funds. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and How we
strive to manage the risk
- ------------------------------------------------- --------------------- --------------------- ------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------- --------------------- ------------------------
<S> <C> <C> <C>
Market risk is the risk that all or a majority Each of the underlying Delaware Investments Funds and the Delaware
of the securities in a certain market -- like Foundation Funds themselves are subject to this risk. In all
the stock or bond market -- will decline in Funds, we maintain a long-term investment approach and focus on
value because of factors such as economic securities we believe can appreciate over an extended time frame
conditions, future expectations or investor regardless of interim market fluctuations. Though we may hold
confidence. securities for any amount of time, we typically do not trade for
short-term purposes.
Each Fund may hold a substantial part of its assets in cash or cash
equivalents as a temporary, defensive strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Industry and security risk is the risk that the Each of the underlying Delaware Investments Funds and the
value of securities in a particular industry or Foundation Funds themselves are subject to this risk. The
the value of an individual stock or bond will underlying funds generally hold a number of different securities
decline because of changing expectations for spread across various sectors. The Funds also follow a rigorous
the performance of that industry or for the selection process before choosing securities and continuously
individual company issuing the stock. monitor them while they remain in the portfolio.
This combined with the fact that the Delaware Foundation Funds will
hold at least four different Delaware Investments funds, typically
representing different asset classes, should help to reduce
industry and security risk.
- ------------------------------------------------- --------------------------------------------------------------------
Small company risk is the risk that prices of Delaware DelCap Fund, Delaware Select Growth Fund, Delaware Small
smaller companies may be more volatile than Cap Value Fund, Delaware Trend Fund and Delaware International
larger companies because of limited financial Small Cap Fund are all subject to this risk. These Funds maintain
resources or dependence on narrow product lines. well-diversified portfolios, select stocks carefully and monitor
them continuously. In determining the asset allocation for the
Foundation Funds, the manager will evaluate the current risk and
reward potential of small-cap stocks and make allocation decisions
accordingly.
--------------------- --------------------- ------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio will
will generally have will have moderate generally have
less exposure to exposure to this significant exposure
this risk due to risk. to this risk, due to
its reduced its greater emphasis
emphasis on equity on equities.
securities.
- ------------------------------------------------- --------------------- --------------------- ------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and How we
strive to manage the risk
- ------------------------------------------------- --------------------- --------------------- ------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------- --------------------- ------------------------
<S> <C> <C> <C>
Interest rate risk is the risk that securities For Delaware Investments funds in the Fixed Income group this is
will decrease in value if interest rates rise. generally the most significant risk. In striving to manage this
The risk is generally associated with bonds; risk, managers of Delaware Fixed Income Funds will typically
however, because smaller companies often borrow monitor economic conditions and the interest rate environment.
money to finance their operations, they may be They will also usually keep the average maturity of a fund as
adversely affected by rising interest rates. short as is prudent, in keeping with the individual fund's
investment objective.
The funds listed above that are subject to small company risk may
also be subject to this risk. The managers of these funds consider
the potential effect that rising interest rates might have on a
stock before the stock is purchased.
--------------------- --------------------- ------------------------
For the Income The Balanced The Growth Portfolio
Portfolio, this is Portfolio will will generally have
a significant risk generally have moderate exposure to
due to its moderate exposure this risk due to its
substantial to this risk. lesser emphasis on
allocation to fixed Though it will have fixed income funds and
income funds and a fixed income securities. Though it
securities. allocation and will have holdings of
holdings of small small companies, these
companies, these may be balanced by
may be balanced by equity holdings of
equity holdings of larger companies.
larger companies.
- ------------------------------------------------- --------------------- --------------------- ------------------------
Credit risk is the risk that a bond's issuer Each of the Delaware Investments funds in the Fixed Income group
might be unable to make timely payments of is subject to some degree of credit risk. This is less substantial
interest and principal. for high-quality, government-oriented funds like Delaware American
Government Bond Fund and Delaware Limited-Term Government Fund and
Investing in so-called "junk" or "high-yield" more significant for funds that invest in lower quality bonds such
bonds entails greater risk of principal loss as Delaware Delchester Fund and Delaware High-Yield Opportunities
than the risk involved in investment grade Fund.
bonds.
--------------------- --------------------- ------------------------
For the Income For the Balanced For the Growth
Portfolio, this may Portfolio, this is Portfolio, this is a
be a significant a moderate risk. less significant risk
risk because the Though it probably due to its reduced
Fund may have a will invest in emphasis on fixed
substantial Delaware Delchester income securities.
allocation to Fund or Delaware
Delaware Delchester High-Yield
Fund or Delaware Opportunities Fund,
High-Yield these holdings may
Opportunities Fund. be balanced by an
equity allocation
or better quality
bond holdings.
- ------------------------------------------------- --------------------- --------------------- ------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and How we
strive to manage the risk
- ------------------------------------------------- --------------------- --------------------- ------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------- --------------------- ------------------------
<S> <C> <C> <C>
High-Yield Bond Risk Delaware Delchester Fund and Delaware High-Yield Opportunities
Investing in so-called "junk" or "high-yield" Fund are subject to this risk. Delaware Global Bond Fund and
bonds entails the risk of principal loss, which Delaware Emerging Markets Fund may be subject to this risk since
may be greater than the risk involved in they are permitted to hold high-yield securities of emerging
investment grade bonds. Credit risk is greater market issuers. Both Delaware Delchester Fund and Delaware
for these bonds because they are sometimes High-Yield Opportunities Fund follow careful, credit-oriented bond
issued by companies whose earnings at the time selection and hold a diversified selection of high-yield bonds in
of issuance are less than the projected debt an effort to manage this risk. The portfolio manager of the
service on the junk bonds. Foundation Funds will look carefully at the risk profile of the
high-yield bond asset class in deciding how much to allocate to
In addition, high-yield bonds may also be the Delaware Investments funds that invest in those securities.
subject to greater risks related to recessions,
the ability to accurately value bonds and the
possibility of adverse legislative or regulatory
actions.
--------------------- --------------------- ------------------------
For the Income For the Balanced For the Growth
Portfolio, this may Portfolio, this is Portfolio, this is a
be a significant a moderate risk less significant risk
risk because the because holdings due to its reduced
Fund may have a subject to this emphasis on fixed
substantial risk may be income securities and
allocation to balanced by its the limitation on its
Delaware Delchester equity allocation allocation to
Fund or Delaware or better quality international
High-Yield bond holdings. securities.
Opportunities Fund.
- ------------------------------------------------- --------------------- --------------------- ------------------------
Prepayment risk is the risk that the principal Prepayment risk can be a significant risk to funds that have a
on a bond you own will be prepaid prior to large percentage of holdings in mortgage securities. Among the
maturity at a time when interest rates are funds available to the Delaware Foundation Funds portfolios, these
lower than what that bond was paying. You would include the Delaware American Government Bond Fund and the
then have to reinvest that money at a lower Delaware Limited-Term Government Fund. In order to manage this
interest rate. risk, when we think interest rates are low or that rates will be
declining, managers of these Funds typically look for mortgage
securities that they believe are less likely to be prepaid. The
Delaware Foundation Funds will be more or less subject to this
risk depending on how much they have allocated to these Delaware
Investments funds.
--------------------- --------------------- ------------------------
For the Income For the Balance For the Growth
Portfolio, this Portfolio there is Portfolio there is low
could be a relatively low exposure to this risk
significant risk exposure to this due to a reduced
due to its greater risk, due to its emphasis on the
focus on the balanced approach fixed-income asset
fixed-income asset and allocation to class.
class. equity securities.
- ------------------------------------------------- --------------------- --------------------- ------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and How we
strive to manage the risk
- ------------------------------------------------- --------------------- --------------------- ------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------- --------------------- ------------------------
<S> <C> <C> <C>
Currency Risk is the risk that the value of a Each of the Delaware Investments funds in the International group
Fund's investments may be negatively affected is subject to this risk. The Funds may try to hedge currency risk
by changes in foreign currency exchange rates. by purchasing foreign currency exchange contracts. By agreeing to
Adverse changes in exchange rates may reduce or purchase or sell foreign securities at a pre-set price on a future
eliminate any gains produced by investments date, the Funds strive to protect the value of the securities they
that are denominated in foreign currencies and own from future changes in currency rates. The Funds will use
may increase any losses. forward currency exchange contracts only for defensive measures,
not to enhance portfolio returns. However, there is no assurance
that a strategy such as this will be successful.
For the Delaware Foundation Funds, this risk will vary depending on
how much of their assets are allocated to international funds.
However, the maximum amount that we will invest in International
Funds is 30% (in the Growth Portfolio).
--------------------- --------------------- ------------------------
For the Income For the Balanced For the Growth
Portfolio, there is Portfolio, there is Portfolio, there is
minimal exposure to moderate exposure moderate exposure to
this risk because to this risk, since this risk, since
international international international holdings
holdings are holdings may range may range from 10% to
limited to 10% of from 5% to 20% of 30% of net assets.
net assets. net assets.
- ------------------------------------------------- --------------------- --------------------- ------------------------
Emerging Markets Risk is the possibility that The Delaware Global Bond Fund, Delaware Emerging Markets Fund and
the risks associated with international Delaware New Pacific Fund are all subject to this risk. Each Fund
investing will be greater in emerging markets carefully selects securities within emerging markets and strives
than in more developed foreign markets because, to consider all relevant risks associated with an individual
among other things, emerging markets may have company. When deciding how much to allocate to these Funds, the
less stable political and economic environments. Delaware Foundation Funds manager will consider whether the
potential rewards of investing in these funds outweigh the
potential risks.
--------------------- --------------------- ------------------------
For the Income For the Balanced For the Growth
Portfolio, there is Portfolio, there is Portfolio, there is
low exposure to moderate exposure moderate exposure to
this risk because to this risk, since this risk, since
international international international holdings
holdings are holdings may range may range from 10% to
limited to 10% of from 5% to 20% of 30% of net assets.
net assets. net assets.
- ------------------------------------------------- --------------------- --------------------- ------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and How we
strive to manage the risk
- ------------------------------------------------- --------------------- --------------------- ------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------- --------------------- ------------------------
<S> <C> <C> <C>
Futures and options risk is the possibility Each of the Delaware Foundation Funds and some of the Delaware
that the Fund may experience a loss if it Investments funds may use options and futures for defensive
employs an options or futures strategy related purposes, such as to protect gains in the portfolio without
to a security or a market index and that actually selling a security or to gain exposure to a particular
security or index moves in the opposite market segment without purchasing individual securities in the
direction from what the manager anticipated. segment. We will generally not use futures and options for
Futures and options also involve additional speculative reasons.
expenses, which could reduce any benefit or
increase any loss that Fund gains from using
the strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Foreign risk is the risk that foreign Though each of the Foundation Funds portfolios may invest in
securities may be adversely affected by International Funds or international securities, none may invest
political instability, changes in currency more than 30% of net assets in International Funds. Holding both
exchange rates, inefficient markets, foreign international and domestic securities in a well-allocated
economic conditions, lack of information or portfolio may actually help to reduce overall portfolio risk since
inadequate regulatory and accounting standards. these types of securities may experience different performance
cycles.
--------------------- --------------------- ------------------------
For the Income For the Balanced For the Growth
Portfolio, there is Portfolio, there is Portfolio, there is
low exposure to moderate exposure moderate exposure to
this risk because to this risk, since this risk, since
international international international holdings
holdings are holdings may range may range from 10% to
limited to 10% of from 5% to 20% of 30% of net assets.
net assets. net assets.
- ------------------------------------------------- --------------------- --------------------- ------------------------
Non-diversified risk Non-diversified funds have Each of the Delaware Foundation Funds as well as several of the
the flexibility to invest as much as 50% of Delaware Investments funds they may hold are non-diversified funds
their assets in as few as two issuers provided subject to this risk. Nevertheless, we typically hold shares of at
no single issuer accounts for more than 25% of least four different Delaware Investments funds, which in turn
the portfolio. The remaining 50% of the hold a number of securities representing a variety of different
portfolio must be diversified so that no more issuers or industry sectors. Though we are technically subject to
than 5% of the Fund's assets is invested in the non-diversified risk, we do not believe it will have a substantial
securities of a single issuer. When a fund impact on the Delaware Foundation Funds.
invests its assets in fewer issuers, the value
of fund shares may increase or decrease more
rapidly than if the fund were fully diversified.
- ------------------------------------------------- --------------------------------------------------------------------
Liquidity risk is the possibility that Each of the Delaware Foundation Fund's exposure to illiquid
securities cannot be readily sold within seven securities is limited to 15% of net assets. For each of the Delaware
days at approximately the price that a fund has Investments funds exposure to illiquid securities is limited to 10%
valued them. to 15% of net assets.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
<PAGE>
Who manages the Funds
Investment manager
The Funds are managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company manages each
Fund's assets by allocating a Fund's assets among the Delaware Investments
funds. The management services include monitoring the Delaware Investments funds
in order to determine whether they are investing their assets in a manner that
is consistent with the asset classes targeted for investment by each Fund.
Delaware Management Company also oversees the Funds' direct investment in
securities, manages the Funds' business affairs and provides daily
administrative services. For these services, the manager was paid a fee for the
last fiscal year as follows:
<TABLE>
<CAPTION>
Asset Allocation Fees*
- -------------------------------------------------------------- ---------------------- --------------------- --------------------
Delaware Foundation Delaware Foundation Delaware
Funds Income Funds Balanced Foundation Funds
Portfolio Portfolio Growth Portfolio
- -------------------------------------------------------------- ---------------------- --------------------- --------------------
<S> <C> <C> <C>
As a percentage of average daily net assets 0.00% 0.00% 0.00%
- -------------------------------------------------------------- ---------------------- --------------------- --------------------
</TABLE>
*Reflects the manager's expense caps.
Portfolio managers
J. Paul Dokas has primary responsibility for making day-to-day investment
decisions for the Funds. In making investment decisions for each Fund, Mr. Dokas
regularly consults with Richard G. Unruh.
J. Paul Dokas, Vice President/Portfolio Manager, is responsible for both asset
allocations among the underlying Delaware Investments Funds and the Portfolios'
direct investments in securities. He holds a BBA in Business from Loyola College
and an MBA from the University of Maryland. Prior to joining Delaware
Investments in 1997, he was a Director of Trust Investments for Bell Atlantic
Corporation in Philadelphia. Mr. Dokas is a CFA charterholder.
Richard G. Unruh, Executive Vice President/Chief Investment Officer, Equity,
joined Delaware Investments in 1982 after 19 years of investment experience with
Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive Vice President of
the Funds in 1994. He is also a member of the Board of Directors of Delaware
Management Company and was named Executive Vice President of Delaware Management
Company in 1994.
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Trustees
<TABLE>
<CAPTION>
<S> <C> <C>
Investment manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Financial advisers
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager or
sub-adviser to make investment decisions for individual portfolios on a
day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for a Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay
when you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than 0.30%
of average daily net assets, which is lower than the 12b-1 fee for Class B
and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
<PAGE>
Class A sales charges
<TABLE>
<CAPTION>
- -------------------------- ---------------- ---------------------------------------------------------------- --------------------
Amount of purchase Sales charge Sales charge as % of amount invested Dealer's
as % commission as %
of offering of offering price
price
- -------------------------- ---------------- ---------------------------------------------------------------- --------------------
Delaware Delaware Delaware
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
$50,000 but 4.75% 4.00%
under $100,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
$100,000 but 3.75% 3.00%
under $250,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
$250,000 but 2.50% 2.00%
under $500,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
$500,000 but 2.00% 1.60%
under $1 million
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- -------------------------- --------------------------- ------------------------------- ------------------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- -------------------------- --------------------------- ------------------------------- ------------------------------------------
<S> <C> <C> <C> <C>
$1 million up to $5 none none 1.00%
million
- -------------------------- --------------------------- ------------------------------- ------------------------------------------
Next $20 million none none 0.50%
Up to $25 million
- -------------------------- --------------------------- ------------------------------- ------------------------------------------
Amount over $25 million none none 0.25%
- -------------------------- --------------------------- ------------------------------- ------------------------------------------
</TABLE>
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in a Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1% of average daily net assets,
of which 0.25% are service fees paid to the distributor, dealers or others
for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the eighth anniversary of
purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in a Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid to
the distributor, dealers or others for providing services and maintaining
shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of a Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of a Fund's assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ----------------------------- -------------------------------- ---------------------------------------------------------------
Program How it works Share class
A B C
- ----------------------------- -------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of Intent X Although the Letter of Intent and Rights of
you agree to invest a Accumulation do not apply to the purchase of
certain amount in Delaware Class B and C shares, you can combine your
Investment Funds (except purchase of Class A shares with your
money market funds with no purchase of B and C shares to fulfill your
sales charge) over a Letter of Intent or qualify for Rights of
13-month period to qualify Accumulation.
for reduced front-end
sales charges.
- ----------------------------- -------------------------------- ----------------
Rights of Accumulation You can combine your X
holdings or purchases of
all funds in the Delaware
Investments family (except
money market funds with no
sales charge) as well as
the holdings and purchases
of your spouse and
children under 21 to
qualify for reduced
front-end sales charges.
- ----------------------------- -------------------------------- ---------------- --------------------------- ------------------
Reinvestment of Up to 12 months after you For Class A, For Class B, your Not
redeemed shares redeem shares, you can you will not account will be available.
reinvest the proceeds with have to pay credited with the
no additional sales charge. an contingent deferred
additional sales charge you
front-end previously paid on
sales charge. the amount you are
reinvesting. Your
schedule for
contingent deferred
sales charges and
conversion to Class
A will not start
over again; it will
pick up from the
point at which you
redeemed your
shares.
- ----------------------------- -------------------------------- ---------------- ----------------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may X There is no reduction in sales charges for
SARSEP, Prototype qualify for reduced sales Class B or Class C shares for group
Profit Sharing, charges by combining the purchases for retirement plans.
Pension, 401(k), SIMPLE purchases of all members
401(k), 403(b)(7), and of the group. Members of
457 Retirement Plans these groups may also
qualify to purchase shares
without a front-end sales
charge and a waiver of any
contingent deferred sales
charges.
- ----------------------------- -------------------------------- ---------------- ----------------------------------------------
</TABLE>
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on a Fund's net asset
value. If we receive your order after the close of trading, you will pay the
next business day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject any purchase
order.
We determine a Fund's net asset value (NAV) per share at the close of trading of
the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in a Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of trustees. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at fair market value using a method approved by the board of
trustees.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Funds may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Funds can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern Time), you will receive the net asset value as determined on the
business day we receive your request. We will deduct any applicable contingent
deferred sales charges. You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, a Fund may redeem your account after
60 days' written notice to you.
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange.
<PAGE>
About your account (continued)
Special services (continued)
MoneyLineSM On Demand Service
Through our MoneyLineSM On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
Dividends for the Delaware Foundation Funds Income Portfolio and Delaware
Foundation Funds Balanced Portfolio, if any, are paid quarterly. Dividends for
the Delaware Foundation Funds Growth Portfolio, if any, are paid once a year.
Capital gains, if any, are paid once a year. We automatically reinvest all
dividends and any capital gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from a Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from a Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time a Fund held the assets. In addition, you may be subject to state
and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, each Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." Each Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of any Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Funds invest. The
portfolio manager and investment professionals of each Fund consider Year 2000
compliance in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
<PAGE>
53
Financial highlights
The financial highlights table are intended to help you understand a Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with each Fund's financial statements, is included in their
annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------ -------------------------
Delaware Foundation Funds Growth Portfolio Class A
------------------------------------------------------------------------------------------------ -------------------------
<S> <C> <C>
Period
Year 12/31/97(1)
Ended 9/30 through
1999 9/30/98
------------------------------------------------------------------------------------------------ ----------- -------------
------------------------------------------------------------------------------------------------ ----------- -------------
Net asset value, beginning of period $8.500
------------------------------------------------------------------------------------------------ ----------- -------------
------------------------------------------------------------------------------------------------ ----------- -------------
Income from investment operations:
------------------------------------------------------------------------------------------------ ----------- -------------
Net investment income(2) 0.083
------------------------------------------------------------------------------------------------ ----------- -------------
Net realized and unrealized loss on investments (0.413)
-------
------------------------------------------------------------------------------------------------ ----------- -------------
Total from investment operations (0.330)
-------
------------------------------------------------------------------------------------------------ ----------- -------------
------------------------------------------------------------------------------------------------ ----------- -------------
Less dividends and distributions:
------------------------------------------------------------------------------------------------ ----------- -------------
Dividends from net investment income ---
-------
------------------------------------------------------------------------------------------------ ----------- -------------
Distributions from net realized gain on investment transactions ---
-------
------------------------------------------------------------------------------------------------ ----------- -------------
Total dividends and distributions ---
-------
------------------------------------------------------------------------------------------------ ----------- -------------
------------------------------------------------------------------------------------------------ ----------- -------------
Net asset value, end of period $8.170
======
------------------------------------------------------------------------------------------------ ----------- -------------
------------------------------------------------------------------------------------------------ ----------- -------------
Total return(3) (3.88%)
------------------------------------------------------------------------------------------------ ----------- -------------
------------------------------------------------------------------------------------------------ ----------- -------------
Ratios and supplemental data:
------------------------------------------------------------------------------------------------ ----------- -------------
Net assets, end of period (000 omitted) $547
------------------------------------------------------------------------------------------------ ----------- -------------
Ratio of expenses to average net assets 0.80%
------------------------------------------------------------------------------------------------ ----------- -------------
Ratio of expenses to average net assets prior to expense limitation 16.14%
------------------------------------------------------------------------------------------------ ----------- -------------
Ratio of net investment income to average net assets 1.28%
------------------------------------------------------------------------------------------------ ----------- -------------
Ratio of net investment income loss to average net assets prior to expense limitation (14.06%)
------------------------------------------------------------------------------------------------ ----------- -------------
Portfolio turnover 77%
------------------------------------------------------------------------------------------------ ----------- -------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------- ------------------------- ---------------------------
Delaware Foundation Funds Growth Portfolio Class B Class C
- ------------------------------------------------------------------------- ------------------------- ---------------------------
Year Period Year Period
Ended 12/31/97(1) Ended 12/31/97(1)
9/30 through 9/30 through
1999 9/30/98 1999 9/30/98
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net asset value, beginning of period $8.500 $8.500
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Income from investment operations:
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net investment income(2) 0.035 0.034
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net realized and unrealized loss on investments (0.395) (0.394)
------- -------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Total from investment operations (0.360) (0.360)
------- -------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Less dividends and distributions:
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Dividends from net investment income --- ---
------- -------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Distributions from net realized gain on investment transactions --- ---
------- -------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Total dividends and distributions --- ---
------- -------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net asset value, end of period $8.140 $8.140
====== ======
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Total return(3) (4.24%) (4.24%)
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratios and supplemental data:
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net assets, end of period (000 omitted) $885 $74
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratio of expenses to average net assets 1.55% 1.55%
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratio of expenses to average net assets prior to expense limitation 16.89% 16.89%
- ------------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratio of net investment income to average net assets 0.53% 0.53%
- ------------------------------------------------------------------------- ------------ ----------- ------------ --------------
Ratio of net investment income loss to average net assets prior to
expense limitation (14.81%) (14.81%)
- ------------------------------------------------------------------------- ------------ ----------- ------------ --------------
Portfolio turnover 77% 77%
- ------------------------------------------------------------------------- ------------ ----------- ------------ --------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------- -------------------------
Delaware Foundation Funds Balanced Portfolio Class A
- ------------------------------------------------------------------------------------------------- -------------------------
Period
Year 12/31/97(1)
Ended 9/30 through
1999 9/30/98
- ------------------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net asset value, beginning of period $8.500
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Income from investment operations:
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net investment income(2) 0.165
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net realized and unrealized loss on investments (0.465)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Total from investment operations (0.300)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Less dividends and distributions:
- ------------------------------------------------------------------------------------------------- ----------- -------------
Dividends from net investment income (0.070)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Distributions from net realized gain on investment transactions ---
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Total dividends and distributions (0.070)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net asset value, end of period $8.130
======
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Total return(3) (3.68%)
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net assets, end of period (000 omitted) $972
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of expenses to average net assets 0.80%
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of expenses to average net assets prior to expense limitation 14.36%
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of net investment income to average net assets 2.53%
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of net investment income loss to average net assets prior to expense limitation (11.03%)
- ------------------------------------------------------------------------------------------------- ----------- -------------
Portfolio turnover 73%
- ------------------------------------------------------------------------------------------------- ----------- -------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------- ------------------------- ---------------------------
Delaware Foundation Funds Balanced Portfolio Class B Class C
- -------------------------------------------------------------------- ------------------------- ---------------------------
Year Period Year Period
Ended 12/31/97(1) Ended 12/31/97(1)
9/30 through 9/30 through
1999 9/30/98 1999 9/30/98
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net asset value, beginning of period $8.500 $8.500
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Income from investment operations:
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net investment income(2) 0.116 0.116
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net realized and unrealized loss on investments (0.471) (0.461)
------- -------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Total from investment operations (0.355) (0.345)
------- -------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Less dividends and distributions:
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Dividends from net investment income (0.015) (0.015)
------- -------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Distributions from net realized gain on investment transactions --- ---
------ ------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Total dividends and distributions (0.015) (0.015)
------- -------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net asset value, end of period $8.130 $8.140
====== ======
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Total return(3) (4.02%) (3.90%)
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratios and supplemental data:
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Net assets, end of period (000 omitted) $408 $694
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratio of expenses to average net assets 1.55% 1.55%
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratio of expenses to average net assets prior to expense limitation 15.11% 15.11%
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratio of net investment income to average net assets 1.78% 1.78%
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Ratio of net investment income loss to average net assets prior to
expense limitation (11.78%) (11.78%)
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
Portfolio turnover 73% 73%
- -------------------------------------------------------------------- ------------ ------------ ------------ --------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------- -------------------------
Delaware Foundation Funds Income Portfolio Class A
- ------------------------------------------------------------------------------------------------- -------------------------
Period
Year 12/31/97(1)
Ended 9/30 through
1999 9/30/98
- ------------------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net asset value, beginning of period $8.500
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Income from investment operations:
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net investment income(2) 0.261
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net realized and unrealized loss on investments (0.361)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Total from investment operations (0.100)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Less dividends and distributions:
- ------------------------------------------------------------------------------------------------- ----------- -------------
Dividends from net investment income ---
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Distributions from net realized gain on investment transactions (0.110)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Total dividends and distributions (0.110)
-------
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net asset value, end of period $8.290
======
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Total return(3) (1.21%)
- ------------------------------------------------------------------------------------------------- ----------- -------------
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------- ----------- -------------
Net assets, end of period (000 omitted) $398
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of expenses to average net assets 0.80%
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of expenses to average net assets prior to expense limitation 36.76%
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of net investment income to average net assets 3.97%
- ------------------------------------------------------------------------------------------------- ----------- -------------
Ratio of net investment income loss to average net assets prior to expense limitation (31.99%)
- ------------------------------------------------------------------------------------------------- ----------- -------------
Portfolio turnover 81%
- ------------------------------------------------------------------------------------------------- ----------- -------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------- ---------------------------
Delaware Foundation Funds Income Portfolio Class B Class C
- --------------------------------------------------------------------------------------------- ---------------------------
Year Period Year Period
Ended 12/31/97(1) Ended 12/31/97(1)
9/30 through 9/30 through
1999 9/30/98 1999 9/30/98
- -------------------------------------------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------- ------------ ------------ --------------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Net asset value, beginning of period $8.500 $8.500
- -------------------------------------------------------------------------------- ------------ ------------ --------------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Income from investment operations:
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Net investment income(2) 0.212 0.215
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Net realized and unrealized loss on investments (0.342) (0.345)
------- -------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Total from investment operations (0.130) (0.130)
------- -------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Less dividends and distributions:
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Dividends from net investment income --- ---
------ ------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Distributions from net realized gain on investment transactions (0.080) (0.080)
------- -------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Total dividends and distributions (0.080) (0.080)
------- -------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Net asset value, end of period $8.290 $8.290
====== ======
- -------------------------------------------------------------------------------- ------------ ------------ --------------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Total return(3) (1.56%) (1.56%)
- -------------------------------------------------------------------------------- ------------ ------------ --------------
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Ratios and supplemental data:
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Net assets, end of period (000 omitted) $26 $123
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Ratio of expenses to average net assets 1.55% 1.55%
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Ratio of expenses to average net assets prior to expense limitation 37.51% 37.51%
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Ratio of net investment income to average net assets 3.22% 3.22%
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Ratio of net investment income loss to average net assets prior to
expense limitation (32.74%) (32.74%)
- -------------------------------------------------------------------------------- ------------ ------------ --------------
Portfolio turnover 81% 81%
- -------------------------------------------------------------------------------- ------------ ------------ --------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
<PAGE>
How to read the financial highlights
Net investment loss
Net investment loss includes dividend and interest income earned from the Fund's
investments; it is after expenses have been deducted.
Net realized and unrealized gain on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less distributions-Distributions from net realized gain on
investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment loss to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
<PAGE>
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
<PAGE>
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Russell 2000 Growth Index
Russell 2000 Growth Index measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth values.
These stocks are selected from the 2000 smallest companies in the Russell 3000
Index, which represent approximately 10% of the total market capitalization of
the Russell 3000 Index.
<PAGE>
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
<PAGE>
Delaware Foundation Funds Income Portfolio
Delaware Foundation Funds Balanced Portfolio
Delaware Foundation Funds Growth Portfolio
Additional information about each Fund's investments is available in the Funds'
annual and semi-annual report to shareholders. In the Funds' shareholder report,
you will find a discussion of the market conditions and investment strategies
that significantly affected a Fund's performance during the report period. You
can find more detailed information about the Funds in the current Statement of
Additional Information, which we have filed electronically with the Securities
and Exchange Commission (SEC) and which is legally a part of this prospectus. If
you want a free copy of the Statement of Additional Information, the annual or
semi-annual report, or if you have any questions about investing in the Funds,
you can write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800.523.1918. You may also obtain additional information about the
Fund from your financial adviser.
You can find reports and other information about the Funds on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For Fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-1485
Fund Symbols
CUSIP NASDAQ
Class A
Class B
Class C
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware Group Foundation Funds
Institutional Classes
Prospectus
December , 1999
Asset Allocation Funds
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
1
<PAGE>
Table of Contents
Fund profiles page
Delaware Foundation Funds Income Portfolio
Delaware Foundation Funds Balanced Portfolio
Delaware Foundation Funds Growth Portfolio
How we manage the Funds page
Our investment strategies
The securities we typically invest in
The risks of investing in the Funds
Who manages the Funds page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Funds
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
2
<PAGE>
Profile: Delaware Foundation Funds Income Portfolio
What are the Fund's goals?
The Delaware Foundation Funds Income Portfolio seeks a combination of current
income and preservation of capital with capital appreciation. Although the Fund
will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in shares of selected Delaware Investments funds including
equity and fixed income funds. We may also invest in individual securities. We
use an active asset allocation approach in selecting investments for the Fund.
In striving to meet its objective, the Income Portfolio would typically have a
larger percentage of its assets allocated to fixed income funds and securities
(generally at least 45%) than to equity funds and securities (generally at least
20%). The Income Portfolio may allocate up to 10% to international funds and
securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund is subject to the same risks as the
underlying Delaware Investments funds that it invests in. Therefore, to the
extent that it invests in equity funds, it will be affected by declines in stock
prices. To the extent that it invests in fixed income funds, it will be affected
by changes in interest rates. If interest rates rise, the value of the bonds in
the portfolio will decline. The Fund's share value could decline as well.
Because the Fund may invest in as few as four different underlying funds or a
small number of securities, it is considered a non-diversified investment
company under the Investment Company Act of 1940 and may be subject to greater
risk than if it were diversified. However, the Delaware Investments funds
generally hold a broad mix of securities, which helps to lessen this risk. For a
more complete discussion of risk, please turn to "The risks of investing in the
Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors who are in the wealth preservation phase, generally with lower risk
tolerance.
o Investors in the pre-retirement/retirement phase, looking for an increase in
income.
o Investors who want a portfolio with broad diversification across various
types of securities and active asset allocation by a professional money
manager.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is capital appreciation.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
3
<PAGE>
How has the Delaware Foundation Funds Income Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the return for the Fund for the past calendar year as well
as the average annual returns for the one-year and lifetime periods. The Fund's
past performance does not necessarily indicate how it will perform in the
future. The returns reflect expense limitations. The returns would be lower
without the expense limitation.
[GRAPHIC OMITTED: BAR CHART TOTAL RETURN (Institutional)]
Institutional Class total return
- --------------
1998
- --------------
0.00%
- --------------
The Delaware Foundation Funds Income Fund Institutional Class had a 00.00%
year-to-date return as of September 30, 1999. During the periods illustrated in
this bar chart, the Class' highest quarterly return was 0.00% for the quarter
ended ___________ 1998 and its lowest quarterly return was 0.00% for the quarter
ended _______________ 1998.
Average annual returns for the period ending 12/31/98
- -------------------------------------------------------------------------
Delaware Foundation Lehman Brothers
Funds Income Fund Aggregate Bond Index
Institutional Class
(Inception12/31/97)
- -------------------------------------------------------------------------
1 year
- -------------------------------------------------------------------------
Lifetime
- -------------------------------------------------------------------------
The Fund's returns are compared to the performance of the Lehman Brothers
Aggregate Bond Index. You should remember that unlike the Fund, the index is
unmanaged and doesn't include the costs of operating a mutual fund, such as the
costs of buying, selling, and holding the securities. In addition, the Fund
invests in a variety of asset classes, not represented in the index, including
equity securities, international securities and high-yielding corporate bonds.
4
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge none
(load) as a percentage of original purchase
price or redemption price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on none
reinvested dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
- -----------------------------------------------------------------
Management fees 0.25%
- -----------------------------------------------------------------
Distribution and service (12b-1) fees none
- -----------------------------------------------------------------
Other expenses 0.00%
- -----------------------------------------------------------------
Total annual fund operating expenses 0.00%
- -----------------------------------------------------------------
Fee waivers and payments(2) (0.00%)
- -----------------------------------------------------------------
Net expenses 0.00%
- -----------------------------------------------------------------
The example below is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(3) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------------
1 year
- ------------------------------
3 years
- ------------------------------
5 years
- ------------------------------
10 years
- ------------------------------
Just like the example above, the example below is based on a same hypothetical
investment of $10,000 with an annual 5% return over the time shown and the net
expenses of the Delaware Foundation Funds Income Portfolio noted above. However,
in the example below we have also included an estimation of the average
aggregate total operating expenses of the Delaware Investments funds described
on page ___. When the Delaware Foundation Funds Income Portfolio invests in any
of these funds, it absorbs a portion of their underlying expenses. This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------------
1 year
- ------------------------------
3 years
- ------------------------------
5 years
- ------------------------------
10 years
- ------------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has contracted to waive fees and pay expenses through
September 30, 2000 in order to prevent total operating expenses (excluding
taxes, interest, brokerage fees and extraordinary expenses) from exceeding
0.55% of average daily net assets.
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses were 0.00% for the first year and 0.00% for
years two through ten.
5
<PAGE>
Profile: Delaware Foundation Funds Balanced Portfolio
What are the Fund's goals?
The Delaware Foundation Funds Balanced Portfolio seeks capital appreciation with
current income as a secondary objective. Although the Fund will strive to meet
its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in shares of selected Delaware Investments funds including
equity, fixed income and international funds. We may also invest in individual
securities. We use an active asset allocation approach in selecting investments
for the Fund.
The Fund has the flexibility to invest more in equity funds and securities or
more in fixed income funds and securities, depending on market conditions.
However, it will typically invest at least 25% in fixed income securities or
fixed income funds. The Fund will typically invest between 5% and 20% of its
assets in international funds and securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund is subject to the same risks as the
underlying Delaware Investments funds that it invests in. Therefore, to the
extent that it invests in equity funds, it will be affected by declines in stock
prices. To the extent that it invests in fixed income funds, it will be affected
by changes in interest rates. If interest rates rise, the value of the bonds in
the portfolio will decline. The Fund's share value could decline as well. To the
extent that it invests in international funds or securities, the Fund will be
affected by changes in currency exchange rates as well as political, economic
and regulatory conditions in the countries represented in its portfolio.
Because the Fund may invest in as few as four different underlying funds or a
small number of securities, it is considered a non-diversified investment
company under the Investment Company Act of 1940 and may be subject to greater
risk than if it were diversified. However, the Delaware Investments funds
generally hold a broad mix of securities, which helps to lessen this risk. For a
more complete discussion of risk, please turn to "The risks of investing in the
Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors who are in the wealth accumulation phase, generally with moderate
risk tolerance.
o Investors looking for the capital appreciation potential of the stock market
and the income potential of the bond market.
o Investors who would like a portfolio with broad diversification across
various types of securities and active asset allocation by a professional
money manager.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is high current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
6
<PAGE>
How has the Delaware Foundation Funds Balanced Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the return for the Fund for the past calendar year as well
as the average annual returns for the one-year and lifetime periods. The Fund's
past performance does not necessarily indicate how it will perform in the
future. The returns reflect expense limitations. The returns would be lower
without the expense limitation.
[GRAPHIC OMITTED: BAR CHART TOTAL RETURN (Institutional)]
Institutional Class total return
- --------------
1998
- --------------
0.00%
- --------------
The Delaware Foundation Funds Balanced Fund Institutional Class had a 00.00%
year-to-date return as of September 30, 1999. During the periods illustrated in
this bar chart, the Class' highest quarterly return was 0.00% for the quarter
ended ___________ 1998 and its lowest quarterly return was 0.00% for the quarter
ended _______________ 1998.
<TABLE>
<CAPTION>
Average annual returns for the period ending 12/31/98
- ----------------------------------------------------------------------------------------------------------
Delaware Foundation Funds S&P 500 Index Lehman Brothers Aggregate Bond
Balanced Fund Index
Institutional Class
(Inception 12/31/97)
- ----------------------------------------------------------------------------------------------------------
<S> <C>
1 year
- ----------------------------------------------------------------------------------------------------------
Lifetime
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's returns are compared to the performance of the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index. You should remember that unlike the Fund,
the indexes are unmanaged and don't reflect the actual costs of operating a
mutual fund, such as the costs of buying, selling, and holding securities.
Neither index is a perfect comparison to Delaware Foundation Funds Balanced
Portfolio since the S&P 500 does not include fixed-income securities and the
Lehman Brothers Aggregate Bond Index does not include stocks.
7
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on none
purchases as a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge none
(load) as a percentage of original purchase
price or redemption price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on none
reinvested dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
- -----------------------------------------------------------------
Management fees 0.25%
- -----------------------------------------------------------------
Distribution and service (12b-1) fees none
- -----------------------------------------------------------------
Other expenses 0.00%
- -----------------------------------------------------------------
Total annual fund operating expenses 0.00%
- -----------------------------------------------------------------
Fee waivers and payments(2) (0.00%)
- -----------------------------------------------------------------
Net expenses 0.00%
- -----------------------------------------------------------------
The example below is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(3) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------------
1 year
- ------------------------------
3 years
- ------------------------------
5 years
- ------------------------------
10 years
- ------------------------------
Just like the example above, the example below is based on a same hypothetical
investment of $10,000 with an annual 5% return over the time shown and the net
expenses of the Delaware Foundation Funds Balanced Portfolio noted above.
However, in the example below we have also included an estimation of the average
aggregate total operating expenses of the Delaware Investments funds described
on page ___. When the Delaware Foundation Fund Balanced Portfolio invests in any
of these funds, it absorbs a portion of their underlying expenses. This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------------
1 year
- ------------------------------
3 years
- ------------------------------
5 years
- ------------------------------
10 years
- ------------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has contracted to waive fees and pay expenses through
September 30, 2000 in order to prevent total operating expenses (excluding
taxes, interest, brokerage fees and extraordinary expenses) from exceeding
0.55% of average daily net assets.
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses were 0.00% for the first year and 0.00% for
years two through ten.
8
<PAGE>
Profile: Delaware Foundation Funds Growth Portfolio
What are the Fund's goals?
The Delaware Foundation Funds Growth Portfolio seeks long-term capital growth.
Although the Fund will strive to meet its goals, there is no assurance that it
will.
What are the Fund's main investment strategies?
We invest primarily in shares of selected Delaware Investments funds including
equity funds and to a lesser extent, fixed income funds. We may also invest in
individual securities. We use an active asset allocation approach in selecting
investments for the Fund. In striving to meet its objective, the Fund will
typically invest more of its assets in equity funds and securities than in fixed
income funds and securities. Typically, the Fund will invest between 10% and 30%
of its assets in international funds or securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund is subject to the same risks as the
underlying Delaware Investments funds that it invests in. Therefore, to the
extent that it invests in equity funds, it will be affected by declines in stock
prices. To the extent that it invests in fixed income funds, it will be affected
by changes in interest rates. If interest rates rise, the value of the bonds in
the portfolio would decline. The value of Fund shares could decline as well. To
the extent that it invests in international funds or securities, the Fund will
be affected by changes in currency exchange rates as well as political, economic
and regulatory conditions in the countries represented in its portfolio.
Because the Fund may invest in as few as four different underlying funds or a
small number of securities, it is considered a non-diversified investment
company under the Investment Company Act of 1940 and may be subject to greater
risk than if it were diversified. However, because the underlying funds
generally hold a broad mix of securities, we do not believe this risk is
significant. For a more complete discussion of risk, please turn to "The risks
of investing in the Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors who are in the earlier stage of wealth accumulation, generally with
higher risk tolerance.
o Investors looking for the capital appreciation potential of the stock market
and who have no need for current income.
o Investors who would like a portfolio with broad diversification across
various types of securities and active asset allocation by a professional
money manager.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
9
<PAGE>
How has the Delaware Foundation Funds Growth Portfolio performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the return for the Fund for the past calendar year as well
as the average annual returns for the one-year and lifetime periods. The Fund's
past performance does not necessarily indicate how it will perform in the
future. The returns reflect expense limitations. The returns would be lower
without the expense limitation.
[GRAPHIC OMITTED: BAR CHART TOTAL RETURN (Institutional)]
Institutional Class total return
- --------------
1998
- --------------
0.00%
- --------------
The Delaware Foundation Funds Growth Fund Institutional Class had a 00.00%
year-to-date return as of September 30, 1999. During the periods illustrated in
this bar chart, the Class' highest quarterly return was 0.00% for the quarter
ended ___________ 1998 and its lowest quarterly return was 0.00% for the quarter
ended _______________ 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns for the Fund shown the table below do include the
sales charges.
Average annual returns for the period ending 12/31/98
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A B (if redeemed)* C (if redeemed)* S&P 500 Index
(Inception 12/31/97) (Inception 12/31/97) (Inception 12/31/97)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year
- ----------------------------------------------------------------------------------------------------------------
Lifetime
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's returns are compared to the performance of the S&P 500 Index. You
should remember that unlike the Fund, the index is unmanaged and doesn't reflect
the actual costs of operating a mutual fund, such as the costs of buying,
selling, and holding securities.
10
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge none
(load) as a percentage of original purchase
price or redemption price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
- -----------------------------------------------------------------
Management fees 0.25%
- -----------------------------------------------------------------
Distribution and service (12b-1) fees none
- -----------------------------------------------------------------
Other expenses 0.00%
- -----------------------------------------------------------------
Total annual fund operating expenses 0.00%
- -----------------------------------------------------------------
Fee waivers and payments(2) (0.00%)
- -----------------------------------------------------------------
Net expenses 0.00%
- -----------------------------------------------------------------
The example below is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(3) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------------
1 year
- ------------------------------
3 years
- ------------------------------
5 years
- ------------------------------
10 years
- ------------------------------
Just like the example above, the example below is based on a same hypothetical
investment of $10,000 with an annual 5% return over the time shown and the net
expenses of the Delaware Foundation Funds Growth Portfolio noted above. However,
in the example below we have also included an estimation of the average
aggregate total operating expenses of the Delaware Investments funds described
on page ___. When the Delaware Foundation Fund Growth Portfolio invests in any
of these funds, it absorbs a portion of their underlying expenses. This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ------------------------------
1 year
- ------------------------------
3 years
- ------------------------------
5 years
- ------------------------------
10 years
- ------------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has contracted to waive fees and pay expenses through
September 30, 2000 in order to prevent total operating expenses (excluding
taxes, interest, brokerage fees and extraordinary expenses) from exceeding
0.55% of average daily net assets.
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses were 0.00% for the first year and 0.00% for
years two through ten.
11
<PAGE>
Indirect expenses paid by the Delaware Foundation Funds
Because the Delaware Foundations Funds invest primarily in other Delaware
Investments funds, they will be shareholders of those funds. Like all
shareholders, the Delaware Foundation Funds will indirectly bear a proportionate
share of any management fees and other expenses of the funds it holds. These
fees, which are deducted from the underlying funds before their share prices are
calculated are in addition to the fees and expenses described in each Delaware
Foundation Fund profile. Depending on which funds are held in each Delaware
Foundation Fund portfolio, the fees will vary over time. However, in order to
give you an idea of what these fees might be, we have calculated an average
expense ratio for each Delaware Foundation Fund, based on the expense ratios of
the Delaware Investments funds for each of their most recent fiscal years and
the Foundation Funds' portfolio allocations as of September 30, 1999, all of
which is presented below. Based on these hypothetical calculations, the combined
average expense ratio of the Delaware Investments funds that is borne
indirectly by each of the Foundation Funds would have been as follows:
Income Portfolio _______%
Balanced Portfolio _________%
Growth Portfolio ___________%
Expenses will differ depending on how the Delaware Foundation Funds allocate
assets among the Delaware Investments Funds.
12
<PAGE>
How we manage the Funds
Our investment strategies
In order to meet the changing needs of investors throughout their lives, the
Delaware Foundation Funds offer three different portfolios with varying levels
of income and growth potential and corresponding variations in risk. From the
most conservative (the Income Portfolio) to the moderate (the Balanced
Portfolio) to the most aggressive (the Growth Portfolio), each Fund relies on
active asset allocation and invests in a range of Delaware Investments mutual
funds as they strive to attain their objectives.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Each Delaware Foundation Fund is a type of mutual fund known as a fund-of-funds.
A fund-of-funds typically invests in other mutual funds rather than individual
securities. The potential benefits of such a strategy are three-fold:
1. An extra layer of diversification through shared ownership in the
individual securities held by the underlying funds;
2. Access to the investment expertise of multiple portfolio managers and
analysts who work on the individual underlying funds; and
3. A professional portfolio manager who makes asset allocation decisions.
We offer the Delaware Foundation Funds because we determined that a
fund-of-funds was an efficient way to provide active asset allocation services
to meet the needs of investors at various stages of their life and wealth
accumulation efforts. Our active asset allocation strategy begins with an
evaluation of three key factors:
[ ] the expected return of specific asset classes such as equities or
fixed-income securities;
[ ] the expected volatility or degree to which returns have varied from one
period to the next; and
[ ] the correlation of various asset classes, that is the degree to which two
asset classes move up or down together.
After using this information to determine how much of each Delaware Foundation
Fund will be allocated to a particular asset class, we then select specific
Delaware Investments funds for the portfolio. We have identified a select group
of funds that suit the allocation strategies of the Delaware Foundation Funds
and have grouped them into four broad asset classes.
The Delaware Investments funds we typically invest in are listed below in their
respective asset classes. Groupings are approximate and based on the core
strategy of each individual fund. Funds may be added or deleted from this list
without shareholder approval.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Delaware Investments funds available to the Delaware Foundation Funds
- ------------------------------------------------------------------------------------------------------------
<S> <C>
U.S. Equities
- ----------------------------------------------------- ------------------------------------------------------
Delaware Blue Chip Fund Delaware Select Growth Fund
- ----------------------------------------------------- ------------------------------------------------------
Delaware DelCap Fund Delaware Small Cap Value Fund
- ----------------------------------------------------- ------------------------------------------------------
Delaware Diversified Growth Fund Delaware Trend Fund
- ----------------------------------------------------- ------------------------------------------------------
Delaware Diversified Value Fund Delaware U.S. Growth Fund
Delaware REIT Fund
Delaware Select Equity Portfolio
- ----------------------------------------------------- ------------------------------------------------------
- ----------------------------------------------------- ------------------------------------------------------
International Equities
- ----------------------------------------------------- ------------------------------------------------------
Delaware Emerging Markets Fund Delaware International Small-Cap Fund
- ----------------------------------------------------- ------------------------------------------------------
Delaware International Equity Fund Delaware New Pacific Fund
- ----------------------------------------------------- ------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------- ------------------------------------------------------
- ----------------------------------------------------- ------------------------------------------------------
Fixed-Income Securities
- ----------------------------------------------------- ------------------------------------------------------
Delaware American Government Bond Fund Delaware Extended Duration Bond Fund.
- ----------------------------------------------------- ------------------------------------------------------
Delaware Delchester Fund Delaware Global Bond Fund
- ----------------------------------------------------- ------------------------------------------------------
Delaware Corporate Bond Fund Delaware Limited-Term Government Fund
- ----------------------------------------------------- ------------------------------------------------------
Delaware High-Yield Opportunities Fund
- ----------------------------------------------------- ------------------------------------------------------
- ----------------------------------------------------- ------------------------------------------------------
Money Market Securities
- ----------------------------------------------------- ------------------------------------------------------
Delaware Cash Reserve Fund
- ----------------------------------------------------- ------------------------------------------------------
- ----------------------------------------------------- ------------------------------------------------------
</TABLE>
Once we select appropriate investments for each Delaware Foundation Funds
portfolio, we continually monitor the market and economic environments, the
risk/reward profiles of each asset class and the performance of individual funds
and actively adjust each Delaware Foundation Funds portfolio striving to meet
its investment objective.
The Delaware Foundation Funds' investment objectives are non-fundamental. This
means that the Board of Trustees may change the objective without obtaining
shareholder approval. If the objective were changed, we would notify
shareholders before the change became effective.
14
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------------
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Equity Funds or Equity Securities 20% to 50% of Assets 35% to 65% of Assets 45% to 75% of Assets
May include Delaware Investments funds in the equity
asset class or individual equity securities. The Fund will generally The Fund will generally
invest in at least four The Fund will generally invest in at least four
individual mutual funds. invest in at least four individual mutual funds.
individual mutual funds.
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
Delaware Blue Chip Fund Delaware Blue Chip Fund seeks long-term capital appreciation. Current income
is a secondary objective. It invests primarily in large ("blue chip")
companies.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Growth and Income Fund Delaware 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. It invests primarily in dividend-paying
stocks of large, well-established companies.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware DelCap Fund Delaware DelCap Fund seeks long-term capital growth. It invests primarily in
common stocks and convertible securities of medium-sized companies believed
to have growth potential.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Diversified Growth Fund Delaware Diversified Growth Fund seeks capital appreciation. It invests
primarily in large companies believed to have the potential to grow faster
than the average company in the S&P 500 Index.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Diversified Value Fund Delaware Diversified Value Fund seeks capital appreciation with income as a
secondary objective. It invests primarily in dividend-paying stocks or
income-producing securities that are convertible into common stocks.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware REIT Fund Delaware REIT Fund seeks maximum long-term total return, with capital
appreciation as a secondary objective. It invests primarily in real estate
investment trusts (REITs) and other companies in the real estate industry.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Select Equity Portfolio Delaware Select Equity Portfolio seeks to provide maximum long-term capital
appreciation. It invests primarily in equity securities and will generally
hold between 20 and 30 different stocks that are also held by other funds in
the Delaware Investments family.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Select Growth Fund Delaware Select Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities of
companies of all sizes,
that the Manager believes
have the potential for
high earnings growth.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Small Cap Value Fund Delaware Small Cap Value Fund seeks capital appreciation. It invests
primarily in small-cap companies that are believed to be undervalued.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Trend Fund Delaware Trend Fund seeks capital appreciation by investing primarily in
securities of emerging or other growth-oriented companies. It focuses on
small companies that are believed to be responsive to changes in the
marketplace and that have the fundamental characteristics to support
continued growth.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware U.S. Growth Fund Delaware U.S. Growth Fund seeks maximum capital appreciation. It invests
primarily in large company growth stocks.
- ------------------------------------------------------ -----------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------------
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Fixed Income Securities 45% to 75% of Assets 25% to 55% of Assets 5% to 35% of Assets
May include Delaware Investments funds in the fixed
income asset class or individual fixed income
securities. The Fund will generally
invest in at least four The Fund will generally The Fund will generally
individual mutual funds. invest in at least four invest in at least four
individual mutual funds. individual mutual funds.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware American Government Bond Fund Delaware American Government Bond Fund seeks high current income consistent
with safety of principal by investing primarily in debt obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
including mortgage-backed securities.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Corporate Bond Fund Delaware Corporate Bond Fund seeks to provide investors with total return. It
invests primarily in corporate bonds, typically those rated BBB and above by
a nationally recognized statistical ratings agency.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Extended Duration Bond Fund Delaware Extended Duration Bond Fund seeks to provide investors with total
return. It invests primarily in corporate bonds, typically those rated BBB
and above by a nationally recognized statistical ratings agency.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Delchester Fund Delaware Delchester Fund seeks as high a current income as is consistent with
providing reasonable safety. It invests primarily in high-yield, higher risk
corporate bonds, commonly known as "junk bonds."
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Global Bond Fund Delaware Global Bond Fund seeks current income consistent with preservation
of principal. It invests primarily in fixed-income securities that may also
provide the potential for capital appreciation. At least 65% of its assets
will be invested in three different countries, including the U.S.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Limited-Term Government Fund Delaware Limited-Term Government Fund seeks to provide a high stable level of
current income, while attempting to minimize fluctuations in principal and
provide maximum liquidity. It invests primarily in short and intermediate-
term fixed income securities issued or guaranteed by the U.S. government as
well as instruments backed by those securities.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware High-Yield Opportunities Fund Delaware High-Yield Opportunities Fund seeks to provide investors with total
return and, as a secondary objective, high current income. It invests
primarily in high-yield, higher risk corporate bonds, commonly known as
"junk bonds."
- ------------------------------------------------------ -----------------------------------------------------------------------------
- ------------------------------------------------------ -------------------------- --------------------------- ----------------------
Money Market Funds or Securities 0-35% of Assets 0-35% of Assets 0-35% of Assets
May include Delaware Cash Reserve, a
money market fund, individual money market The Fund will The Fund will generally The Fund will
securities or repurchase agreements. generally invest in at invest in at least four generally invest in at
least four individual individual mutual funds. least four individual
mutual funds. mutual funds.
- ------------------------------------------------------ -------------------------- --------------------------- ----------------------
Delaware Cash Reserve Delaware Cash Reserve seeks to provide maximum current income, while
preserving principal and maintaining liquidity. As a money market fund, it
invests in highly liquid money market instruments.
- ------------------------------------------------------ -----------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------ -----------------------------------------------------------------------------
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------------ -------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
International Equity Securities 0-10% of Assets 5% to 20% of Assets 10%-30% of Assets
May include Delaware Investments funds in
the international equity asset class or The Fund will The Fund will generally The Fund will
individual international equity securities. generally invest in at invest in at least four generally invest in at
least four individual individual mutual funds. least four individual
mutual funds. mutual funds.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware Emerging Markets Fund Delaware Emerging Markets Fund seeks long-term capital appreciation. It
invests primarily in companies located in under-developed, emerging market
countries.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware International Equity Fund Delaware International Equity Fund seeks long-term growth without undue risk
to principal. It invests primarily in large companies located in developed
countries.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware International Small Cap Fund Delaware International Small Cap Fund seeks to achieve long-term capital
appreciation. It invests primarily in small companies located in foreign
countries.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Delaware New Pacific Fund Delaware New Pacific Fund seeks to maximize long-term capital appreciation by
investing primarily in equity securities of companies that are domiciled in
or have their principal business activities in countries located in the
Pacific Basin.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Other Types of Securities which may be held
by the Delaware Foundation Funds.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer The Delaware Foundation Funds may use overnight repurchase agreements to
and seller of securities in which the seller agrees invest cash prior to investing it in other funds or
to buy the securities back within a specified time securities, or for temporary defensive purposes.
at the same price the buyer paid for them, plus an
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as equivalent
to cash.
- ------------------------------------------------------ -----------------------------------------------------------------------------
Options and Futures: Options represent a right to
buy or sell a security or group of securities at an We might use options or futures to gain exposure to a particular market
agreed upon price at a future date. The purchaser of segment without purchasing individual funds or securitiesin that segment. We
an option may or may not choose to go through with might use this approach if we had excess cash that we wanted to invest
the transaction. quickly or to make an investment without disrupting one of the other
Delaware Investments funds.
Futures contracts are agreements for the purchase or
sale of a security or group of securities at a We might also use options or futures to neutralize the effect of potential
specified price, on a specified date. Unlike an price declines without selling securities.
option, a futures contract must be executed unless
it is sold before the settlement date. Use of these strategies can increase the operating costs of the Funds and
can lead to loss of principal.
Options and futures are generally considered to be
derivative securities.
- --------------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Borrowing from banks
The Delaware Foundation Funds may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. Borrowing money could
result in the Funds being unable to meet their investment objectives.
Temporary defensive positions
The Delaware Foundation Funds are permitted to make temporary investments in
bonds, cash or cash equivalents and may allocate 100% of their net assets to
Delaware Cash Reserve in response to unfavorable market conditions. To the
extent a Fund engages in temporary defensive measures, it may be unable to
achieve its objective.
Portfolio turnover
Though we anticipate that each of the Delaware Foundation Funds will have an
annual portfolio turnover of less than 100%, some of the funds that the Delaware
Foundation Funds may invest in could have a turnover rate greater than 100%. A
turnover rate of 100% would occur if a fund sold and replaced securities valued
at 100% of its net assets within one year. High turnover rates in the individual
funds held by the Delaware Foundation Funds could result in higher expenses.
18
<PAGE>
More About the Delaware Foundation Funds
Guidelines for Purchasing and Redeeming Shares of Other Delaware Investments
funds
Following is important information about how the Delaware Foundation Funds
operate, which you should consider when evaluating the Funds.
[] Each Delaware Foundation Funds portfolio will invest in the institutional
class shares of approved Delaware Investments funds. When investing in
Delaware Cash Reserve, Class A will be used. This means the Foundation
Funds will pay no sales charges or 12b-1 distribution fees on the shares
that they purchase.
[] Each Foundation Funds portfolio will indirectly bear a share of fees and
expenses that apply to the Institutional Classes of the Delaware
Investments funds they hold. For more information about this, see x.
[] Any performance reported for the Delaware Foundation Funds will include
the impact of all fund expenses whether they are related to the Foundation
Funds or the underlying funds they invest in.
[] We have adopted Asset Allocation Guidelines for our purchase and sale of
other Delaware Investments funds. If the manager of the Foundation Funds
anticipates that a purchase or redemption will disrupt the investment
strategies of another fund, the manager will confer with the portfolio
managers of that fund to determine how to minimize adverse affects on both
funds. Such steps might include staggering the timing and amounts of the
transactions. As a result, the Foundation Funds might not be able to
purchase or redeem shares of other Delaware Investments funds in the exact
manner they would like to. This could decrease the total return or
increase the volatility of each Foundation Fund.
[] Because many Delaware Investments funds are managed independently by
different individuals or investment teams, there is no overall
coordination of purchases and sales of individual securities. Therefore,
it is possible that one of the funds held by a Delaware Foundation Funds
portfolio or the Delaware Foundation Funds themselves might be acquiring
securities at the same time another is selling them. This could increase
transaction costs.
19
<PAGE>
The risks of investing in the Funds
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Funds you should
carefully evaluate the risks. An investment in the Funds typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Funds. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and
How we strive to manage the risk
- ------------------------------------------------- --------------------------------------------------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority Each of the underlying Delaware Investments funds and the Delaware
of the securities in a certain market -- like Foundation Funds themselves are subject to this risk. In all
the stock or bond market -- will decline in Funds, we maintain a long-term investment approach and focus on
value because of factors such as economic securities we believe can appreciate over an extended time frame
conditions, future expectations or investor regardless of interim market fluctuations. Though we may hold
confidence. securities for any amount of time, we typically do not trade for
short-term purposes.
Each Fund may hold a substantial part of its assets in cash or cash
equivalents as a temporary, defensive strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Industry and security risk is the risk that the Each of the underlying Delaware Investments funds and the
value of securities in a particular industry or Foundation Funds themselves are subject to this risk. The
the value of an individual stock or bond will underlying funds generally hold a number of different securities
decline because of changing expectations for spread across various sectors. The Funds also follow a rigorous
the performance of that industry or for the selection process before choosing securities and continuously
individual company issuing the stock. monitor them while they remain in the portfolio.
This combined with the fact that the Delaware Foundation Funds will
hold at least four different Delaware Investments funds, typically
representing different asset classes, should help to reduce industry
and security risk.
- ------------------------------------------------- --------------------------------------------------------------------
Small company risk is the risk that prices of Delaware DelCap Fund, Delaware Select Growth Fund, Delaware Small
smaller companies may be more volatile than Cap Value Fund, Delaware Trend Fund and Delaware International
larger companies because of limited financial Small Cap Fund are all subject to this risk. These Funds maintain
resources or dependence on narrow product lines. well-diversified portfolios, select stocks carefully and monitor
them continuously. In determining the asset allocation for the
Foundation Funds, the manager will evaluate the current risk and
reward potential of small-cap stocks and make allocation decisions
accordingly.
--------------------------------------------------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio will
will generally have will have moderate generally have
less exposure to exposure to this significant exposure
this risk due to risk. to this risk, due to
its reduced its greater emphasis
emphasis on equity on equities.
securities.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and
How we strive to manage the risk
- ------------------------------------------------- --------------------------------------------------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities For Delaware Investments funds in the Fixed Income group this is
will decrease in value if interest rates rise. generally the most significant risk. In striving to manage this
The risk is generally associated with bonds; risk, managers of Delaware fixed income funds will typically however,
because smaller companies often borrow monitor economic conditions and the interest rate environment.
money to finance their operations, they may be They will also usually keep the average maturity of a fund as
adversely affected by rising interest rates. short as is prudent, in keeping investment objective.
with the individual fund's
The Funds listed above that are subject to small company risk may
also be subject to this risk. The managers of these Funds consider
the potential effect that rising interest rates might have on a stock
before the stock is purchased.
--------------------------------------------------------------------
For the Income The Balanced The Growth Portfolio
Portfolio, this is Portfolio will will generally have
a significant risk generally have moderate exposure to
due to its moderate exposure this risk due to its
substantial to this risk. lesser emphasis on
allocation to fixed Though it will have fixed income funds and
income funds and a fixed income securities. Though it
securities. allocation and will have holdings of
holdings of small small companies, these
companies, these may be balanced by
may be balanced by equity holdings of
equity holdings of larger companies.
larger companies.
- ------------------------------------------------- --------------------------------------------------------------------
Credit risk is the risk that a bond's issuer Each of the Delaware Investments funds in the Fixed Income group
might be unable to make timely payments of is subject to some degree of credit risk. This is less substantial
interest and principal. for high-quality, government-oriented funds like Delaware American
Government Bond Fund and Delaware Limited-Term Government Fund and
Investing in so-called "junk" or "high-yield" more significant for funds that invest in lower quality bonds such
bonds entails greater risk of principal loss as Delaware Delchester Fund and Delaware High-Yield Opportunities
than the risk involved in investment grade bonds. Fund.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and
How we strive to manage the risk
- ------------------------------------------------- --------------------------------------------------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
For the Income For the Balanced For the Growth
Portfolio, this may Portfolio, this is Portfolio, this is a
be a significant a moderate risk. less significant risk
risk because the Though it probably due to its reduced
Fund may have a will invest in emphasis on fixed
substantial Delaware Delchester income securities.
allocation to Fund or Delaware
Delaware Delchester High-Yield
Fund or Delaware Opportunities Fund,
High-Yield these holdings may
Opportunities Fund. be balanced by an
equity allocation
or better quality
bond holdings.
- ------------------------------------------------- --------------------------------------------------------------------
High-Yield Bond Risk Delaware Delchester Fund and Delaware High-Yield Opportunities
Investing in so-called "junk" or "high-yield" Fund are subject to this risk. Delaware Global Bond Fund and
bonds entails the risk of principal loss, which Delaware Emerging Markets Fund may be subject to this risk since
may be greater than the risk involved in they are permitted to hold high-yield securities of emerging
investment grade bonds. Credit risk is greater market issuers. Both Delaware Delchester Fund and Delaware
for these bonds because they are sometimes High-Yield Opportunities Fund follow careful, credit-oriented bond
issued by companies whose earnings at the time selection and hold a diversified selection of high-yield bonds in
of issuance are less than the projected debt an effort to manage this risk. The portfolio manager of the
service on the junk bonds. Foundation Funds will look carefully at the risk profile of the
high-yield bond asset class in deciding how much to allocate to
In addition, high-yield bonds may also be the Delaware Investments funds that invest in those securities.
subject to greater risks related to recessions,
the ability to accurately value bonds and the
possibility of adverse legislative or
regulatory actions.
- ------------------------------------------------- --------------------------------------------------------------------
For the Income For the Balanced For the Growth
Portfolio, this may Portfolio, this is Portfolio, this is a
be a significant a moderate risk less significant risk
risk because the because holdings due to its reduced
Fund may have a subject to this emphasis on fixed
substantial risk may be income securities and
allocation to balanced by its the limitation on its
Delaware Delchester equity allocation allocation to
Fund or Delaware or better quality international
High-Yield bond holdings. securities.
Opportunities Fund.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and
How we strive to manage the risk
- ------------------------------------------------- --------------------------------------------------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Prepayment risk is the risk that the principal Prepayment risk can be a significant risk to funds that have a
on a bond you own will be prepaid prior to large percentage of holdings in mortgage securities. Among the
maturity at a time when interest rates are funds available to the Delaware Foundation Funds portfolios, these
lower than what that bond was paying. You would include the Delaware American Government Bond Fund and the
then have to reinvest that money at a lower Delaware Limited-Term Government Fund. In order to manage this
interest rate. risk, when we think interest rates are low or that rates will be
declining, managers of these funds typically look for mortgage
securities that they believe are less likely to be prepaid. The
Delaware Foundation Funds will be more or less subject to this
risk depending on how much they have allocated to these Delaware
Investments funds.
--------------------------------------------------------------------
For the Income For the Balance For the Growth
Portfolio, this Portfolio there is Portfolio there is low
could be a relatively low exposure to this risk
significant risk exposure to this due to a reduced
due to its greater risk, due to its emphasis on the
focus on the balanced approach fixed-income asset
fixed-income asset and allocation to class.
class. equity securities.
- ------------------------------------------------- --------------------------------------------------------------------
Currency Risk is the risk that the value of a Each of the Delaware Investments funds in the International group
Fund's investments may be negatively affected is subject to this risk. The Funds may try to hedge currency risk by
changes in foreign currency exchange rates. by purchasing foreign currency exchange contracts. By agreeing to
Adverse changes in exchange rates may reduce or purchase or sell foreign securities at a pre-set price on a future
eliminate any gains produced by investments date, the Funds strive to protect the value of the securities they
that are denominated in foreign currencies and own from future changes in currency rates. The Funds will use
may increase any losses. forward currency exchange contracts only for defensive measures,
not to enhance portfolio returns. However, there is no assurance
that a strategy such as this will be successful.
For the Delaware Foundation Funds, this risk will vary depending on
how much of their assets are allocated to international funds.
However, the maximum amount that we will invest in International
Funds is 30% (in the Growth Portfolio).
--------------------------------------------------------------------
For the Income For the Balanced For the Growth
Portfolio, there is Portfolio, there is Portfolio, there is
minimal exposure to moderate exposure moderate exposure to
this risk because to this risk, since this risk, since
international international international holdings
holdings are holdings may range may range from 10% to
limited to 10% of from 5% to 20% of 30% of net assets.
net assets. net assets.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and
How we strive to manage the risk
- ------------------------------------------------- --------------------------------------------------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Emerging Markets Risk is the possibility that The Delaware Global Bond Fund, Delaware Emerging Markets Fund and
the risks associated with international Delaware New Pacific Fund are all subject to this risk. Each Fund
investing will be greater in emerging markets carefully selects securities within emerging markets and strives
than in more developed foreign markets because, to consider all relevant risks associated with an individual
among other things, emerging markets may have company. When deciding how much to allocate to these Funds, the
less stable political and economic environments. Delaware Foundation Funds manager will consider whether the
potential rewards of investing in these Funds outweigh the
potential risks.
--------------------------------------------------------------------
For the Income For the Balanced For the Growth
Portfolio, there is Portfolio, there is Portfolio, there is
low exposure to moderate exposure moderate exposure to
this risk because to this risk, since this risk, since
international international international holdings
holdings are holdings may range may range from 10% to
limited to 10% of from 5% to 20% of 30% of net assets.
net assets. net assets.
- ------------------------------------------------- --------------------------------------------------------------------
Futures and options risk is the possibility Each of the Delaware Foundation Funds and some of the Delaware
that the Fund may experience a loss if it Investments funds may use options and futures for defensive
employs an options or futures strategy related purposes, such as to protect gains in the portfolio without
to a security or a market index and that actually selling a security or to gain exposure to a particular
security or index moves in the opposite market segment without purchasing individual securities in the
direction from what the manager anticipated. segment. We will generally not use futures and options for
Futures and options also involve additional speculative reasons.
expenses, which could reduce any benefit or
increase any loss that Fund gains from using
the strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Foreign risk is the risk that foreign Though each of the Foundation Funds portfolios may invest in
securities may be adversely affected by international funds or international securities, none may invest
political instability, changes in currency more than 30% of net assets in international funds. Holding both
exchange rates, inefficient markets, foreign international and domestic securities in a well-allocated
economic conditions, lack of information or portfolio may actually help to reduce overall portfolio risk since
inadequate regulatory and accounting standards. these types of securities may experience cycles.
different performance
--------------------------------------------------------------------
For the Income For the Balanced For the Growth
Portfolio, there is Portfolio, there is Portfolio, there is
low exposure to moderate exposure moderate exposure to
this risk because to this risk, since this risk, since
international international international holdings
holdings are holdings may range may range from 10% to
limited to 10% of from 5% to 20% of 30% of net assets.
net assets. net assets.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks Degree to which the Funds are subject to this risk and
How we strive to manage the risk
- ------------------------------------------------- --------------------------------------------------------------------
Foundation Funds Foundation Funds Foundation Funds
Income Portfolio Balanced Portfolio Growth Portfolio
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Non-diversified risk Non-diversified funds have Each of the Delaware Foundation Funds as well as several of the
the flexibility to invest as much as 50% of Delaware Investments funds they may hold are non-diversified funds
their assets in as few as two issuers provided subject to this risk. Nevertheless, we typically hold shares of at
no single issuer accounts for more than 25% of least four different Delaware Investments funds, which in turn
the portfolio. The remaining 50% of the hold a number of securities representing a variety of different
portfolio must be diversified so that no more issuers or industry sectors. Though we are technically subject to
than 5% of the Fund's assets is invested in the non-diversified risk, we do not believe it will have a substantial
securities of a single issuer. When a fund impact on the Delaware Foundation Funds.
invests its assets in fewer issuers, the value
of fund shares may increase or decrease more
rapidly than if the fund were fully diversified.
- ------------------------------------------------- --------------------------------------------------------------------
Liquidity risk is the possibility that Each of the Delaware Foundation Fund's exposure to illiquid
securities cannot be readily sold within seven securities is limited to 15% of net assets. For each of the Delaware
days at approximately the price that a fund has Investments funds exposure to illiquid securities is limited to 10%
valued them. to 15% of net assets.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
25
<PAGE>
Who manages the Funds
Investment manager
The Funds are managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company manages each
Fund's assets by allocating a Fund's assets among the Delaware Investments
funds. The management services include monitoring the Delaware Investments funds
in order to determine whether they are investing their assets in a manner that
is consistent with the asset classes targeted for investment by each Fund.
Delaware Management Company also oversees the Funds' direct investment in
securities, manages the Funds' business affairs and provides daily
administrative services. For these services, the manager was paid a fee for the
last fiscal year as follows:
<TABLE>
<CAPTION>
Asset Allocation Fees*
- -------------------------------------------------------------- ---------------------- --------------------- --------------------
Delaware Foundation Delaware Foundation Delaware
Funds Income Funds Balanced Foundation Funds
Portfolio Portfolio Growth Portfolio
- -------------------------------------------------------------- ---------------------- --------------------- --------------------
<S> <C> <C> <C>
As a percentage of average daily net assets 0.00% 0.00% 0.00%
- -------------------------------------------------------------- ---------------------- --------------------- --------------------
</TABLE>
*Reflects the manager's expense caps.
Portfolio managers
J. Paul Dokas has primary responsibility for making day-to-day investment
decisions for the Funds. In making investment decisions for each Fund, Mr. Dokas
regularly consults with Richard G. Unruh.
J. Paul Dokas, Vice President/Portfolio Manager, is responsible for both asset
allocations among the underlying Delaware Investments Funds and the Portfolios'
direct investments in securities. He holds a BBA in Business from Loyola College
and an MBA from the University of Maryland. Prior to joining Delaware
Investments in 1997, he was a Director of Trust Investments for Bell Atlantic
Corporation in Philadelphia. Mr. Dokas is a CFA charterholder.
Richard G. Unruh, Executive Vice President/Chief Investment Officer, Equity,
joined Delaware Investments in 1982 after 19 years of investment experience with
Kidder, Peabody & Co. Inc. Mr. Unruh was named an Executive Vice President of
the Funds in 1994. He is also a member of the Board of Directors of Delaware
Management Company and was named Executive Vice President of Delaware Management
Company in 1994.
26
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C>
Investment managers The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager or
sub-adviser to make investment decisions for individual portfolios on a
day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
27
<PAGE>
About your account
Investing in the Funds
Institutional Class shares are available for purchase only by the following:
o 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
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts
o 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 to the financial institution of a Rule 12b-1 Plan fee
o 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
28
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
29
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on a Fund's net asset
value. If we receive your order after the close of trading, you will pay the
next business day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject any purchase
order.
We determine the funds net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in a Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of trustees. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at fair market value using a method approved by the Board of
Trustees.
30
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215-255-8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
31
<PAGE>
About your account (continued)
How to redeem shares (cont.)
Account minimums
If you redeem shares and your account balance falls below $250, a Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends for the Delaware Foundation Funds Income Portfolio and Delaware
Foundation Funds Balanced Portfolio, if any, are paid quarterly. Dividends for
the Delaware Foundation Funds Growth Portfolio, if any, are paid once a year.
Capital gains, if any, are paid once a year. We automatically reinvest all
dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from a Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from a Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time a Fund held the assets. In addition, you may be subject to state
and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
32
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, each Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." Each Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of any Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Funds invest. The
portfolio manager and investment professionals of each Fund consider Year 2000
compliance in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
33
<PAGE>
Financial highlights
The financial highlights table are intended to help you understand a Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with each Fund's financial statements, is included in their
annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
Delaware Growth Portfolio Institutional Class
- ----------------------------------------------------------------------------------------
Year Period
Ended 12/31/97(1)
9/30 through
1999 9/30/98
- ----------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $8.500
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(2) 0.099
- ----------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.419)
- ----------------------------------------------------------------------------------------
Total from investment operations (0.320)
- ----------------------------------------------------------------------------------------
Less dividends and distributions:
- ----------------------------------------------------------------------------------------
Dividends from net investment income --
- ----------------------------------------------------------------------------------------
Distributions from net realized gain on investment
transactions --
- ----------------------------------------------------------------------------------------
Total dividends and distributions --
- ----------------------------------------------------------------------------------------
Net asset value, end of period $8.180
- ----------------------------------------------------------------------------------------
Total return(3) (3.77%)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $48
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.55%
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to expense
limitation 15.89%
- ----------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 1.53%
- ----------------------------------------------------------------------------------------
Ratio of net investment income loss to average net assets
prior to expense limitation (13.81%)
- ----------------------------------------------------------------------------------------
Portfolio turnover 77%
- ----------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
34
<PAGE>
Financial highlights
The financial highlights table are intended to help you understand a Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with each Fund's financial statements, is included in their
annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
Delaware Income Portfolio Institutional Class
- ----------------------------------------------------------------------------------------
Year Period
Ended 12/31/97(1)
9/30 through
1999 9/30/98
- ----------------------------------------------------------------------------------------
<S> <C>
- ----------------------------------------------------------------------------------------
Net asset value, beginning of period $8.500
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Income from investment operations:
- ----------------------------------------------------------------------------------------
Net investment income(2) 0.277
- ----------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.367)
- ----------------------------------------------------------------------------------------
Total from investment operations (0.090)
- ----------------------------------------------------------------------------------------
Less dividends and distributions:
- ----------------------------------------------------------------------------------------
Dividends from net investment income --
- ----------------------------------------------------------------------------------------
Distributions from net realized gain on investment
transactions (0.130)
- ----------------------------------------------------------------------------------------
Total dividends and distributions (0.130)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $8.280
- ----------------------------------------------------------------------------------------
Total return(3) (1.10%)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $49
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.55%
Ratio of expenses to average net assets prior to expense
limitation 36.51%
- ----------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 4.22%
- ----------------------------------------------------------------------------------------
Ratio of net investment income loss to average net assets
prior to expense limitation (31.74%)
- ----------------------------------------------------------------------------------------
Portfolio turnover 81%
- ----------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
35
<PAGE>
Financial highlights
The financial highlights table are intended to help you understand a Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with each Fund's financial statements, is included in their
annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
Delaware Balanced Portfolio Institutional Class
- ----------------------------------------------------------------------------------------
Year Period
Ended 12/31/97(1)
9/30 through
1999 9/30/98
- ----------------------------------------------------------------------------------------
<S> <C>
- ----------------------------------------------------------------------------------------
Net asset value, beginning of period $8.500
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Income from investment operations:
- ----------------------------------------------------------------------------------------
Net investment income(2) 0.181
- ----------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.516)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Total from investment operations (0.335)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Less dividends and distributions:
- ----------------------------------------------------------------------------------------
Dividends from net investment income (0.035)
- ----------------------------------------------------------------------------------------
------
- ----------------------------------------------------------------------------------------
Distributions from net realized gain on investment
transactions ( --)
- ----------------------------------------------------------------------------------------
Total dividends and distributions (0.035)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Net asset value, end of period $8.130
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Total return(3) (3.56%)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $48
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.55%
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to expense
limitation 14.11%
- ----------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 2.78%
- ----------------------------------------------------------------------------------------
Ratio of net investment income loss to average net assets
prior to expense limitation (10.78%)
- ----------------------------------------------------------------------------------------
Portfolio turnover 73%
- ----------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
36
<PAGE>
How to read the financial highlights
Net investment loss
Net investment loss includes dividend and interest income earned from the Fund's
investments; it is after expenses have been deducted.
Net realized and unrealized gain on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less distributions-Distributions from net realized gain on
investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment loss to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
37
<PAGE>
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
38
<PAGE>
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
39
<PAGE>
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
40
<PAGE>
Delaware Foundation Funds Income Portfolio
Delaware Foundation Funds Balanced Portfolio
Delaware Foundation Funds Growth Portfolio
Additional information about each Fund's investments is available in the Funds'
annual and semi-annual report to shareholders. In the Funds' shareholder report,
you will find a discussion of the market conditions and investment strategies
that significantly affected a Fund's performance during the report period. You
can find more detailed information about the Funds in the current Statement of
Additional Information, which we have filed electronically with the Securities
and Exchange Commission (SEC) and which is legally a part of this prospectus. If
you want a free copy of the Statement of Additional Information, the annual or
semi-annual report, or if you have any questions about investing in the Funds,
you can write to us at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800.523.1918. You may also obtain additional information about the
Fund from your financial adviser.
You can find reports and other information about the Funds on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-1485
Fund Symbols
CUSIP NASDAQ
Class A
Class B
Class C
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 12/99
<PAGE>
SUBJECT TO COMPLETION
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware S&P 500 Index Fund
Class A * Class B * Class C
Prospectus
December ___, 1999
Total Return Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
1
<PAGE>
Table of Contents
Fund profile page
Delaware S&P 500 Index Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager and sub-adviser
Portfolio manager
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
<PAGE>
Profile: Delaware S&P 500 Index Fund
- ------------------------------------
What are the Fund's goals?
S&P 500 Index Fund seeks to replicate the total return of the Standard & Poor's
500 Composite Stock Price Index. Although the Fund will strive to meet its
goals, there is no assurance that it will.
What are the Fund's main investment strategies?
S&P Index Fund will invest primarily in commons stock. The Fund intends to
invest in all 500 stocks in the S&P 500 Index in proportion to their weighting
in the Index. [No subscription for the Fund will be accepted until Advisor has a
reasonable basis to believe that the Fund will be able to acquire substantially
all 500 stocks in the Index.] To the extent that all 500 stocks cannot be
purchased, the Fund will purchase a representative sample of the stocks listed
in the Index in proportion to their weightings.
The Fund is not managed according to traditional methods of "active" investment
management, which involve the buying and selling of securities based upon
economic, financial and market analysis and investment judgment. Instead, the
Fund utilizes a "passive" investment approach, attempting to duplicate the
investment performance of its benchmark index through automated statistical
analytic procedures.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. The Fund will be affected by declines in stock prices.
For a more complete discussion of risk, please turn to "The risks of investing
in the Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking total return.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS A B C
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
----------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
----------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none none none
dividends
----------------------------------------------------------------------------------------
Redemption fees None none none
----------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------
Management fees 0.10% 0.10% 0.10%
----------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
----------------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------
Total operating expenses 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
CLASS(5) A B B C C
(if redeemed) (if redeemed)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
3 years $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
5 years $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
10 years $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(5) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
<PAGE>
How we manage the Fund
- ----------------------
Our investment strategies
S&P 500 Index Fund is a stock fund that seeks to track the performance of the
Standard & Poor's 500 Composite Stock Index, which emphasizes large U.S.
companies. We employ a passive management strategy by normally investing in all
500 stocks included in the Index. We generally invest in each stock in roughly
the same proportion as represented in the Index. We seek to replicate as closely
as possible the aggregate risk characteristics and industry diversification of
the Index.
Although we normally invest in all 500 stocks in the Index, there is no
predetermined number of stocks that the Fund must hold. S&P may change the
composition of the Index from time to time. We will attempt to reflect those
changes as soon as practical. The Fund is usually fully invested. We may buy and
sell stock index futures, and buy option on stock indexes and on stock index
futures to maintain market exposure and manage cash flow.
We may purchase other types of securities, such as Standard & Poor's Depository
Receipts, American Depository Receipts, high quality short-term debt securities,
and certain derivatives.
To the extent that the Fund seeks to replicate the S&P 500 Index using such
sampling techniques, a close correlation between the Fund's performance and the
performance of the Index is anticipated in both rising and falling markets. The
Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the Index of at least 0.95, before deduction of Fund
expenses. A correlation of 1.00 would represent perfect correlation between
portfolio and index performance. It is anticipated that the correlation of the
Fund's performance to that of the Index will increase as the size of the Fund
increases. The Fund's ability to achieve significant correlation between Fund
and Index performance may be affected by changes in securities markets, changes
in the composition of the Index and the timing of purchases and redemptions of
Fund shares. We will monitor correlation.
S&P 500 Index Fund's investment objective - to seek to replicate the total
return of the Standard & Poor's 500 Composite Stock Price Index - is a
non-fundamental objective. This means that the Board of Trustees may change the
objective without obtaining shareholder approval. If the objective were changed,
we would notify shareholders before the change in the objective became
effective.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ----------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares We will invest primarily in common stocks. Generally, we will
of ownership in a corporation. Stockholders seek to invest in all 500 stocks included in the S&P 500
participate in the corporation's profits and losses, Index.
proportionate to the number of shares they own.
- ------------------------------------------------------------- ----------------------------------------------------------------------
American Depositary Receipts: ADRs are issued by a U.S. We generally invest only in those ADRs included in the
bank and represent the bank's holdings of a stated number S&P 500 Index.
of shares of a foreign corporation. An ADR entitles the
holder to all dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and sold the
same as U.S. securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Futures Contracts and Options on Futures For hedging purposes, we may have the Fund enter into futures
Contracts: Futures contracts are agreements for contracts that relate to securities included in the S&P 500 Index
the purchase or sale of a specified quantity of or that relate to the Index. We may also purchase and write call
securities or the cash value of an index at a and put options on such contracts.
specified future date at a price agreed upon when
the contract is made. Under such contracts no
delivery of the actual securities making up the index
takes place. Rather, upon expiration of the contract,
settlement is made by exchanging cash in an
amount equal to the difference between the contract
price and the closing price of the index at expiration,
net of variation margin previously paid.
Options on futures contracts give the purchaser the
right to assume a position at a specified price in a
futures contract at any time before expiration of the
option contract.
Certain options and futures may be considered to be
derivative securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Options on Securities and Securities Indices: We may write and purchase covered put and call options on
Options represent a right to buy or sell a security at securities included in the S&P 500 Index or that relate to the
an agreed upon price at a future date. The Index. Option transactions of the Fund will be conducted so
purchaser of an option may or may not choose to go that the total amount paid on premiums for all put and call
through with the transaction. options outstanding will not exceed 5% of the value of the
Fund's total assets. Further, we will not have the Fund write a
Options on securities indices are similar to options put or call option or combination thereof if, as a result, the
on securities except there is no transfer of a security aggregate value of all securities or collateral used to cover its
and settlement is in cash. A call option on a outstanding options would exceed 25% of the value of the
securities index grants the purchaser of the call, for Fund's total assets.
a premium paid to the seller, the right to receive in
cash an amount equal to the difference between the
closing value of the index and the exercise price of
the option times a multiplier established by the
exchange upon which the option is traded.
Certain options may be considered to be derivative
securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Repurchase agreements: An agreement between Typically, we use repurchase agreements as a short-term
a buyer, such as the Fund, and a seller of securities investment for the Fund's cash position. In order to enter into
in which the seller agrees to buy the securities back these repurchase agreements, the Fund must have collateral of
within a specified time at the same price the buyer at least 102% of the repurchase price.
paid for them, plus an amount equal to an agreed
upon interest rate. Repurchase agreements are
often viewed as equivalent to cash.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest in privately placed securities that are eligible for
whose resale is restricted under securities law. resale only among certain institutional buyers without
registration, including Rule 144A Securities. Restricted
securities that are determined to be illiquid may not exceed the
Fund's 15% limit on illiquid securities, which is described
below.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 15% of net assets in illiquid securities,
ready market, and cannot be easily sold within including repurchase agreements with maturities of over seven
seven days at approximately the price that the Fund days.
has valued them.
- ------------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities, such as Standard & Poor's
Depository Receipts, American Depository Receipts, high quality short-term debt
securities, and certain derivatives. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
Lending securities
The Fund may lend up to one-third of its assets to qualified dealers and
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective. In taking these measures, the
Fund may not achieve its investment goal.
Portfolio turnover
We anticipate that securities will be sold from the Fund only to reflect certain
changes in its benchmark index (including mergers or changes in the composition
of the index) or to accommodate cash flows into and out of the Fund while
maintaining the similarity of the Fund to the benchmark index. Accordingly, the
turnover rate for the Fund is not expected to exceed 50%, a generally lower
turnover rate than for most actively managed investment companies.
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a We maintain a long-term investment approach and focus on
majority of the securities in a certain stocks we believe can appreciate over an extended time
market -- like the stock or bond market -- frame regardless of interim market fluctuations. We do not try
will decline in value because of factors to predict overall stock market movements and though we
such as economic conditions, future may hold securities for any amount of time, we typically do
expectations or investor confidence. not trade for short-term purposes.
We may hold a substantial part of the Fund's assets in cash
or cash equivalents as a temporary, defensive strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Industry and security risk is the risk We limit the amount of the Fund's assets invested in any one
that the value of securities in a particular industry and in any individual security. We also follow a
industry or the value of an individual rigorous selection process before choosing securities and
stock or bond will decline because of continuously monitor them while they remain in the portfolio.
changing expectations for the
performance of that industry or for the
individual company issuing the stock.
- ------------------------------------------------- --------------------------------------------------------------------
Futures and options risk is the We will use options and futures for hedging purposes. We
possibility that the Fund may experience will not use futures and option for speculative reasons.
a significant loss if it employs an options
or futures strategy related to a securities
or a market index and that security or
index moves in the opposite direction
from what the was anticipated. Futures
and options also involve additional
expenses, which could reduce any
benefit or increase any loss that the
Fund may gain from using the strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio
securities may be adversely affected by in foreign corporations indirectly through American
political instability, changes in currency Depositary Receipts. When we do purchase ADRs, they are
exchange rates, foreign economic generally denominated in U.S. dollars and traded on a U.S.
conditions or inadequate regulatory and exchange.
accounting standards.
- ------------------------------------------------- --------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold within
seven days at approximately the price
that the Fund has valued them.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
<PAGE>
Who manages the Fund
Investment manager and sub-adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. State Street Global Advisors, a division of
State Street Corporation, is the Fund's sub-adviser. As sub-adviser, State
Street Global Advisors is responsible for day-to-day management of the Fund's
assets. Delaware Management Company administers the Fund's business affairs and
has ultimate responsibility for all investment advisory services for the Fund.
Delaware Management Company also supervises the sub-adviser's performance. For
their services to the Fund, Delaware and State Street will be paid 0.10% as a
percentage of average daily net assets for the fiscal year.
Portfolio manager
James B. May has primary responsibility for making investment decisions for S&P
500 Index Fund. Mr. May is a Principal and Portfolio Manager at State Street
Global Advisors, where he manages several mutual funds as well as several
separately managed funds. Mr. May works in State Street Global Advisors U.S.
Passive Equity group. Prior to that time he worked State Street's passive U.S.
Equities operations department. Mr. May holds a BS in Finance from Bentley
College and his MBA from Boston College. He is a member of the Financial
Management Association and is working toward the CFA designation.
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Trustees
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-adviser
State Street Global Advisors
Two International Place
Boston, MA 02110
Portfolio manager Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service
1818 Market Street Company, Inc.
Philadelphia, PA 19103 1818 Market Street
Philadelphia, PA 19103
Financial advisers
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Sub-adviser A sub-adviser is a company generally responsible for the management
of the fund's assets. They are selected and supervised by the investment
manager.
Portfolio managers Portfolio managers are employed by the investment manager or
sub-adviser to make investment decisions for individual portfolios on a
day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
<PAGE>
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you
pay when you buy the shares. The offering price for Class A shares
includes the front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How
to reduce your sales charge," and under certain circumstances the sales
charge may be waived; please see the Statement of Additional
Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than
0.30% of average daily net assets, which is lower than the 12b-1 fee
for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table
below.
<PAGE>
Class A sales charges
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of Sales charge as % Sales charge as % of Dealer's commission as %
purchase of offering price amount invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 5.00%
$50,000 but 4.75% 4.00%
under $100,000
$100,000 but 3.75% 3.00%
under $250,000
$250,000 but 2.50% 2.00%
under $500,000
$500,000 but 2.00% 1.60%
under $1 million
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of Sales charge as % Sales charge as % of Dealer's commission as %
purchase of offering price amount invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
$1 million up to $5 none none 1.00%
million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Next $20 million none none 0.50%
Up to $25 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount over $25 million none none 0.25%
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
</TABLE>
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within six
years after you buy them.
o If you redeem Class B shares during the first year after you buy them,
the shares will be subject to a contingent deferred sales charge of 5%.
The contingent deferred sales charge is 4% during the second year, 3%
during the third and fourth years, 2% during the fifth year, 1% during
the sixth year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they
are subject to annual 12b-1 fees no greater than 1% of average daily
net assets, of which 0.25% are service fees paid to the distributor,
dealers or others for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses
and any dividends paid on these shares are lower than dividends on
Class A shares.
o Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of no more
than 0.30%. Conversion may occur as late as three months after the
eighth anniversary of purchase, during which time Class B's higher
12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge of 1% if you redeem your shares within
12 months after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be
greater than 1% of average daily net assets, of which 0.25% are service
fees paid to the distributor, dealers or others for providing services
and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses
and pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at
any one time. The limitation on maximum purchases varies for retirement
plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------------------- --------------------------------------------------
Program How it works Share class
A B C
- ---------------------------------- ---------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent
agree to invest a certain amount and Rights of Accumulation
in Delaware Investment Funds do not apply to the purchase
(except money market funds with no of Class B and C shares, you
sales charge) over a 13-month can combine your purchase
period to qualify for reduced of Class A shares with your
front-end sales charges. your purchase of B and C shares
- ------------------------------------------------------------------------------------------- to fulfill your Letter of Intent
Rights of Accumulation You can combine your holdings X or qualify for Rights of
or purchases of all funds in the Accumulation.
Delaware Investments family
(except money market funds
with no sales charge) as well as
the holdings and purchases of
your spouse and children under
21 to qualify for reduced front-
end sales charges.
- ---------------------------------- ---------------------------------------- --------------- ----------------------------------
Reinvestment of Up to 12 months after you For Class Not
redeemed shares redeem shares, you can reinvest A, you will For Class B, available.
the proceeds with no additional not have to your account
sales charge. pay an will be
additional credited with
front-end the
sales contingent
charge. deferred
sales charge
you
previously
paid on the
amount you
are
reinvesting.
Your
schedule for
contingent
deferred
sales
charges and
conversion to
Class A will
not start over
again, it will
pick up from
the point at
which you
redeemed
your shares.
- ---------------------------------- ---------------------------------------- --------------- -----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------------------- --------------------------------------------------
Program How it works Share class
A B C
- ---------------------------------- ---------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
SIMPLE IRA, SEP IRA, SARSEP, These investment plans may qualify X There is no reduction in sales
Prototype Profit Sharing, for reduced sales charges by charges for Class B or Class C
Pension, 401(k), SIMPLE combining the purchases of all shares for group purchases for
401(k), 403(b)(7), and 457 members of the group. Members of retirement plans.
Retirement Plans these groups may also qualify to
purchase shares without a front-end sales
charge and a waiver of any contingent
deferred sales charges.
- ---------------------------------- ---------------------------------------- --------------- -----------------------------------
</TABLE>
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of trustees. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at fair market value using a method approved by the board of
trustees.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern Time), you will receive the net asset value as determined on the
business day we receive your request. We will deduct any applicable contingent
deferred sales charges. You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange.
<PAGE>
About your account (continued)
Special services (continued)
MoneyLineSM On Demand Service
Through our MoneyLineSM On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid quarterly. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio manager and investment professionals of the Fund consider Year 2000
compliance in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
About the S&P 500 Index
The S&P 500 Index. The S&P 500 Index is composed of 500 common stocks which are
chosen by Standard & Poor's Corporation ("Standard & Poor's") to best capture
the price performance of a large cross-section of the US publicly traded stock
market. The Index is structured to approximate the general distribution of
industries in the US economy. The inclusion of a stock in the S&P 500 Index in
no way implies that Standard & Poor's believes the stock to be an attractive
investment, nor is Standard & Poor's a sponsor or in any way affiliated with the
Fund. The 500 securities, most of which trade on the New York Stock Exchange,
represent approximately 75% of the market value of all US common stocks. Each
stock in the S&P 500 Index is weighted by its market capitalization. That is,
each security is weighted by its total market value relative to the total market
values of all the securities in the Index. Component stocks included in the S&P
500 Index are chosen with the aim of achieving a distribution at the index level
representative of the various components of the US GNP and therefore do not
represent the 500 largest companies. Aggregate market value and trading activity
are also considered in the selection process. A limited percentage of the Index
may include foreign securities.
"Standard & Poor's," "S&P," "Standard & Poor's 500," and "500" are trademarks of
Standard & Poor's and have been licensed for use by SSgA Fund. The Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the shareholders of
the Fund regarding the advisability of investing in securities generally or in
the Fund particularly or the ability of the S&P 500 Index to track general stock
market performance. Standard & Poor's only relationship to the Fund is the
licensing of the trademarks and tradenames of Standard & Poor's including the
S&P 500 Index, which is determined, composed and calculated by Standard & Poor's
without regard to the Fund. Standard & Poor's has no obligation to take the
needs of the shareholders of the Fund into consideration in determining,
composing or calculating this Index. Standard & Poor's is not responsible for
and has not participated in the determination of the prices and amount of the
Fund or the timing of the issuance or sale of the shares or in the determination
or calculation of the equation by which the shares of the Fund are to be
redeemed. Standard & Poor's has no obligation or liability in connection with
the administration, marketing or trading of the Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD & POOR'S SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. STANDARD & POOR'S MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND OR THE
SHAREHOLDERS OF THE FUND OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX
OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL STANDARD &
POOR'S HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
<PAGE>
Financial highlights
Financial highlights are not provided for the Fund because it commenced
operations after the close of its fiscal year.
<PAGE>
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
<PAGE>
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
<PAGE>
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
<PAGE>
Delaware S&P 500 Index Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual report to shareholders. In the Fund's shareholder
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For Fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811- 08457
Delaware S&P 500 Index Fund Symbols
CUSIP NASDAQ
Class A
Class B
Class C
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
<PAGE>
SUBJECT TO COMPLETION
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
Delaware S&P 500 Index Fund
Consultant Class * Institutional Class
Prospectus
December ___, 1999
Total Return Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Table of Contents
Fund profile page
Delaware S&P 500 Index Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager and sub-adviser
Portfolio manager
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
<PAGE>
Profile: Delaware S&P 500 Index Fund
- ------------------------------------
What are the Fund's goals?
S&P 500 Index Fund seeks to replicate the total return of the Standard & Poor's
500 Composite Stock Price Index. Although the Fund will strive to meet its
goals, there is no assurance that it will.
What are the Fund's main investment strategies?
S&P Index Fund will invest primarily in commons stock. The Fund intends to
invest in all 500 stocks in the S&P 500 Index in proportion to their weighting
in the Index. [No subscription for the Fund will be accepted until Advisor has a
reasonable basis to believe that the Fund will be able to acquire substantially
all 500 stocks in the Index.] To the extent that all 500 stocks cannot be
purchased, the Fund will purchase a representative sample of the stocks listed
in the Index in proportion to their weightings.
The Fund is not managed according to traditional methods of "active" investment
management, which involve the buying and selling of securities based upon
economic, financial and market analysis and investment judgment. Instead, the
Fund utilizes a "passive" investment approach, attempting to duplicate the
investment performance of its benchmark index through automated statistical
analytic procedures.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. The Fund will be affected by declines in stock prices.
For a more complete discussion of risk, please turn to "The risks of investing
in the Fund."
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking total return.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
------------------------------------------------------ ----------------- ---------------
CLASS Consutant Instutitional
------------------------------------------------------ ----------------- ---------------
<S> <C> <C>
Maximum sales charge (load) imposed on purchases as none none
a percentage of offering price
------------------------------------------------------ ----------------- ---------------
Maximum contingent deferred sales charge (load) as a none none
percentage of original purchase price or redemption
price, whichever is lower
------------------------------------------------------ ----------------- ---------------
Maximum sales charge (load) imposed on reinvested none none
dividends
------------------------------------------------------ ----------------- ---------------
Redemption fees none none
------------------------------------------------------ ----------------- ---------------
Exchange fees none(1) none(1)
------------------------------------------------------ ----------------- ---------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
------------------------------------------------------ ----------------- ---------------
<S> <C> <C>
Management fees 0.10% 0.10%
------------------------------------------------------ ----------------- ---------------
Distribution and service (12b-1) fees 0.25% none
------------------------------------------------------ ----------------- ---------------
Other expenses 0.00% 0.00%
------------------------------------------------------ ----------------- ---------------
Total operating expenses 0.00% 0.00%
------------------------------------------------------ ----------------- ---------------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(2) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- --------------------------------------------------------- ---------------
CLASS Consultant Institutional
<S> <C> <C>
------------------------------------------------------ ----------------- ---------------
1 year $000 $000
------------------------------------------------------ ----------------- ---------------
3 years $000 $000
------------------------------------------------------ ----------------- ---------------
5 years $000 $000
------------------------------------------------------ ----------------- ---------------
10 years $000 $000
------------------------------------------------------ ----------------- ---------------
</TABLE>
(1) Exchanges are subject to the requirements of each Delaware Investments
funds. A front-end sales charge may apply if you exchange your shares into
a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
<PAGE>
How we manage the Fund
- ----------------------
Our investment strategies
S&P 500 Index Fund is a stock fund that seeks to track the performance of the
Standard & Poor's 500 Composite Stock Index, which emphasizes large U.S.
companies. We employ a passive management strategy by normally investing in all
500 stocks included in the Index. We generally invest in each stock in roughly
the same proportion as represented in the Index. We seek to replicate as closely
as possible the aggregate risk characteristics and industry diversification of
the Index.
Although we normally invest in all 500 stocks in the Index, there is no
predetermined number of stocks that the Fund must hold. S&P may change the
composition of the Index from time to time. We will attempt to reflect those
changes as soon as practical. The Fund is usually fully invested. We may buy and
sell stock index futures, and buy option on stock indexes and on stock index
futures to maintain market exposure and manage cash flow.
We may purchase other types of securities, such as Standard & Poor's Depository
Receipts, American Depository Receipts, high quality short-term debt securities,
and certain derivatives.
To the extent that the Fund seeks to replicate the S&P 500 Index using such
sampling techniques, a close correlation between the Fund's performance and the
performance of the Index is anticipated in both rising and falling markets. The
Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the Index of at least 0.95, before deduction of Fund
expenses. A correlation of 1.00 would represent perfect correlation between
portfolio and index performance. It is anticipated that the correlation of the
Fund's performance to that of the Index will increase as the size of the Fund
increases. The Fund's ability to achieve significant correlation between Fund
and Index performance may be affected by changes in securities markets, changes
in the composition of the Index and the timing of purchases and redemptions of
Fund shares. We will monitor correlation.
S&P 500 Index Fund's investment objective - to seek to replicate the total
return of the Standard & Poor's 500 Composite Stock Price Index - is a
non-fundamental objective. This means that the Board of Trustees may change the
objective without obtaining shareholder approval. If the objective were changed,
we would notify shareholders before the change in the objective became
effective.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ----------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of We will invest primarily in common stocks. Generally, we will
ownership in a corporation. Stockholders participate in the seek to invest in all 500 stocks included in the S&P 500 Index.
corporation's profits and losses, proportionate to the
number of shares they own.
- ------------------------------------------------------------- ----------------------------------------------------------------------
American Depositary Receipts: ADRs are issued by a U.S. We generally invest only in those ADRs included in the S&P 500 Index.
bank and represent the bank's holdings of a stated number
of shares of a foreign corporation. An ADR entitles the
holder to all dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and sold the
same as U.S. securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Futures Contracts and Options on Futures Contracts: Futures For hedging purposes, we may have the Fund enter into futures
contracts are agreements for the purchase or sale of a contracts that relate to securities included in the S&P 500 Index or
specified quantity of securities or the cash value of an that relate to the Index. We may also purchase and write call and
index at a specified future date at a price agreed upon put options on such contracts.
when the contract is made. Under such contracts no delivery
of the actual securities making up the index takes place.
Rather, upon expiration of the contract, settlement is made
by exchanging cash in an amount equal to the difference
between the contract price and the closing price of the
index at expiration, net of variation margin previously
paid.
Options on futures contracts give the purchaser the right to
assume a position at a specified price in a futures contract
at any time before expiration of the option contract.
Certain options and futures may be considered to be
derivative securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Options on Securities and Securities Indices: Options We may write and purchase covered put and call options on securities
represent a right to buy or sell a security at an agreed included in the S&P 500 Index or that relate to the Index. Option
upon price at a future date. The purchaser of an option transactions of the Fund will be conducted so that the total amount
may or may not choose to go through with the transaction. paid on premiums for all put and call options outstanding will not
exceed 5% of the value of the Fund's total assets. Further, we will
Options on securities indices are similar to options on not have the Fund write a put or call option or combination thereof
securities except there is no transfer of a security and if, as a result, the aggregate value of all securities or collateral
settlement is in cash. A call option on a securities index used to cover its outstanding options would exceed 25% of the value
grants the purchaser of the call, for a premium paid to the of the Fund's total assets.
seller, the right to receive in cash an amount equal to the
difference between the closing value of the index and the
exercise price of the option times a multiplier established
by the exchange upon which the option is traded.
Certain options may be considered to be derivative
securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ----------------------------------------------------------------------
The securities we typically invest in How we use them
- ------------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Repurchase agreements: An agreement between a buyer, such Typically, we use repurchase agreements as a short-term investment
as the Fund, and a seller of securities in which the seller for the Fund's cash position. In order to enter into these
agrees to buy the securities back within a specified time repurchase agreements, the Fund must have collateral of at least
at the same price the buyer paid for them, plus an amount 102% of the repurchase price.
equal to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest in privately placed securities that are eligible for
resale is restricted under securities law. resale only among certain institutional buyers without registration,
including Rule 144A Securities. Restricted securities that
are determined to be illiquid may not exceed the Fund's 15% limit
on illiquid securities, which is described below.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid securities,
market, and cannot be easily sold within seven days at including repurchase agreements with maturities of over seven days.
approximately the price that the Fund has valued them.
- ------------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities, such as Standard & Poor's
Depository Receipts, American Depository Receipts, high quality short-term debt
securities, and certain derivatives. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
Lending securities
The Fund may lend up to one-third of its assets to qualified dealers and
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective. In taking these measures, the
Fund may not achieve its investment goal.
Portfolio turnover
We anticipate that securities will be sold from the Fund only to reflect certain
changes in its benchmark index (including mergers or changes in the composition
of the index) or to accommodate cash flows into and out of the Fund while
maintaining the similarity of the Fund to the benchmark index. Accordingly, the
turnover rate for the Fund is not expected to exceed 50%, a generally lower
turnover rate than for most actively managed investment companies.
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of
the stock or bond market -- will decline in interim market fluctuations. We do not try to predict overall
value because of factors such as economic stock market movements and though we may hold securities for any
conditions, future expectations or investor amount of time, we typically do not trade for short-term purposes.
confidence.
We may hold a substantial part of the Fund's assets in cash
or cash equivalents as a temporary, defensive strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one
value of securities in a particular industry or industry and in any individual security. We also follow a rigorous
the value of an individual stock or bond will selection process before choosing securities and continuously
decline because of changing expectations for monitor them while they remain in the portfolio.
the performance of that industry or for the
individual company issuing the stock.
- ------------------------------------------------- --------------------------------------------------------------------
Futures and options risk is the possibility We will use options and futures for hedging purposes. We will not
that the Fund may experience a significant loss use futures and option for speculative reasons.
if it employs an options or futures strategy
related to a securities or a market index and
that security or index moves in the opposite
direction from what the was anticipated.
Futures and options also involve additional
expenses, which could reduce any benefit or
increase any loss that the Fund may gain from
using the strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio
securities may be adversely affected by in foreign corporations indirectly through American Depositary
political instability, changes in currency Receipts. When we do purchase ADRs, they are generally denominated
exchange rates, foreign economic conditions or in U.S. dollars and traded on a U.S. exchange.
inadequate regulatory and accounting standards.
- ------------------------------------------------- --------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold within seven
days at approximately the price that the Fund
has valued them.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
<PAGE>
Who manages the Fund
Investment manager and sub-adviser
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. State Street Global Advisors, a division of
State Street Corporation, is the Fund's sub-adviser. As sub-adviser, State
Street Global Advisors is responsible for day-to-day management of the Fund's
assets. Delaware Management Company administers the Fund's business affairs and
has ultimate responsibility for all investment advisory services for the Fund.
Delaware Management Company also supervises the sub-adviser's performance. For
their services to the Fund, Delaware and State Street will be paid 0.10% as a
percentage of average daily net assets for the fiscal year.
Portfolio manager
James B. May has primary responsibility for making investment decisions for S&P
500 Index Fund. Mr. May is a Principal and Portfolio Manager at State Street
Global Advisors, where he manages several mutual funds as well as several
separately managed funds. Mr. May works in State Street Global Advisors U.S.
Passive Equity group. Prior to that time he worked State Street's passive U.S.
Equities operations department. Mr. May holds a BS in Finance from Bentley
College and his MBA from Boston College. He is a member of the Financial
Management Association and is working toward the CFA designation.
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Trustees
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Sub-adviser
State Street Global Advisors
Two International Place
Boston, MA 02110
Portfolio manager Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service
1818 Market Street Company, Inc.
Philadelphia, PA 19103 1818 Market Street
Philadelphia, PA 19103
Financial advisers
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Sub-adviser A sub-adviser is a company generally responsible for the management
of the fund's assets. They are selected and supervised by the investment
manager.
Portfolio managers Portfolio managers are employed by the investment manager or
sub-adviser to make investment decisions for individual portfolios on a
day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
<PAGE>
About your account
Consultant Class
o Consultant Class shares may be purchased through financial advisers,
including brokers, financial institutions and other entities that have a
dealer agreement with the Fund's distributor or a service agreement with the
Fund.
o Consultant Class shares do not have an up-front sales charge.
o Consultant Class shares are subject to an annual 12b-1 fee no greater than
0.30% (currently the 12b-1 fee is set at 0.25%) of average daily net assets.
The 12b-1 fee is typically used to compensate your financial adviser for the
ongoing guidance and service he or she provides to you.
o Consultant Class shares are not subject to a contingent deferred sales
charge.
Institutional Class
Institutional Class shares are available for purchase only by the
following:
o 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
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts
o 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 to the financial institution of a Rule 12b-1 Plan fee
o 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
o Institutional Class shares do not have an up-front sales charge.
o Institutional Class shares are not subject to a front-end or contingent
o Institutional Class shares are not subject to an annual 12b-1 fee.
The Consultant Class of the Fund has adopted a separate 12b-1 plan that allows
it to pay distribution fees for the sales and distribution of its shares.
Because these fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open a Consultant Class account by exchange,
call the Shareholder Service Center at 800.523.1918. To open an Institutional
Class account by exchange, call a Client Services Representative at
800.510.4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange Consultant Class shares through Delaphone, our
automated telephone service, or through our web site,
www.delawareinvestments.com. For more information about how to sign up for these
services, call our Shareholder Service Center at 800.523.1918.
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open a Consultant Class account
with an initial investment of $1,000 and make additional investments at any time
for as little as $100. If you are buying Consultant Class shares in an IRA or
Roth IRA, under the Uniform Gifts to Minors Act or the Uniform Transfers to
Minors Act; or through an Automatic Investing Plan, the minimum purchase is
$250, and you can make additional investments of only $25. The minimum for an
Education IRA is $500. The minimums vary for retirement plans other than IRAs,
Roth IRAs or Education IRAs.
There are no minimum purchase requirements for the Institutional Class, but
certain eligibility requirements must be satisfied.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of trustees. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at fair market value using a method approved by the board of
trustees.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, Consultant Class shares in the Fund
may be suitable for group retirement plans. You may establish your IRA account
even if you are already a participant in an employer-sponsored retirement plan.
For more information on how shares in the Fund can play an important role in
your retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem Consultant Class shares through Delaphone, our automated
telephone service, or through our web site, www.delawareinvestments.com. For
more information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern Time), you will receive the net asset value as determined on the
business day we receive your request. We will deduct any applicable contingent
deferred sales charges. You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem Consultant Class shares and your account balance falls below the
required account minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act
accounts or accounts with automatic investing plans, $500 for Education IRAs)
for three or more consecutive months, you will have until the end of the current
calendar quarter to raise the balance to the minimum. If your account is not at
the minimum by the required time, you will be charged a $9 fee for that quarter
and each quarter after that until your account reaches the minimum balance. If
your account does not reach the minimum balance, the Fund may redeem your
account after 60 days' written notice to you.
If you redeem Institutional Class shares and your account balance falls below
$250, the Fund may redeem your account after 60 days.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
In certain circumstances, Class A shares of the Delaware Investments funds may
be subject to a contingent deferred sales charge for up to two years after
purchase. This would occur if the fund normally had a front-end sales charge,
but the shares were purchased without paying a sales charge and a financial
adviser was paid a commission on the purchase. If you purchase Class A shares of
another fund in this manner, you may exchange them for shares of the Fund's
Consultant or Institutional Class. You will not have to pay the contingent
deferred sales charge at the time of the exchange. However, you may have to pay
the contingent deferred sales if you later redeem your shares of the Fund's A or
Consultant Class or if you exchange them for shares of another fund and then
redeem those shares. The time that you are invested in the Fund will count
toward the fulfillment of the two-year holding period.
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services to Consultant Class
shareholders.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
MoneyLine(SM) On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
<PAGE>
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid quarterly. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio manager and investment professionals of the Fund consider Year 2000
compliance in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
About the S&P 500 Index
The S&P 500 Index. The S&P 500 Index is composed of 500 common stocks which are
chosen by Standard & Poor's Corporation ("Standard & Poor's") to best capture
the price performance of a large cross-section of the US publicly traded stock
market. The Index is structured to approximate the general distribution of
industries in the US economy. The inclusion of a stock in the S&P 500 Index in
no way implies that Standard & Poor's believes the stock to be an attractive
investment, nor is Standard & Poor's a sponsor or in any way affiliated with the
Fund. The 500 securities, most of which trade on the New York Stock Exchange,
represent approximately 75% of the market value of all US common stocks. Each
stock in the S&P 500 Index is weighted by its market capitalization. That is,
each security is weighted by its total market value relative to the total market
values of all the securities in the Index. Component stocks included in the S&P
500 Index are chosen with the aim of achieving a distribution at the index level
representative of the various components of the US GNP and therefore do not
represent the 500 largest companies. Aggregate market value and trading activity
are also considered in the selection process. A limited percentage of the Index
may include foreign securities.
"Standard & Poor's," "S&P," "Standard & Poor's 500," and "500" are trademarks of
Standard & Poor's and have been licensed for use by SSgA Fund. The Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the shareholders of
the Fund regarding the advisability of investing in securities generally or in
the Fund particularly or the ability of the S&P 500 Index to track general stock
market performance. Standard & Poor's only relationship to the Fund is the
licensing of the trademarks and tradenames of Standard & Poor's including the
S&P 500 Index, which is determined, composed and calculated by Standard & Poor's
without regard to the Fund. Standard & Poor's has no obligation to take the
needs of the shareholders of the Fund into consideration in determining,
composing or calculating this Index. Standard & Poor's is not responsible for
and has not participated in the determination of the prices and amount of the
Fund or the timing of the issuance or sale of the shares or in the determination
or calculation of the equation by which the shares of the Fund are to be
redeemed. Standard & Poor's has no obligation or liability in connection with
the administration, marketing or trading of the Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD & POOR'S SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. STANDARD & POOR'S MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND OR THE
SHAREHOLDERS OF THE FUND OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX
OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL STANDARD &
POOR'S HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
<PAGE>
Financial highlights
Financial highlights are not provided for the Fund because it commenced
operations after the close of its fiscal year.
<PAGE>
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
<PAGE>
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
<PAGE>
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
<PAGE>
Delaware S&P 500 Index Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual report to shareholders. In the Fund's shareholder
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center (Consultant Class)
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Client Services Representative (Institutional Class)
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-08457
Delaware S&P 500 Index Fund Symbols
CUSIP NASDAQ
Consultant Class
Institutional Class
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
<PAGE>
Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end funds
give investors the ability to create a portfolio that fits their personal
financial goals. For more information, shareholders of the Fund Classes and
Consultant Class should contact their financial adviser or call Delaware
Investments at 800-523-1918, and shareholders of the Institutional Classes
should contact Delaware Investments at 800-510-4015.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
SUB-ADVISER
State Street Global Advisors
Two International Place
Boston, MA 02110.
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
- ----------------------------------------------------
DELAWARE GROUP FOUNDATION FUNDS
- ----------------------------------------------------
DELAWARE FOUNDATION FUNDS
INCOME PORTFOLIO
- ----------------------------------------------------
DELAWARE FOUNDATION FUNDS
BALANCED PORTFOLIO
- ----------------------------------------------------
DELAWARE FOUNDATION FUNDS
GROWTH PORTFOLIO
- ----------------------------------------------------
DELAWARE S&P 500 INDEX FUND
- ----------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ----------------------------------------------------
December 27, 1999
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
December 27, 1999
DELAWARE GROUP FOUNDATION FUNDS
Delaware Foundation Funds Income Portfolio
Delaware Foundation Funds Growth Portfolio
Delaware Foundation Funds Growth Portfolio
Delware S&P 500 Index Fund
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Class: 800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares, Class C Shares and Consultant Class Shares:
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Foundation Funds ("Foundation Funds") is a
professionally-managed mutual fund of the series type which currently offers the
four series of shares noted above. Each series is referred to individually as a
"Fund" or collectively as the "Funds." Each Fund offers Class A Shares, Class B
Shares and Class C Shares (together referred to as the "Fund Classes"). Each
Fund also offers an Institutional Class (the "Institutional Class"). In
addition, Delaware S&P 500 Index Fund offers Consultant Class Shares. All
references to "shares" in this Part B refer to all Classes of shares of
Foundation Funds, except where noted.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses for
the Funds dated December 27, 1999, as they may be amended from time to time.
Part B should be read in conjunction with the respective Class' Prospectus. Part
B is not itself a prospectus but is, in its entirety, incorporated by reference
into each Class' Prospectus. A Prospectus may be obtained by writing or calling
your investment dealer or by contacting the Fund's national distributor,
Delaware Distributors, L.P. (the "Distributor"), at the above address or by
calling the above phone numbers. The Fund's financial statements, the notes
relating thereto, the financial highlights and the report of independent
auditors are incorporated by reference from the Annual Report into this Part B.
The Annual Report will accompany any request for Part B. The Annual Report can
be obtained, without charge, by calling 800-523-1918.
-2-
<PAGE>
________________________________________________________________________________
TABLE OF CONTENTS
Page
----
Cover Page 1
Investment Objectives and Policies 2
Performance Information 6
Trading Practices and Brokerage 11
Purchasing Shares 13
Investment Plans 25
Determining Offering Price and Net Asset Value 33
Redemption and Exchange 34
Dividends and Realized Securities Profits 41
Taxes 42
Investment Management Agreement 46
Officers and Trustees 48
General Information 60
Financial Statements 62
Appendix A 63
-3-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Investment Restrictions
The following restrictions are fundamental policies, which may not be
amended without approval of a majority of the outstanding voting securities of
the affected Fund, which is the lesser of (i) more than 50% of the outstanding
voting securities, or (ii) 67% of the voting securities of the affected Fund
present at a shareholder meeting if 50% or more of the voting securities are
present in person or represented by proxy. The percentage limitations contained
in the restrictions and policies set forth herein apply at the time of purchase
of securities.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 ("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 Fund 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 Fund 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 (the "1933 Act").
4. 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 Fund 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 a Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent a Fund
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
prospectus, a Fund will be subject to the following investment restrictions,
which are considered non-fundamental and may be changed by the Board of Trustees
without shareholder approval.
1. Delaware S&P Index Fund 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
-4-
<PAGE>
connection with a merger, reorganization, consolidation or other similar
transaction. However, Delaware S&P 500 Index Fund may not 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. A Fund 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 Fund has valued the
investment.
The following are additional non-fundamental investment restrictions
for Delaware Foundation Funds Income Portfolio, Delaware Foundation Funds Growth
Portfolio and Delaware Foundation Funds Growth Portfolio:
A Fund will not:
1. Invest more than 25% of its total assets in any one industry
(including investments in Delaware Investments Funds that concentrate in that
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. For purposes of this restriction,
investments in the Delaware Investments Funds will not be deemed to be
investments in "investment company" industry.
2. 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 and loan
participations), whether or not the purchase was made upon the original issuance
of the securities, and except that each Fund may loan its assets (other than
shares of the Delaware Investments Funds) to qualified broker/dealers or
institutional investors.
3. 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 Fund might be deemed to be
an underwriter under the Securities Act of 1933 (the "1933 Act"). No limit is
placed on the proportion of the Fund's assets which may be invested in such
securities.
4. Borrow money or issue senior securities, except to the extent
permitted by the Investment Company Act of 1940 (the "1940 Act") or any rule or
order thereunder or interpretation thereof. Subject to the foregoing, each Fund
may engage in short sales, purchase securities on margin, and write put and call
options.
5. Purchase or sell physical commodities or physical commodity
contracts, including physical commodity option or futures contracts in a
contract market or other futures market.
6. Purchase or sell real estate; provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
7. Invest for the purpose of acquiring control of any company. This
policy will not prohibit acquisition of a controlling interest in a Delaware
Investments Fund.
-5-
<PAGE>
8. Invest in securities of other investment companies, except in
accordance with the provisions of the 1940 Act in effect at the time of the
investment or any rules, regulations, SEC orders or staff positions thereunder.
9. Invest in interests in oil, gas and other mineral leases or other
mineral exploration or development programs.
10. Purchase securities on margin except short-term credits that may be
necessary for the clearance of purchases and sales of securities. This
restriction does not apply to the purchase of futures or options contracts.
INVESTMENT POLICIES AND OTHER INVESTMENTS - Delaware Foundation Funds Income
Portfolio, Delaware Foundation Funds Growth Portfolio, Delaware Foundation Funds
Growth Portfolio
The Funds will invest primarily in open-end investment companies
(mutual funds) that are members of the Delaware Investments Family of Funds
(individually, a "Delaware Investments Fund" and collectively, the "Delaware
Investments Funds") listed below. In addition, if the Trust receives an
exemptive order from the Securities and Exchange Commission (the "SEC"), the
Funds may invest in the same kinds of securities as those in which the Delaware
Investments Funds may invest and employ the same investment strategies as any of
the Delaware Investments Funds, to the extent consistent with each Fund's
investment objective stated in the Prospectuses.
The Delaware Investments Funds include funds investing in U.S. and
foreign stocks, bonds, and money market instruments. The list of Delaware
Investments Funds set forth below may change from time to time, and Delaware
Investments Funds may be added or deleted upon the recommendation of the
Delaware Management Company (the "Manager") without shareholder approval.
Delaware Investments Funds Available to the Delaware Foundation Funds Income
Portfolio, Delaware Foundation Funds Growth Portfolio, Delaware Foundation
Funds Growth Portfolio
U.S. Equities
Delaware Blue Chip Fund Delaware Select Growth Fund
Delaware DelCap Fund Delaware Small Cap Value Fund
-6-
<PAGE>
Delaware Diversified Growth Fund Delaware Trend Fund
Delaware Diversified Value Fund Delaware U.S. Growth Fund
Delaware REIT Fund
The Select Equity Portfolio
International Equities
Delaware Emerging Markets Fund Delaware International Small-Cap Fund
Delaware International Equity Fund Delaware New Pacific Fund
Fixed-Income Securities
Delaware American Government Bond Fund Delaware Extended Duration Bond Fund.
Delaware Delchester Fund Delaware Global Bond Fund
Delaware Corporate Bond Fund Delaware Limited-Term Government Fund
Delaware High-Yield Opportunities Fund
Money Market Securities
Delaware Cash Reserve Fund
-7-
<PAGE>
The following investment policies relate to the Delaware Investments
Funds, consistent with each fund's investment objective as described in the
Prospectuses. In addition, if the Trust receives an exemptive order from the
SEC, each Fund may engage in these investment instruments and strategies
directly.
U.S. Government Securities
Securities issued or guaranteed by the U.S. government or its agencies
or instrumentalities ("Government Securities") in which the Delaware Investments
Funds may invest include debt obligations of varying maturities issued by the
U.S. Treasury or issued or guaranteed by an agency or instrumentality of the
U.S. government, including the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks, Fannie Mae, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Student Loan Marketing Association and Resolution Trust Corporation. Direct
obligations of the United States Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. Because the
U.S. government is not obligated by law to provide support to an instrumentality
that it sponsors, each Delaware Investments Fund invests in obligations issued
by an instrumentality of the U.S. government only if its investment manager
determines that the instrumentality's credit risk does not make its securities
unsuitable for investment by a Delaware Investments Fund.
Money Market Instruments
Money market instruments in which the Delaware Investments Funds may
invest include U.S. government securities; certificates of deposit, time
deposits and bankers' acceptances issued by domestic banks (including their
branches located outside the U.S. and subsidiaries located in Canada), domestic
branches of foreign banks, savings and loan associations and similar
institutions; high grade commercial paper; and repurchase agreements with
respect to the foregoing types of instruments.
Certain types of money market instruments are described below.
U.S. Government Securities--Securities issued or guaranteed by the U.S.
government, including Treasury Bills, Notes and Bonds.
U.S. Government Agency Securities--Obligations issued or guaranteed by
agencies or instrumentalities of the U.S. government whether supported by the
full faith and credit of the U.S. Treasury or the credit of a particular agency
or instrumentality.
Bank Obligations--Certificates of deposit, bankers' acceptances and
other short-term obligations of U.S. commercial banks and their overseas
branches and foreign banks of comparable quality, provided each such bank
combined with its branches has total assets of at least one billion dollars. Any
obligations of foreign banks shall be denominated in U.S. dollars. Obligations
of foreign banks and obligations of overseas branches of U.S. banks are subject
to somewhat different regulations and risks than those of U.S. domestic banks.
In particular, a foreign country could impose exchange controls which might
delay the release of proceeds from that country. Such deposits are not covered
by the Federal Deposit Insurance Corporation. Because of conflicting laws and
regulations, an issuing bank could maintain that liability for an investment is
solely that of the overseas branch which could expose the Delaware Investments
Fund to a greater risk of loss. The Delaware Investments Funds will only buy
short-term instruments in nations where these risks are minimal. The Delaware
Investments Funds will consider these factors
-8-
<PAGE>
along with other appropriate factors in making an investment decision to acquire
such obligations and will only acquire those which, in the opinion of
management, are of an investment quality comparable to other debt securities
bought by the Delaware Investments Funds.
Commercial Paper--The Delaware Investments Funds may invest in
short-term promissory notes issued by corporations which at the time of purchase
are rated P-1 and/or A-1. Commercial paper ratings P-1 by Moody's Investors
Service, Inc. ("Moody's") and A-1 by Standard & Poor's Ratings Group ("S&P") are
the highest investment grade category.
Corporate Debt--The Delaware Investments Funds may invest in corporate
notes and bonds rated A or above. Excerpts from Moody's description of those
categories of 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.
Rule 144A Securities
The Delaware Investments Funds may invest in restricted securities,
including unregistered securities eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the 1933 Act. Rule 144A
Securities may be freely traded among qualified institutional investors without
registration under the 1933 Act.
Investing in Rule 144A Securities could have the effect of increasing
the level of a Delaware Investments Fund'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
directors/trustees of a Delaware Investments Fund and its investment manager
will continue to monitor the liquidity of that security to ensure that an
Delaware Investments Fund's holdings of illiquid securities does not exceed its
limit on investments in such securities.
Repurchase Agreements
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 the
Delaware Investments Funds, if any, would be the difference between the
repurchase price and the market value of the security. A Delaware Investments
Fund will limit its investments in repurchase agreements to those which the
respective investment manager, under the guidelines of the Board of
Directors/Trustees of such Delaware Investments Fund, determines to present
minimal credit risks and which are of high quality. In addition, each Delaware
Investments Fund must have collateral of at least 102% of the repurchase price,
including the portion representing a Delaware Investments Fund's yield under
such agreements which is monitored on a daily basis. While the Delaware
Investments Funds are permitted to do so, they normally do not invest in
repurchase agreements, except to invest cash balances.
The funds available from the Delaware Investments family have obtained
an exemption from the joint-transaction prohibitions of Section 17(d) of the
1940 Act to allow the funds in the Delaware Investments family jointly to invest
cash balances. The Delaware Investments Funds may invest cash balances in a
joint repurchase agreement in accordance with the terms of the Order and subject
generally to the conditions described above.
-9-
<PAGE>
Reverse Repurchase Agreements
Certain Delaware Investments Funds are authorized to enter into reverse
repurchase agreements. A reverse repurchase agreement is the sale of a security
by a Delaware Investments Fund and its agreement to repurchase the security at
a specified time and price. A Delaware Investments Fund will maintain in a
segregated account with the Custodian cash, cash equivalents or U.S. government
securities in an amount sufficient to cover its obligations under reverse
repurchase agreements with broker/dealers (but no collateral is required on
reverse repurchase agreements with banks). Under the 1940 Act, reverse
repurchase agreements may be considered borrowings by a Delaware Investments
Fund; accordingly, a Delaware Investments Fund will limit its investments in
reverse repurchase agreements, together with any other borrowings, to no more
than one-third of its total assets. The use of reverse repurchase agreements by
a Delaware Investments Fund creates leverage which increases the Delaware
Investments Fund's investment risk. If the income and gains on securities
purchased with the proceeds of reverse repurchase agreements exceed the costs of
the agreements, a Delaware Investments Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the costs, earnings or net asset value would decline faster
than otherwise would be the case.
Portfolio Loan Transactions
It is the understanding of the respective investment manager that the
staff of the SEC 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 a
Delaware Investments Fund involved 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 the Delaware Investments Fund
involved; 3) the Delaware Investments Fund must be able to terminate the loan
after notice, at any time; 4) the Delaware Investments Fund 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) the Delaware Investments Fund 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/Trustees
of the Delaware Investments Funds 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 Delaware Investments Fund would be exposed
on a portfolio loan transaction is the risk that the borrower would go bankrupt
at a time when the value of the security goes up. Therefore, a Delaware
Investments Fund will only enter into loan arrangements after a review of all
pertinent facts by the respective investment manager, under the supervision of
the Board of Directors/Trustees, 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 manager.
High-Yield Securities
Among the possible risks of investing in high-yield securities are the
possibility of legislative and regulatory action and proposals. 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 securities. For example, Congressional legislation limited
the deductibility of interest paid on certain high-yield securities 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 purchases of high-yield securities as a result of, among other
-10-
<PAGE>
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 a Delaware Investments Fund to attain its
investment objective.
Investment Company Securities
Any investments that certain Delaware Investments Funds 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, of such other investment companies. Under the 1940 Act's current
limitations, a Delaware Investments Fund may not (1) own more than 3% of the
voting stock of another investment company; (2) invest more than 5% of the
Delaware Investments Fund's total assets in the shares of any one investment
company; nor (3) invest more than 10% of the Delaware Investments Fund's total
assets in shares of other investment companies. If a Delaware Investments Fund
elects to limit its investment in other investment companies to closed-end
investment companies, the 3% limitation described above is increased to 10%.
These percentage limitations also apply to and Delaware Investments Fund's
investments in unregistered investment companies. The Delaware Investments Funds
may not acquire securities of registered open-end investment companies or
registered unit investment trusts in reliance on sections 12(d)(1)(F) or (G) of
the 1940 Act.
Unseasoned Companies
Certain Delaware Investments Funds may invest in relatively new or
unseasoned companies which are in their early stages of development, or small
companies positioned in new and emerging industries where the opportunity for
rapid growth is expected to be above average. Securities of unseasoned companies
present greater risks than securities of larger, more established companies. The
companies in which a Delaware Investments Fund may invest may have relatively
small revenues, limited product lines, and may have a small share of the market
for their products or services. Small companies may lack depth of management,
they may be unable to internally generate funds necessary for growth or
potential development or to generate such funds through external financing or
favorable terms, or they may be developing or marketing new products or services
for which markets are not yet established and may never become established. Due
to these and other factors, small companies may suffer significant losses as
well as realize substantial growth, and investments in such companies tend to be
volatile and are therefore speculative.
Mortgage-Backed Securities
In addition to mortgage-backed securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, certain Delaware Investments
Funds may also invest its assets in securities issued by certain private,
nongovernment corporations, such as financial institutions, if the securities
are fully collateralized at the time of issuance by securities or certificates
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Two principal types of mortgage-backed securities are 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. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
-11-
<PAGE>
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 Delaware Investments
Fund's yield to maturity. If the underlying mortgage assets experience greater
than anticipated prepayments of principal, a Delaware Investments Fund 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 its limit in such securities.
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 and certain REMICs also may be stripped.
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. Certain Delaware
Investments Funds will invest in such private-backed securities only if they are
100% collateralized at the time of issuance by securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities.
Mortgage Dollar Rolls
Certain Delaware Investments Funds may enter into mortgage "dollar
rolls" in which the Delaware Investments Fund sells mortgage-backed securities
for delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. Dollar roll transactions consist of the sale by a Fund of
mortgage-backed securities, together with a commitment to purchase similar, but
not necessarily identical, securities at a future date. Any difference between
the sale price and the purchase price is netted against the interest income
foregone on the securities to arrive at an implied borrowing (reverse
repurchase) rate. Alternatively, the sale and purchase transactions which
constitute the dollar roll can be executed at the same price, with a Delaware
Investments Fund being paid a fee as consideration for entering into the
commitment to purchase. Dollar rolls may be renewed prior to cash settlement and
initially may involve only a firm commitment agreement by a Delaware
Investments Fund to buy a security. If the broker/dealer to whom a Delaware
Investments Fund sells the security becomes insolvent, such Delaware Investments
Fund's right to purchase or repurchase the security may be restricted; the value
of the security may change adversely over the term of the dollar roll; the
security that a Delaware Investments Fund is required to repurchase may be
worth less than the security that the Delaware Investments Fund originally held,
and the return earned by the Delaware Investments Fund with the proceeds of a
dollar roll may not exceed transaction costs. The Delaware Investments Fund will
place U.S. government or other liquid, high quality assets in a segregated
account in an amount sufficient to cover its repurchase obligation.
-12-
<PAGE>
Asset-Backed Securities
Certain Delaware Investments Funds may invest a portion of its assets
in asset-backed securities. 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, in the case of certain
Delaware Investments Funds, 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.
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 Delaware Investments Funds 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 information and 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.
Convertible Securities
Certain Delaware Investments Funds may invest in convertible
securities, including corporate debentures, bonds, notes and preferred stocks
that may be converted into or exchanged for common stock. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, a
Delaware Investments Fund may be required to pay for a convertible security an
amount in excess of the value of the underlying common stock. Common stock
acquired by a Delaware Investments Fund upon conversion of a convertible
security will generally be held for so long as the respective manager
anticipates such stock will provide a
-13-
<PAGE>
Delaware Investments Fund with opportunities which are consistent with a
Delaware Investments Fund's investment objectives and policies.
A Delaware Investments Fund may invest not more than 5% of its assets
in convertible debentures that are rated below investment grade or are unrated
but are determined by its investment manager to be of comparable quality.
Investing in convertible debentures that are rated below investment grade or
unrated but of comparable quality entails certain risks, including the risk of
loss of principal, which may be greater than the risks involved in investing in
investment grade convertible debentures. Under rating agency guidelines, lower
rated securities and comparable unrated securities will likely have some quality
and protective characteristics that are outweighed by large uncertainties or
major risk exposures to adverse conditions.
A Delaware Investments Fund may have difficulty disposing of such
lower rated convertible debentures because the trading market for such
securities may be thinner than the market for higher rated convertible
debentures. To the extent a secondary trading market for these securities does
exist, it generally is not as liquid as the secondary trading market for higher
rated securities. The lack of a liquid secondary market as well as adverse
publicity with respect to these securities, may have an adverse impact on market
price and a Delaware Investments Fund's ability to dispose of particular issues
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for a Delaware Investments
Fund to obtain accurate market quotations for purposes of pricing such Delaware
Investments Fund's portfolio and calculating its net asset value. The market
behavior of convertible securities in lower rating categories is often more
volatile than that of higher quality securities. Lower quality convertible
securities are judged by Moody's and S&P to have speculative elements or
characteristics; their future cannot be considered as well assured and earnings
and asset protection may be moderate or poor in comparison to investment grade
securities.
In addition, such lower quality securities face major ongoing
uncertainties or exposure to adverse business, financial or economic conditions,
which could lead to inadequate capacity to meet timely payments. The market
values of securities rated below investment grade tend to be more sensitive to
company specific developments and changes in economic conditions than higher
rated securities. Issuers of these securities are often highly leveraged, so
that their ability to service their debt obligations during an economic downturn
or during sustained periods of rising interest rates may be impaired. In
addition, such issuers may not have more traditional methods of financing
available to them, and may be unable to repay debt at maturity by refinancing.
When-Issued and Delayed Delivery Securities
Certain Delaware Investments Funds 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 Delaware
Investments Fund 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 a Delaware Investments Fund enters into the
commitment and no interest accrues to such Delaware Investments Fund 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.
Combined Transactions
Certain Delaware Investments Funds may enter into multiple
transactions, including multiple options transactions, multiple futures
transactions, multiple currency transactions (including forward
-14-
<PAGE>
currency contracts) and multiple interest rate transactions and any combination
of futures, options, currency and interest rate transactions ("component
transactions"), instead of a single transaction, as part of a single or combined
strategy when, in the opinion of the investment manager, it is in the best
interests of a Delaware Investments Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its component
transactions. Although combined transactions are normally entered into based on
the investment manager's judgment that the combined strategies will reduce risk
or otherwise more effectively achieve the desired portfolio management goal, it
is possible that the combination will instead increase such risks or hinder
achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars
Certain Delaware Investments Funds may enter into interest rate,
currency and index swaps and the purchase or sale of related caps, floors and
collars. The Delaware Investments Funds expect to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio, to protect against currency fluctuations, as a duration
management technique or to protect against any increase in the price of
securities a Delaware Investments Fund anticipates purchasing at a later date.
The Delaware Investments Funds intend to use these transactions as hedges and
not speculative investments and will not sell interest rate caps or floors where
it does not own securities or other instruments providing the income stream a
Delaware Investments Fund may be obligated to pay. Interest rate swaps involve
the exchange by a Delaware Investments Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a nominal amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
A Delaware Investments Fund will usually enter into swaps on a net
basis, i.e., the two payment streams are netted out in a cash settlement on the
payment date or dates specified in the instrument, with such Delaware
Investments Fund receiving or paying, as the case may be, only the net amount of
the two payments. Inasmuch as these swaps, caps, floors and collars are entered
into for good faith hedging purposes, the investment managers and the Delaware
Investments Funds believe such obligations do not constitute senior securities
under the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. A Delaware Investments Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or is determined to
be of equivalent credit quality by the investment manager. If there is a default
by the counterparty, a Delaware Investments Fund may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agent utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid. Caps,
floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, accordingly, they are less
liquid than swaps.
-15-
<PAGE>
Eurodollar Instruments
Certain Delaware Investments Funds may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. A Delaware Investments Fund might use Eurodollar futures contracts
and options thereon to hedge against changes in LIBOR, to which many interest
rate swaps and fixed-income instruments are linked.
"Roll" Transactions
Certain Delaware Investments Funds may engage in "roll" transactions. A
"roll" transaction is the sale of securities together with a commitment (for
which a Delaware Investments Fund may receive a fee) to purchase similar, but
not identical, securities at a future date. Under the 1940 Act, these
transactions may be considered borrowings by a Delaware Investments Fund;
accordingly, a Delaware Investments Fund will limit its use of these
transactions, together with any other borrowings, to no more than one-third of
its total assets. A Delaware Investments Fund will segregate liquid assets such
as cash, U.S. government securities or other high grade debt obligations in an
amount sufficient to meet their payment obligations in these transactions.
Although these transactions will not be entered into for leveraging purposes, to
the extent an Underlying Fund's aggregate commitments under these transactions
exceed its holdings of cash and securities that do not fluctuate in value (such
as short-term money market instruments), a Delaware Investments Fund
temporarily will be in a leveraged position (i.e., it will have an amount
greater than its net assets subject to market risk). Should the market value of
a Delaware Investments Fund's portfolio securities decline while such Delaware
Investments Fund is in a leveraged position, greater depreciation of its net
assets would likely occur than were it not in such a position. As a Delaware
Investments Fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases.
Variable and Floating Rate Notes
Variable rate master demand notes, in which certain Delaware
Investments Funds may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. A Delaware Investments
Fund will not invest over 5% of its assets in variable rate master demand notes.
Because master demand notes are direct lending arrangements between a Delaware
Investments Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Delaware Investments Fund may demand
payment of principal and accrued interest at any time. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes (which are normally manufacturing, retail, financial, and other
business concerns) must satisfy the same criteria as set forth above for
commercial paper. In determining average weighted portfolio maturity, a variable
amount master demand note will be deemed to have a maturity equal to the period
of time remaining until the principal amount can be recovered from the issuer
through demand.
A variable rate note is one whose terms provide for the adjustment of
its interest rate on set dates and which, upon such adjustment, can reasonably
be expected to have a market value that approximates its par value. A floating
rate note is one whose terms provide for the adjustment of its interest rate
whenever a specified interest rate changes and which, at any time, can
reasonably be expected to have a market value that approximates its par value.
Such notes are frequently not rated by credit rating agencies; however, unrated
variable and floating rate notes purchased by a Delaware Investments Fund will
be determined by such Delaware Investments Fund's investment manager under
guidelines established by the Board of Directors/Trustees to be of comparable
quality at the time of purchase to rated instruments eligible for purchase under
a Delaware Investments Fund's investment policies. In making such
-16
<PAGE>
determinations, the investment manager will consider the earning power, cash
flow and other liquidity ratios of the issuers of such notes (such issuers
include financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Delaware Investments Fund, such Delaware Investments Fund may
re-sell the note at any time to a third party. The absence of such an active
secondary market, however, could make it difficult for a Delaware Investments
Fund to dispose of the variable or floating rate note involved in the event the
issuer of the note defaulted on its payment obligations, and the Delaware
Investments Fund could, for this or other reasons, suffer a loss to the extent
of the default. Variable or floating rate notes may be secured by bank letters
of credit.
Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements providing for settlement more than seven
days after notice), exceed 10% of a Delaware Investments Fund's total assets
only if such notes are subject to a demand feature that will permit such
Delaware Investments Fund to demand payment of the principal within seven days
after demand by a Delaware Investments Fund. If not rated, such instruments
must be found by a Delaware Investments Fund's investment manager under
guidelines established by the Board of Directors/Trustees, to be of comparable
quality to instruments that are rated high quality. A rating may be relied upon
only if it is provided by a nationally recognized statistical rating
organization that is not affiliated with the issuer or guarantor of the
instruments. For a description of the rating symbols of S&P and Moody's used in
this paragraph, see the Prospectuses. A Delaware Investments Fund may also
invest in Canadian Commercial Paper which is commercial paper issued by a
Canadian corporation or a Canadian counterpart of a U.S. corporation and in
Europaper which is U.S. dollar denominated commercial paper of a foreign issuer.
Municipal Securities
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, roads, schools, water and sewer works, and other
utilities. Other public purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities. In addition, certain debt obligations known as "private activity
bonds" may be issued by or on behalf of municipalities and public authorities to
obtain funds to provide certain water, sewage and solid waste facilities,
qualified residential rental projects, certain local electric, gas and other
heating or cooling facilities, qualified hazardous waste facilities, high-speed
intercity rail facilities, government-owned airports, docks and wharves and mass
commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation. Certain debt obligations known as "industrial development
bonds" under prior federal tax law may have been issued by or on behalf of
public authorities to obtain funds to provide certain privately-operated housing
facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to finance the construction, improvement, equipment or
repair of privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues is
limited under current and prior federal tax law.
Information about the financial condition of issuers of Municipal
Securities may be less available than about corporations with a class of
securities registered under the Securities Exchange Act of 1934 (the "1934
Act").
-17-
<PAGE>
Foreign Securities
Investors should recognize that investing in foreign issuers involves
certain considerations, including those set forth in the Prospectuses, which are
not typically associated with investing in United States issuers. Since the
stocks of foreign companies are frequently denominated in foreign currencies,
and since a Delaware Investments Fund may temporarily hold uninvested reserves
in bank deposits in foreign currencies, a Delaware Investments Fund 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 certain Delaware Investments
Funds permit it to enter into forward foreign currency exchange contracts in
order to hedge those Delaware Investments Funds' holdings and commitments
against changes in the level of future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract.
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 a Delaware
Investments Fund. Payment of such interest equalization tax, if imposed, would
reduce a Delaware Investments Fund'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 Delaware Investments Fund by United States corporations.
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 generally include 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, futures contract, option and similar financial instruments other than
any "regulated futures contract" or "nonequity option" 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. However, foreign
currency-related regulated futures contracts and nonequity options are generally
not subject to the special currency rules, if they are or would be treated as
sold for their fair market value at year-end under the marking to market rules
applicable to other futures contracts, unless an election is made to have such
currency rules apply. 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, futures contracts and
options that are capital assets in the hands of the taxpayer and which are not
part of a straddle. 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. The income tax effects of integrating and
treating a transaction as a single transaction are generally to create a
synthetic debt instrument that is subject to the original discount provisions.
It is anticipated that some of the non-U.S. dollar denominated investments and
foreign currency contracts a Delaware Investments Fund may make or enter into
will be subject to the special currency rules described above.
Foreign Currency Transactions
Certain Delaware Investments Funds 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.
-18-
<PAGE>
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 Delaware Investments Fund
will account for forward contracts by marking to market each day at daily
exchange rates.
When a Delaware Investments Fund 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 a Fund's
assets denominated in such foreign currency, a Delaware Investments Fund's
Custodian Bank or subcustodian will place cash or liquid high grade debt
securities in a separate account of such Delaware Investments Fund in an amount
not less than the value of such Delaware Investments Fund'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 a Delaware Investments Fund's commitments
with respect to such contracts.
Depositary Receipts
Certain Delaware Investments Funds may make foreign investments through
the purchase and sale of sponsored or unsponsored American Depositary Receipts
("ADRs") and European and Global Depositary Receipts ("Depositary Receipts").
ADRs are receipts typically issued by a U.S. bank or trust company, while
Depositary Receipts are issued by a foreign bank or trust company. ADRs and
Depositary Receipts evidence ownership of underlying securities issued by a
foreign corporation. "Sponsored" ADRs and Depositary Receipts are issued jointly
by the issuer of the underlying security and a depository, whereas "unsponsored"
ADRs and Depositary Receipts are issued without participation of the issuer of
the deposited security. Holders of unsponsored ADRs and Depositary Receipts
generally bear all the costs of such facilities and the depository of an
unsponsored 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 or Depositary Receipt.
Options
Certain Delaware Investments Funds may write call options on a covered
basis only, purchase call options, write secured put options and purchase put
options, and will not engage in option writing strategies for speculative
purposes.
Certain Delaware Investments Funds may invest in options that are
either listed on U.S. or recognized foreign exchanges 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 a Delaware Investments Fund's ability to effectively hedge its securities.
Covered Call Writing -- Certain Delaware Investments Funds may write
covered call options from time to time on such portion of its portfolio, without
limit, as the investment manager determines is appropriate in seeking to obtain
a Delaware Investments Fund's investment objective. A call option gives the
purchaser of such option the right to buy, and the writer, in this case an
Delaware Investments Fund, has the obligation to sell the underlying security at
the exercise price during the option period. The advantage to a Delaware
Investments Fund of writing covered calls is that the Delaware Investments Fund
receives additional income, in the form of a premium, which may offset any
capital loss or decline in market value of the security. However, if the
security rises in value, a Delaware Investments Fund may not fully participate
in the market appreciation.
-19-
<PAGE>
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 both options on actual portfolio securities owned by an
Delaware Investments Fund and options on stock indices, a Delaware Investments
Fund may enter into closing purchase transactions. A closing purchase
transaction is one in which a Delaware Investments Fund, when obligated as a
writer of an option, terminates its obligation by purchasing an option of the
same series as the option previously written.
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 an
Delaware Investments Fund to write another call option on the underlying
security with either a different exercise price or expiration date or both. A
Delaware Investments Fund 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 Delaware Investments Fund 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 Delaware Investments Fund 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.
A Delaware Investments Fund will write call options only on a covered
basis, which means that the Delaware Investments Fund will own the underlying
security subject to the call option at all times during the option period.
Unless a closing purchase transaction is effected, a Delaware Investments Fund
would be required to continue to hold a security which it might otherwise wish
to sell, or deliver a security it would want to hold. Options written by an
Delaware Investments Fund 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.
Purchasing Call Options--Certain Delaware Investments Funds may
purchase call options to the extent that premiums paid by a Delaware
Investments Fund do not aggregate more than 2% of that Delaware Investments
Fund's total assets. When an
-20-
<PAGE>
Delaware Investments Fund purchases a call option, in return for a premium paid
by a Delaware Investments Fund to the writer of the option, such Delaware
Investments Fund 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 a Delaware Investments Fund may alter portfolio characteristics and
modify portfolio maturities without incurring the cost associated with portfolio
transactions.
A Delaware Investments Fund may, following the purchase of a call
option, liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same series as the option previously
purchased. A Delaware Investments Fund 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; a Delaware Investments Fund
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.
Although a Delaware Investments Fund 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 an
Delaware Investments Fund would have to exercise its 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 Delaware
Investments Fund may expire without any value to the Delaware Investments Fund.
Writing Put Options--A Delaware Investments Fund may also write put
options on a secured basis which means that such Delaware Investments Fund will
maintain in a segregated account with its custodian, cash or U.S. government
securities in an amount not less than the exercise price of the option at all
times during the option period. The amount of cash or U.S. government securities
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 a Delaware Investments Fund. Secured put options will generally be written
in circumstances where the investment manager wishes to purchase the underlying
security for a Delaware Investments Fund's portfolio at a price lower than the
current market price of the security. In such event, the Delaware Investments
Fund would write a secured 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, a Delaware Investments Fund 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. A Delaware
Investments Fund may not, however, effect such a closing transaction after it
has been notified of the exercise of the option.
Purchasing Put Options--Certain Delaware Investments Funds may invest
in put options. A Delaware Investments Fund will, at all times during which it
holds a put option, own the security covered by such option.
-21-
<PAGE>
Certain Delaware Investments Funds may 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 Delaware Investments Fund to
protect an unrealized gain in an appreciated security in its portfolio without
actually selling the security. If the security does not drop in value, an
Delaware Investments Fund will lose the value of the premium paid. A Delaware
Investments Fund 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.
A Delaware Investments Fund may sell a put option purchased on
individual portfolio securities or stock indices. Additionally, a Delaware
Investments Fund may enter into closing sale transactions. A closing sale
transaction is one in which a Delaware Investments Fund, 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.
Over-the-Counter Options and Illiquid Securities -- Certain Delaware
Investments Funds may deal in over-the-counter ("OTC") options. The Delaware
Investments Funds understand the position of the staff of the SEC to be that
purchased OTC options and the assets used as "cover" for written OTC options are
illiquid securities. Certain Delaware Investments Funds and their investment
managers disagree with this position and have found the dealers with which they
engage in OTC options transactions generally agreeable to and capable of
entering into closing transactions. The Delaware Investments Funds have adopted
procedures for engaging in OTC options for the purpose of reducing any potential
adverse impact of such transactions upon the liquidity of the portfolio.
As part of these procedures certain Delaware Investments Funds will
engage in OTC options transactions only with primary dealers that have been
specifically approved by the Board of Directors/Trustees, and the investment
managers believe that the approved dealers should be agreeable and able to enter
into closing transactions if necessary and, therefore, present minimal credit
risks to a Delaware Investments Fund. A Delaware Investments Fund anticipates
entering into written agreements with those dealers to whom such Delaware
Investments Fund may sell OTC options, pursuant to which such Delaware
Investments Fund would have the absolute right to repurchase the OTC options
from such dealers at any time at a price determined pursuant to a formula set
forth in certain no action letters published by the SEC staff. A Delaware
Investments Fund will not engage in OTC options transactions if the amount
invested by the Delaware Investments Fund in OTC options plus, with respect to
OTC options written by the Delaware Investments Fund, the amounts required to be
treated as illiquid pursuant to the terms of such letters (and the value of the
assets used as cover with respect to OTC option sales which are not within the
scope of such letters), plus the amount invested by the Delaware Investments
Fund in illiquid securities, would exceed 15% of the Delaware Investments Fund's
total assets. OTC options on securities other than U.S. government securities
may not be within the scope of such letters and, accordingly, the amount
invested by a Delaware Investments Fund in OTC options on such other securities
and the value of the assets used as cover with respect to OTC option sales
regarding such non-U.S. government securities will be treated as illiquid and
subject to the limitation on a Delaware Investments Fund's net assets that may
be invested in illiquid securities.
Options on Foreign Currencies--Certain Delaware Investments Funds may
purchase and write options on foreign currencies for hedging purposes in a
manner similar to that in which futures contracts on foreign currencies, or
forward contracts, will be utilized. For example, a decline in the dollar value
-22-
<PAGE>
of a foreign currency in which portfolio securities are denominated will reduce
the dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
portfolio securities, a Delaware Investments Fund may purchase put options on
the foreign currency. If the value of the currency does decline, a Delaware
Investments Fund will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Delaware Investments Fund may purchase call options
thereon. The purchase of such options could offset, at least partially, the
effects of the adverse movement in exchange rates. As in the case of other types
of options, however, the benefit to a Delaware Investments Fund deriving from
purchases of foreign currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, a Delaware
Investments Fund could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the benefits of
advantageous changes in such rates.
A Delaware Investments Fund may write options on foreign currencies
for the same types of hedging purposes. For example, where a Delaware
Investments Fund anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised, and the diminution in the value of portfolio securities will be
offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, an
Delaware Investments Fund could write a put option on the relevant currency
which, if rates move in the manner projected, will expire unexercised and allow
the Delaware Investments Fund to hedge such increased cost up to the amount of
the premium. As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and a Delaware Investments Fund would be
required to purchase or sell the underlying currency at a loss which may not be
offset by the amount of the premium. Through the writing of options on foreign
currencies, a Delaware Investments Fund also may be required to forego all or a
portion of the benefit which might otherwise have been obtained from favorable
movements in exchange rates.
Certain Delaware Investments Funds intend to write covered call options
on foreign currencies. A call option written on a foreign currency by an
Delaware Investments Fund is "covered" if the Delaware Investments Fund owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration held in a segregated account by the Custodian
Bank) upon conversion or exchange of other foreign currency held in its
portfolio. A call option is also covered if a Delaware Investments Fund has a
call on the same foreign currency and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written, or (b) is greater than the exercise
price of the call written if the difference is maintained by a Delaware
Investments Fund in cash, U.S. government securities or other high-grade liquid
debt securities in a segregated account with its Custodian Bank.
-23-
<PAGE>
With respect to writing put options, at the time the put is written, an
Delaware Investments Fund will establish a segregated account with its Custodian
Bank consisting of cash, U.S. government securities or other high-grade liquid
debt securities in an amount equal in value to the amount the Delaware
Investments Fund will be required to pay upon exercise of the put. The account
will be maintained until the put is exercised, has expired, or a Delaware
Investments Fund has purchased a closing put of the same series as the one
previously written.
In order to comply with the securities laws of one state, a Delaware
Investments Fund will not write put or call options if the aggregate value of
the securities underlying the calls or obligations underlying the puts
determined as of the date the options are sold exceed 25% of the Delaware
Investments Fund's net assets. Should state laws change or a Delaware
Investments Fund receives a waiver of their application for, the Delaware
Investments Funds reserve the right to increase this percentage.
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 Delaware
Investments Fund 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 Delaware Investments Fund 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 (R) Composite Stock Price Index ("S&P 500") or the New
York Stock Exchange Composite Index, or a narrower market index such as the
Standard & Poor's 100 (R) Composite Stock Price Index ("S&P 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 the following Exchanges among others: The Chicago Board
Options Exchange, New York Stock Exchange and American Stock Exchange.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in an
Delaware Investments Fund's portfolio correlate with price movements of the
stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular stock,
whether a Delaware Investments Fund will realize a gain or loss from the
purchase or writing of options on an index depends upon movements in the level
of stock prices in the stock market generally or, in the case of certain
indices, in an
-24-
<PAGE>
industry or market segment, rather than movements in the price of
a particular stock. Since a Delaware Investments Fund's portfolio will not
duplicate the components of an index, the correlation will not be exact.
Consequently, a Delaware Investments Fund 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 underlying the hedging instrument and the hedged
securities which would result in a loss on both such securities and the hedging
instrument. Accordingly, successful use of options on stock indices will be
subject to the investment manager's ability to predict correctly movements in
the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
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 Delaware Investments Fund's ability
to effectively hedge its securities. A Delaware Investments Fund will enter
into an option position only if there appears to be a liquid secondary market
for such options.
The Delaware Investments Funds will not engage in transactions in
options on stock indices for speculative purposes but only to protect
appreciation attained, to offset capital losses and to take advantage of the
liquidity available in the option markets.
Futures
Certain Delaware Investments Funds may enter into contracts for the
purchase or sale for future delivery of securities or foreign currencies. 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 Delaware Investments Fund enters into a futures
transaction, it must deliver to the futures commission merchant selected by the
Delaware Investments Fund an amount referred to as "initial margin." This amount
is maintained by the futures commission merchant in an account at a Delaware
Investments Fund's Custodian Bank. Thereafter, a "variation margin" may be paid
by a Delaware Investments Fund to, or drawn by the Delaware Investments Fund
from, such account in accordance with controls set for such accounts, depending
upon changes in the price of the underlying securities subject to the futures
contract.
In addition, when a Delaware Investments Fund engages in futures
transactions, to the extent required by the SEC, it will maintain with its
Custodian Bank, assets in a segregated account to cover its obligations with
respect to such contracts, which assets will consist of cash, cash equivalents
or high quality debt securities from its portfolio in an amount equal to the
difference between the fluctuating market value of such futures contracts and
the aggregate value of the margin payments made by the Delaware Investments Fund
with respect to such futures contracts.
Certain Delaware Investments Funds may enter into such futures
contracts to protect against the adverse affects of fluctuations in interest or
foreign exchange rates without actually buying or selling the securities or
foreign currency. For example, if interest rates are expected to increase, an
Delaware Investments Fund 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 a Delaware Investments Fund.
If interest rates did increase, the value of the debt securities in the
portfolio would decline, but the value of the futures contracts to a Delaware
Investments Fund would increase at approximately the same rate, thereby keeping
the net asset value of such Delaware Investments Fund from declining as much as
it otherwise would have. Similarly, when it is expected that
-25-
<PAGE>
interest rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of securities at higher prices. Since the
fluctuations in the value of futures contracts should be similar to those of
debt securities, a Delaware Investments Fund 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 such Delaware Investments Fund could then buy debt securities on
the cash market.
With respect to options on futures contracts, when a Delaware
Investments Fund 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. As with the purchase of futures contracts, when an
Delaware Investments Fund 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 writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is below the exercise price, a Delaware
Investments Fund will retain the full amount of the option premium which
provides a partial hedge against any decline that may have occurred in such
Delaware Investments Fund's portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against the increasing price of the
security or foreign currency 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, a Delaware Investments Fund will retain the full amount of
the option premium which provides a partial hedge against any increase in the
price of securities which such Delaware Investments Fund intends to purchase.
If a put or call option a Delaware Investments Fund has written is
exercised, such Delaware Investments Fund 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 Delaware Investments Fund'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, a Delaware Investments Fund will purchase
a put option on a futures contract to hedge such Delaware Investments Fund's
portfolio against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, an
Delaware Investments Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize a loss. For example, if
a Delaware Investments Fund 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 Delaware Investments Fund
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 Delaware Investments Fund 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. A Delaware
Investments Fund may be required to sell securities at a time when it may be
disadvantageous to do so.
-26-
<PAGE>
Further, with respect to options on futures contracts, a Delaware
Investments Fund 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
Certain Delaware Investments Funds may enter into futures contracts on
stocks and stock indices, purchase and sell options on such futures, and enter
into closing transactions with respect to those activities. A futures contract
may be purchased and 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.
When a Delaware Investments Fund enters into a futures transaction, it
must deliver to the futures commission merchant selected an amount referred to
as "initial margin." This amount is maintained by the futures commission
merchant in an account at a Delaware Investments Fund's custodian bank.
Thereafter, a "variation margin" may be paid by a Delaware Investments Fund to,
or drawn by the Delaware Investments Fund from, such account in accordance with
controls set for such accounts, depending upon changes in the price of the
underlying securities subject to the futures contract.
Although futures contracts by their terms generally call for the actual
delivery or acquisition of underlying securities or the cash value of the index,
in most cases the contractual obligation is fulfilled before the date of the
contract without having to make or take such delivery. The contractual
obligation is offset by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take, as the case may be, delivery of the securities
or cash value of the index underlying the contractual obligations. At the time
such transaction is effected, a final determination of variation margin is made
and any loss experienced by a Delaware Investments Fund must be paid to the
contract market clearing house while any profit due to the Delaware Investments
Fund must be delivered to it.
Positions taken in futures markets are not normally held to maturity,
but instead liquidated through offsetting transactions which may result in a
profit or a loss. While a Delaware Investments Fund's futures contracts on
securities will usually be liquidated in this manner, the Delaware Investments
Fund may instead make or take delivery of the underlying securities whenever it
appears economically advantageous to do so. The clearing house associated with
the market on which futures on the securities are traded guarantees that, if
still open, the sale or purchase will be performed on settlement date.
A Delaware Investments Fund may enter into such futures contracts to
protect against the adverse affects of fluctuations in security prices or
interest rates without actually buying or selling the securities. For example,
if interest rates are expected to increase, a Delaware Investments Fund 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
in the portfolio owned by a Delaware Investments Fund. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the futures contracts to a Delaware Investments Fund would
increase at approximately the same rate, thereby keeping the net asset value of
the Delaware Investments Fund from declining as much as it otherwise would have.
Similarly, when it is expected that interest rates may
-27-
<PAGE>
decline, futures contracts may be purchased to hedge in anticipation of
subsequent purchases of securities at higher prices. Since the fluctuations in
the value of futures contracts should be similar to those of debt securities, an
Delaware Investments Fund 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 a Delaware
Investments Fund could then buy debt securities on the cash market.
With respect to options on futures contracts, when a Delaware
Investments Fund 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, a Delaware Investments Fund will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in such Delaware Investments Fund's portfolio
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, a Delaware Investments Fund will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which such Delaware Investments
Fund intends to purchase.
Call and put options on stock index futures are similar to options on
securities except that, rather than the right to purchase or sell stock at a
specified price, options on a stock index future give the holder the right to
receive cash. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures 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 futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing price of the futures contract on the expiration date.
If a put or call option which a Delaware Investments Fund has written
is exercised, such Delaware Investments Fund 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 Delaware Investments Fund'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, a Delaware Investments Fund will purchase
a put option on a futures contract to hedge such Delaware Investments Fund's
portfolio against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, an
Delaware Investments Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize a loss. For example, if
a Delaware Investments Fund is hedged against the possibility of an increase in
interest rates which would adversely affect the price of securities held in its
portfolio
-28-
<PAGE>
and interest rates decrease instead, such Delaware Investments Fund 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 a Delaware Investments Fund 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. A Delaware Investments Fund
may be required to sell securities at a time when it may be disadvantageous to
do so.
Further, with respect to options on futures contracts, a Delaware
Investments Fund 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.
Short Sales Against the Box
Whereas a short sale is the sale of a security a Delaware Investments
Fund does not own, a short sale is "against the box" if at all times during
which the short position is open, such Delaware Investments Fund owns at least
an equal amount of the securities or securities convertible into, or
exchangeable without further consideration for, securities of the same issue as
the securities sold short. Short sales against the box are typically used by
sophisticated investors to defer recognition of capital gains or losses.
Forward Foreign Currency Exchange Contracts
The Delaware Investments Funds' dealings in forward contracts will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward contracts with
respect to specific receivables or payables of a Delaware Investments Fund
generally arising in connection with the purchase or sale of its portfolio
securities and accruals of interest or dividends receivable and fund expenses.
Position hedging is the sale of a foreign currency with respect to portfolio
security positions denominated or quoted in that currency. A Delaware
Investments Fund may not position hedge with respect to a particular currency
for an amount greater than the aggregate market value (determined at the time of
making any sale of a forward contract) of securities held in its portfolio
denominated or quoted in, or currently convertible into, such currency.
When a Delaware Investments Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when an
Delaware Investments Fund anticipates the receipt in a foreign currency of
dividends or interest payments on a security which it holds, such Delaware
Investments Fund may desire to "lock in" the U.S. dollar price of the security
or the U.S. dollar equivalent of such dividend or interest payment as the case
may be. By entering into a forward contract for a fixed amount of dollars for
the purchase or sale of the amount of foreign currency involved in the
underlying transactions, a Delaware Investments Fund will be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.
Additionally, when the investment adviser believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, a Delaware Investments Fund may enter into a forward contract for a
fixed amount of dollars, to sell the amount of foreign currency approximating
the value of some or all of the securities of the Delaware Investments Fund
denominated in such foreign currency.
-29-
<PAGE>
Certain Delaware Investments Funds may use currency forward contracts
to manage currency risks and to facilitate transactions in foreign securities.
The following discussion summarizes the principal currency management strategies
involving forward contracts that could be used by these Funds.
In connection with purchases and sales of securities denominated in
foreign currencies, a Delaware Investments Fund may enter into currency forward
contracts to fix a definite price for the purchase or sale in advance of the
trade's settlement date. This technique is sometimes referred to as a
"settlement hedge" or "transaction hedge." The investment manager expects to
enter into settlement hedges in the normal course of managing the Delaware
Investments Funds' foreign investments. The Delaware Investments Funds could
also enter into forward contracts to purchase or sell a foreign currency in
anticipation of future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected by the
investment manager.
Certain Delaware Investments Funds may also use forward contracts to
hedge against a decline in the value of existing investments denominated in
foreign currency. For example, if a Delaware Investments Fund owned securities
denominated in pounds sterling, it could enter into a forward contract to sell
pounds sterling in return for U.S. dollars to hedge against possible declines in
the pound's value. Such a hedge (sometimes referred to as a "position hedge")
would tend to offset both positive and negative currency fluctuations, but would
not offset changes in security values caused by other factors. A Delaware
Investments Fund could also hedge the position by selling another currency
expected to perform similarly to the pound sterling -- for example, by entering
into a forward contract to sell Deutschemarks or European Currency Units in
return for U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally will not hedge currency exposure as effectively as a simple hedge into
U.S. dollars. Proxy hedges may result in losses if the currency used to hedge
does not perform similarly to the currency in which the hedged securities are
denominated.
Under certain conditions, SEC guidelines require mutual funds to set
aside cash and appropriate liquid assets in a segregated custodian account to
cover currency forward contracts. As required by SEC guidelines, certain
Delaware Investments Funds will segregate assets to cover currency forward
contracts, if any, whose purpose is essentially speculative. The Delaware
Investments Funds will not segregate assets to cover forward contracts,
including settlement hedges, position hedges, and proxy hedges. Successful use
of forward currency contracts will depend on the investment manager's skill in
analyzing and predicting currency values. Forward contracts may substantially
change a Delaware Investments Fund's investment exposure to changes in currency
exchange rates, and could result in losses to a Delaware Investments Fund if
currencies do not perform as the investment manager anticipates. For example, if
a currency's value rose at a time when the investment manager had hedged an
Delaware Investments Fund by selling that currency in exchange for dollars, the
Delaware Investments Fund would be unable to participate in the currency's
appreciation. If the investment manager hedges currency exposure through proxy
hedges, a Delaware Investments Fund could realize currency losses from the
hedge and the security position at the same time if the two currencies do not
move in tandem. Similarly, if the investment manager increases a Delaware
Investments Fund's exposure to a foreign currency, and that currency's value
declines, a Delaware Investments Fund will realize a loss. There is no
assurance that the investment manager's use of forward currency contracts will
be advantageous to the Delaware Investments Funds or that it will hedge at an
appropriate time.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies.
-30-
<PAGE>
Thus, a dealer may offer to sell a foreign currency to a Delaware Investments
Fund at one rate, while offering a lesser rate of exchange should such Delaware
Investments Fund desire to resell that currency to the dealer.
In applying a Fund's fundamental policy concerning concentration that is
described above, it is a matter of non-fundamental policy that: (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; (iii) asset
backed securities will be classified according to the underlying assets securing
such securities, and (iv) investments in the Delaware Investments Funds will not
be deemed to be investments in the "investment company" industry.
OTHER INVESTMENTS - DELAWARE S&P 500 INDEX FUND
U.S. Government Securities
U.S. Government securities include U.S. Treasury bills, notes, and
bonds and other obligations issued or guaranteed as to interest and principal by
the U.S. Government and its agencies or instrumentalities. Obligations issued or
guaranteed as to interest and principal by the U.S. Government, its agencies or
instrumentalities include securities that are supported by the full faith and
credit of the United States Treasury, securities that are supported by the right
of the issuer to borrow from the United States Treasury, discretionary authority
of the U.S. Government agency or instrumentality, and securities supported
solely by the creditworthiness of the issuer.
Repurchase Agreements
The Fund may enter into repurchase agreements with banks and other
financial institutions, such as broker-dealers. In substance, a repurchase
agreement is a loan for which the Fund receives securities as collateral. Under
a repurchase agreement, the Fund purchases securities from a financial
institution that agrees to repurchase the securities at the Fund's original
purchase price plus interest within a specified time (normally one business
day). The Fund will limit repurchase transactions to those member banks of the
Federal Reserve System and broker-dealers whose creditworthiness the Fund's
sub-adviser considers satisfactory. Should the counterparty to a transaction
fail financially, the Fund may encounter delay and incur costs before being able
to sell the securities. Further, the amount realized upon the sale of the
securities may be less than that necessary to fully compensate the Fund.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements under the
circumstances. In substance, a reverse repurchase agreement is a borrowing for
which the Fund provides securities as collateral. Under a reverse repurchase
agreement, the Fund sells portfolio securities to a financial institution in
return for cash in an amount equal to a percentage of the portfolio securities'
market value and agrees to repurchase the securities at a future date at a
prescribed repurchase price equal to the amount of cash originally received plus
interest on such amount. The Fund retains the right to receive interest and
principal payments with respect to the securities while they are in the
possession of the financial institutions. Reverse repurchase agreements involve
the risk of default by the counterparty, which may adversely affect the Fund's
ability to reacquire the underlying securities.
Forward Commitments
The Fund may contract to purchase securities for a fixed price at a
future date beyond customary settlement time. When effecting such transactions,
cash or marketable securities held by the Fund of a dollar amount sufficient to
make payment for the portfolio securities to be purchased will be segregated on
the Fund's records at the trade date and maintained until the transaction is
settled. The failure of the other party to the transaction to complete the
transaction may cause the Fund to miss an advantageous price or yield. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, or if the other party fails to complete
the transaction.
-31-
<PAGE>
When-Issued Transactions
The Fund may purchase securities on a when-issued basis. In these
transactions, the Fund purchases securities with payment and delivery scheduled
for a future time. Until settlement, the Fund segregates cash and marketable
securities equal in value to its when-issued commitments. Between the trade and
settlement dates, the Fund bears the risk of any fluctuation in the value of the
securities. These transactions involve the additional risk that the other party
may fail to complete the transaction and cause the Fund to miss a price or yield
considered advantageous. The Fund will engage in when-issued transactions only
for the purpose of acquiring portfolio securities consistent with its investment
objective and policies and not for investment leverage. The Fund will invest no
more than 25% of its net assets in when-issued securities.
Illiquid Securities
The Fund will not invest more than 15% of its net assets in illiquid
securities or securities that are not readily marketable, including repurchase
agreements and time deposits of more than seven days' duration. The absence of a
regular trading market for illiquid securities imposes additional risks on
investments in these securities. Illiquid securities may be difficult to value
and may often be disposed of only after considerable expense and delay.
Variable Amount Master Demand Notes
Variable amount master demand notes are unsecured obligations that are
redeemable upon demand and are typically unrated. These instruments are issued
pursuant to written agreements between their issuers and holders. The agreements
permit the holders to increase (subject to an agreed maximum) and the holders
and issuers to decrease the principal amount of the notes, and specify that the
rate of interest payable on the principal fluctuates according to an agreed
formula.
Securities Lending
The Fund may lend portfolio securities with a value of up to 33-1/3% of
of its total assets. For these purposes, total assets shall include the value of
all assets received as collateral for the loan. Such loans may be terminated at
any time. The Fund will receive cash or US Treasury bills, notes and bonds in an
amount equal to at least 100% of the current market value (on a daily
marked-to-market basis) of the loaned securities plus accrued interest. In a
loan transaction, as compensation for lending its securities, the Fund will
receive a portion of the dividends or interest accrued on the securities held as
collateral or, in the case of cash collateral, a portion of the income from the
investment of such cash. In addition, the Fund will receive the amount of all
dividends, interest and other distributions on the loaned securities. However,
the borrower has the right to vote the loaned securities. The Fund will call
loans to vote proxies if a material issue affecting the investment is to be
voted upon. Should the borrower of the securities fail financially, the Fund may
experience delays in recovering the securities or exercising its rights in the
collateral. Loans are made only to borrowers that are deemed by the Fund's
sub-adviser to be of good financial standing. In a loan transaction, the Fund
will also bear the risk of any decline in value of securities acquired with cash
collateral. The Fund will minimize this risk by limiting the investment of cash
collateral to high quality instruments of short maturity.
Futures Contracts and Options on Futures
For hedging purposes, including protecting the price or interest rate
of a security that the Fund intends to buy, the Fund may enter into futures
contracts that relate to securities in which it may directly invest and indices
comprised of such securities and may purchase and write call and put options on
such contracts.
A financial futures contract is a contract to buy or sell a specified
quantity of financial instruments such as US Treasury bills, notes and bonds,
commercial paper and bank certificates of
-32-
<PAGE>
deposit or the cash value of a financial instrument index at a specified future
date at a price agreed upon when the contract is made. Under such contracts no
delivery of the actual securities making up the index takes place. Rather, upon
expiration of the contract, settlement is made by exchanging cash in an amount
equal to the difference between the contract price and the closing price of the
index at expiration, net of variation margin previously paid.
Substantially all futures contracts are closed out before settlement date or
called for cash settlement. A futures contract is closed out by buying or
selling an identical offsetting futures contract. Upon entering into a futures
contract, the Fund is required to deposit an initial margin with its custodian
for the benefit of the futures broker. The initial margin serves as a "good
faith" deposit that the Fund will honor its futures commitments. Subsequent
payments (called "variation margin") to and from the broker are made on a daily
basis as the price of the underlying investment fluctuates.
Options on futures contracts give the purchaser the right to assume a position
at a specified price in a futures contract at any time before expiration of the
option contract.
When trading futures contracts, the Fund will not commit more than 5% of the
market value of its total assets to initial margin deposits on futures and
premiums paid for options on futures.
There are certain investment risks in using futures contracts and options as a
hedging technique. Such risks may include: (1) the inability to close out a
futures contract or option caused by the non-existence of a liquid secondary
market; and (2) an imperfect correlation between price movements of the futures
contracts or option with price movements of the portfolio securities or
securities index subject to the hedge.
Options on Securities and Securities Indices
The Fund may write and purchase covered put and call options on
securities in which it may directly invest. Option transactions of the Fund will
be conducted so that the total amount paid on premiums for all put and call
options outstanding will not exceed 5% of the value of the Fund's total assets.
Further, the Fund will not write a put or call option or combination thereof if,
as a result, the aggregate value of all securities or collateral used to cover
its outstanding options would exceed 25% of the value of the Fund's total
assets.
The Fund may purchase or sell options on securities indices that are
comprised of securities in which the Fund may directly invest, subject to the
limitations set forth above and provided such options are traded on a national
securities exchange or in the over-the-counter market. Options on securities
indices are similar to options on securities except there is no transfer of a
security and settlement is in cash. A call option on a securities index grants
the purchaser of the call, for a premium paid to the seller, the right to
receive in cash an amount equal to the difference between the closing value of
the index and the exercise price of the option times a multiplier established by
the exchange upon which the option is traded.
Cash Reserves
For defensive purposes, the Fund may temporarily invest, without
limitation, in high quality short-term fixed income securities. These securities
include obligations issued or guaranteed as to principal and interest by the US
Government, its agencies or instrumentalities and repurchase agreements
collateralized by these obligations, commercial paper, bank certificates of
deposit, bankers' acceptances and time deposits. When using this strategy, the
weighted average maturity of securities held by the Fund will decline, and
thereby possibly cause its yield to decline as well.
-33-
<PAGE>
American Depository Receipts (ADRs)
The Fund may invest in securities of foreign issuers in the form of
ADRs and similar instruments, or other securities convertible into securities of
eligible issuers. These securities may not necessarily be denominated in the
same currency as the securities for which they may be exchanged. Generally,
ADRs, in registered form, are designed for use in the US securities markets.
ADRs are receipts typically issued by a US bank or trust company evidencing
ownership of the underlying securities. ADRs represent the right to receive
securities of foreign issuers deposited in a domestic bank or a correspondent
bank. ADRs do not eliminate the risk inherent in investing in the securities of
foreign issuers. In general, there is a large liquid market in the US for many
ADRs. The information available for ADRs is subject to the accounting, auditing
and financial reporting standards of the domestic market or exchange on which
they are traded, which standards are more uniform and more exacting than those
to which many foreign issuers are subject. For purposes of the Fund's investment
policies, the Fund's investments in ADRs and similar instruments will be deemed
to be investments in the equity securities representing securities of foreign
issuers into which they may be converted.
Investment in securities of non-US issuers and securities involve
investment risks that are different from those of US issuers, including:
uncertain future political, diplomatic and economic developments; possible
imposition of exchange controls or other governmental restrictions; less
publicly available information; lack of uniform accounting, auditing and
financial reporting standards, practices and requirements; lower trading volume,
less liquidity and more volatility for securities; less government regulation of
securities exchanges, brokers and listed companies; political or social
instability; and the possibility of expropriation or confiscatory taxation, each
of which could adversely affect investments in such securities. ADRs are subject
to all of the above risks, except the imposition of exchange controls, and
currency fluctuations during the settlement period.
Preferred Stocks
Preferred stock, unlike common stock, generally confers a stated
dividend rate payable from the corporation's earnings. Such preferred stock
dividends may be cumulative or non-cumulative, fixed, participating, auction
rate or other. If interest rates rise, a fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline either
absolutely or relative to alternative investments. Preferred stock may have
mandatory sinking fund provisions, as well as provisions that allow the issuer
to call or redeem the stock. The rights to payment of preferred stocks are
generally subordinate to rights associated with a corporation's debt securities.
Equity Swaps
Equity swap agreements are contracts between parties in which one party
agrees to make payments to the other party based on the change in market value
of a specified index or asset. In return, the other party agrees to make
payments to the first party based on the return of a different specified index
or asset. Although swap agreements entail the risk that a party will default on
its payment obligations, the portfolios will minimize this risk by entering into
agreements only with counterparties that the Advisor deems creditworthy. The
Fund's sub-adviser will cause the Fund to enter into swap agreements only with
counterparties that would be eligible for consideration as repurchase agreement
counterparties under the Fund's repurchase agreement guidelines.
Investment-Grade Bonds
The Fund may invest in corporate notes and bonds which are rated
investment-grade by a Nationally Recognized Statistical Rating Organization
("NRSRO") or, if unrated, are determined by the Fund's sub-adviser to be of
comparable quality. Investment-grade securities include securities rated Baa3
-34-
<PAGE>
by Moody's or BBB- by S&P (and securities of comparable quality), which
securities have speculative characteristics.
Total Rate of Return Swaps
The Fund may contract with a counterparty to pay a stream of cash flows
and receive the total return of an index or a security for purposes of
attempting to obtain a particular desired return at a lower cost to the Fund
than if the Fund had invested directly in an instrument that yielded that
desired return. The Advisor will cause the Fund to enter into swap agreements
only with counterparties that would be eligible for consideration as repurchase
agreement counterparties under the Fund's repurchase agreement guidelines.
Debt Securities
The Fund may also invest temporarily in investment grade debt
securities for defensive purposes. The Fund may invest in convertible debt
securities.
Purchase of Other Investment Company Funds
To the extent permitted under the 1940 Act and exemptive rules and
orders thereunder, the Fund may seek to achieve its investment objective by
investing solely in the shares of other investment companies that have
substantially similar investment objectives and policies.
Concentration
In applying the Fund's fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (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.
-35-
<PAGE>
ACCOUNTING AND TAX ISSUES
When a Fund 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 Fund'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 asked prices. If an option which a Fund has written
expires on its stipulated expiration date, the Fund reports a realized gain. If
a Fund enters into a closing purchase transaction with respect to an option
which the Fund has written, the Fund realizes a 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. Any such gain or loss is a
short-term capital gain or loss for federal income tax purposes. If a call
option which a Fund has written is exercised, the Fund 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 are increased by the premium originally received.
The premium paid by a Fund for the purchase of a put option is recorded
in the section of the Fund'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 asked prices. If an option which a Fund has
purchased expires on the stipulated expiration date, the Fund realizes a
short-term or long-term capital loss for federal income tax purposes in the
amount of the cost of the option. If a Fund sells the put option, it realizes a
short-term or long-term capital gain or loss, depending on whether the proceeds
from the sale are greater or less than the cost of the option. If a Fund
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. However, since the purchase of a put
option is treated as a short sale for federal income tax purposes, the holding
period of the underlying security will be affected by such a purchase.
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 Fund at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes. Sixty percent 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 Fund intends to qualify as a regulated
investment company under Subchapter M of the Code. As such, a Fund 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.
-36-
<PAGE>
In order to qualify as a regulated investment company for federal
income tax purposes, each Fund must meet certain specific requirements,
including:
(i) A Fund 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 the Fund's total assets, and,
with respect to 50% of the Fund'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 the Fund's total assets;
(ii) A Fund 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; and
(iii) A Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years.
The Code requires the Funds 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 Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Funds 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.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, a Fund must recognize gain (but not loss) on any constructive sale
of an appreciated financial position in stock, a partnership interest or certain
debt instruments. A Fund 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--The Funds are
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Fund:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund 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
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
-37-
<PAGE>
loss. These gains or losses, referred to under the Code as "Section 988" gains
or losses, may increase or decrease the amount of a Fund's net investment
company taxable income, which, in turn, will affect the amount of income to be
distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other investment company
taxable income during a taxable year, a Fund 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 for 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 Fund 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 Fund 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
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund'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 Fund will be required to record at 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 Fund'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 Funds 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
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by a Fund. 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 Fund); 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 Fund 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 Fund). If
a Fund 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 Fund 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 Fund. In this case, these
taxes will be taken as a deduction by a Fund, 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 Fund. 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 Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by a Fund. 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.
-38-
<PAGE>
Investment in Passive Foreign Investment Company securities--The Funds
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 Fund receives an "excess distribution" with respect
to PFIC stock, the Fund itself may be subject to U.S. federal income tax on a
portion of the distribution, whether or not the corresponding income is
distributed by a Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
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 Fund.
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 Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund 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 a Fund'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. A Fund 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 Fund were to make this second
PFIC election, tax at a Fund 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 Fund (if any), the amounts distributable to you by a
Fund, 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 Fund acquires shares in that corporation. While a
Fund 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 Fund, 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 Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
-39-
<PAGE>
PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return in
advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year, or life-of-fund, periods, as applicable. Each
Fund may also advertise aggregate and average total return information of its
Classes over additional periods of time. In addition, each Fund may include
illustrations showing the power of compounding in advertisements and other types
of literature.
In presenting performance information for Class A Shares, the Limited
CDSC, or other CDSC, applicable only to certain redemptions of those shares will
not be deducted from any computation of total return. See the Prospectus for the
Fund Classes for a description of the Limited CDSC, or other CDSC, and the
limited instances in which it applies. All references to a CDSC in this
Performance Information section will apply to Class B Shares or Class C Shares.
The average annual total rate of return for each 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:
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from
which, in the case of Class A Shares only, the
maximum front-end sales charge is deducted;
T = average annual total return;
n = number of years; and
ERV = redeemable value of the hypothetical $1,000 purchase
at the end of the period after the deduction of the
applicable CDSC, if any, with respect to Class B
Shares and Class C Shares.
Total return performance for each Class 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 offering price
at the beginning of the period. It will reflect, as applicable, the maximum
sales charge, or CDSC, paid with respect to the illustrated investment amount,
but not any income taxes payable by shareholders on the reinvested distributions
included in the calculation. Because securities prices fluctuate, past
performance should not be considered as a representative of the results which
may be realized from an investment in the Funds in the future.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, each Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
-40-
<PAGE>
The performance of the Classes shown below, is the average annual total
return quotations through September 30, 1999, computed as described above. The
average annual total return for Class A Shares at offer reflects the maximum
front-end sales charge of 5.75% paid on the purchase of shares. The average
annual total return for the Class A Shares at net asset value (NAV) does not
reflect the payment of any front-end sales charge. The average annual total
return for Class B and C Shares including deferred sales charge reflects the
deduction of the applicable CDSC that would be paid if the shares were redeemed
at September 30, 1999. The average annual total return for Class B and C Shares
excluding deferred sales charge assumes the shares were not redeemed at
September 30, 1999, and therefore does not reflect the deduction of a CDSC.
Stock prices fluctuated during the periods covered and past results should not
be considered as representative of future performance. Average annual total
return is not shown for Delaware S&P 500 Index Fund since the Fund has not
commenced operations as of the date of this Part B.
- --------------------------------------------------------------------------------
Average Annual Returns(1)
- --------------------------------------------------------------------------------
1 year ended Period
9/30/99 12/31/97(2)
through 9/30/99
- --------------------------------------------------------------------------------
Income Portfolio
- --------------------------------------------------------------------------------
A Class (at offer)
- --------------------------------------------------------------------------------
A Class (at nav)
- --------------------------------------------------------------------------------
B Class (including CDSC)
- --------------------------------------------------------------------------------
B Class (excluding CDSC)
- --------------------------------------------------------------------------------
C Class (including CDSC)
- --------------------------------------------------------------------------------
C Class (excluding CDSC)
- --------------------------------------------------------------------------------
Growth Portfolio
- --------------------------------------------------------------------------------
A Class (at offer)
- --------------------------------------------------------------------------------
A Class (at nav)
- --------------------------------------------------------------------------------
B Class (including CDSC)
- --------------------------------------------------------------------------------
B Class (excluding CDSC)
- --------------------------------------------------------------------------------
C Class (including CDSC)
- --------------------------------------------------------------------------------
C Class (excluding CDSC)
- --------------------------------------------------------------------------------
Balanced Portfolio
- --------------------------------------------------------------------------------
A Class (at offer)
- --------------------------------------------------------------------------------
A Class (at nav)
- --------------------------------------------------------------------------------
B Class (including CDSC)
- --------------------------------------------------------------------------------
B Class (excluding CDSC)
- --------------------------------------------------------------------------------
C Class (including CDSC)
- --------------------------------------------------------------------------------
C Class (excluding CDSC)
- --------------------------------------------------------------------------------
(1) Performance reflects expense limitations in effect during the periods.
(2) Date of commencement of operations.
From time to time, a Fund may also quote each Class' 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
-41-
<PAGE>
monitor the performance of mutual funds. For example, the performance of a Fund
(or Class) may be compared to data prepared by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. or to the S&P 500 or the Dow Jones Industrial
Average.
Lipper 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 Fund'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.
The Russell 2000 Index TR is a total return weighted index which is comprised of
2,000 of the smallest stocks (on the basis of capitalization) in the Russell
3000 Index and is calculated on a monthly basis. The NASDAQ Composite Index is a
market capitalization price only index that tracks the performance of domestic
common stocks traded on the regular NASDAQ market as well as National Market
System traded foreign common stocks and American Depository Receipts. 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 charge or other fees. A direct
investment in an unmanaged index is not possible.
In addition, the performance of multiple indices compiled and
maintained by statistical research firms, such as Salomon Brothers and Lehman
Brothers may be combined to create a blended performance result for comparative
performances. Generally, the indices selected will be representative of the
types of securities in which the Funds may invest and the assumptions that were
used in calculating the blended performance will be described.
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. The Funds 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 a Fund. A Fund may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
The Funds 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 Fund (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), 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 Fund), 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 Fund. In
-42-
<PAGE>
addition, selected indices may be used to illustrate historic performance of
selected asset classes. The Funds 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, stocks, bonds,
treasury bills and shares of a Fund. In addition, advertisements, sales
literature, communications to shareholders or other materials may include a
discussion of certain attributes or benefits to be derived by an investment in a
Fund 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 the Funds and may
illustrate how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other funds, products, and services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds 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 Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include information
regarding the background and experience of its portfolio managers.
-43-
<PAGE>
The following table present examples, for purposes of illustration
only, of cumulative total return performance for the Classes shown below through
September 30, 1998. For these purposes, the calculations assume the reinvestment
of any capital gains distributions and income dividends paid during the
indicated periods. The performance does not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculations. The
performance of Class A Shares reflects the maximum front-end sales charge of
5.75% paid on the purchase of shares but may also be shown without reflecting
the impact of any front-end sales charge. The performance of Class B Shares and
Class C Shares is calculated both with the applicable CDSC included and
excluded. Past performance is no guarantee of future results.
Cumulative total return is not shown for Delaware S&P 500 Index Fund
since the Fund has not commenced operations as of the date of this Part B.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Returns(1)
- -------------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months ended 1 year ended Period
ended 9/30/99 ended 9/30/99 9/30/99 9/30/99 12/31/97(2)
through 9/30/99
- -------------------------------------------------------------------------------------------------------------------------
Income Portfolio
- -------------------------------------------------------------------------------------------------------------------------
A Class (at offer)
- -------------------------------------------------------------------------------------------------------------------------
A Class (at nav)
- -------------------------------------------------------------------------------------------------------------------------
B Class (including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
B Class (excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
C Class (including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
C Class (excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Growth Portfolio
- -------------------------------------------------------------------------------------------------------------------------
A Class (at offer)
- -------------------------------------------------------------------------------------------------------------------------
A Class (at nav)
- -------------------------------------------------------------------------------------------------------------------------
B Class (including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
-44-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B Class (excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
C Class (including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
C Class (excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio
- -------------------------------------------------------------------------------------------------------------------------
A Class (at offer)
- -------------------------------------------------------------------------------------------------------------------------
A Class (at nav)
- -------------------------------------------------------------------------------------------------------------------------
B Class (including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
B Class (excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
C Class (including CDSC)
- -------------------------------------------------------------------------------------------------------------------------
C Class (excluding CDSC)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Performance reflects expense limitations in effect during the periods.
(2) Date of commencement of operations.
-45-
<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Trust and other mutual funds available from
the Delaware Investments family, will provide general information about
investment alternatives and scenarios that will allow investors to assess their
personal goals. This information will include general material about investing
as well as materials reinforcing various industry-accepted principles of prudent
and responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the Manager's overriding
investment philosophy and how that philosophy impacts the investment disciplines
employed in seeking the objectives of the Portfolios and the other funds in the
Delaware Investments family. The Distributor may also from time to time cite
general or specific information about the institutional clients of the Manager,
including the number of such clients serviced by the Manager.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more
-46-
<PAGE>
shares when the price is low and fewer when the price is high. You can choose to
invest at any regular interval--for example, monthly or quarterly--as long as
you stick to your regular schedule. Dollar-cost averaging looks simple and it
is, but there are important things to remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Plan, Direct Deposit
Purchase Plan and the Wealth Builder Option -- that can help to keep your
regular investment program on track. See Direct Deposit Purchase Plan, Automatic
Investing Plan and Wealth Builder Option under Purchasing Shares - Investing by
Electronic Fund Transfer for a complete description of these services, including
restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share of a stock or bond fund over a
period of time will be lower than the average price per share of a Fund for the
same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
-----------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of the Funds or any stock or bond fund in the
Delaware Investments family.
Dollar-cost averaging can be appropriate for investments in shares of
funds that tend to fluctuate in value. Please obtain the prospectus of any fund
in the Delaware Investments family in which you plan to invest through a
dollar-cost averaging program. The prospectus contains additional information,
including charges and expenses. Please read it carefully before you invest or
send money.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. The Funds may include illustrations showing the power
of compounding in advertisements and other types of literature.
-47-
<PAGE>
TRADING PRACTICES AND BROKERAGE
Each Fund selects banks, brokers or dealers to execute transactions 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 banks, 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. When a
commission is paid, the Fund involved pays reasonably competitive brokerage
commission rates based upon the professional knowledge of the Manager as to
rates paid and charged for similar transactions throughout the securities
industry. In some instances, a Fund pays a minimal share transaction cost when
the transaction presents no difficulty. A number of trades are made on a net
basis where the Funds either buy the securities directly from the dealer or sell
them 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.
During the period December 31, 1997 (date of initial public offering)
through September 30, 1998 and the fiscal year ended September 30, 1999, the
aggregate dollar amounts of brokerage commissions paid by the Funds were as
follows:
------------------------------------------------------
1997 1998
------------------------------------------------------
Income Portfolio
------------------------------------------------------
Balanced Portfolio
------------------------------------------------------
Growth Portfolio
------------------------------------------------------
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, 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 Manager in connection with its
investment decision-making processes with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
During the fiscal year ended September 30, 1999, portfolio transactions
in the following amounts, resulting in brokerage commissions of the following
amounts, were directed to brokers for brokerage and research services provided.
------------------------------------------------------
1998
------------------------------------------------------
Portfolio Brokerage
Transactions Commissions
------------------------------------------------------
Income Portfolio
------------------------------------------------------
Balanced Portfolio
------------------------------------------------------
Growth Portfolio
------------------------------------------------------
-48-
<PAGE>
As provided in the 1934 Act and the Funds' Asset Allocation Agreements
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, the
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 Manager which constitute in some part brokerage
and research services used by the Manager in connection with its investment
decision-making process and constitute in some part services used by the Manager
in connection with administrative or other functions not related to its
investment decision-making process. In such cases, the Manager will make a good
faith allocation of brokerage and research services and will pay out of its own
resources for services used by the Manager in connection with administrative or
other functions not related to its 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 the 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 funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best 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 Manager and the Trust's
Board of Trustees that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Conduct Rules of the NASD Regulation, Inc. (the
"NASD"), and subject to seeking best execution, the Funds may place orders with
broker/dealers that have agreed to defray certain expenses of the funds in the
Delaware Investments family such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of funds in the Delaware
Investments family as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Funds.
Portfolio Turnover
The rate of portfolio turnover will not be a limiting factor when
portfolio changes are deemed appropriate. Given the Funds' investment
objectives, their annual portfolio turnover rates are not expected to exceed
100%. A turnover rate of 100% would occur, for example, if all the investments
held by a Fund at the beginning of the year were replaced by the end of the
year. The degree of portfolio activity may affect taxes payable by the Funds'
shareholders. To the extent a Fund realizes gains on securities held for less
than six months, such gains are taxable to the shareholder or to the Fund at
ordinary income tax rates. The turnover rates also may be affected by cash
requirements from redemptions and repurchases of Fund shares.
-49-
<PAGE>
The portfolio turnover rate of the Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less.
During the fiscal period December 31, 1997 (date of initial public
offering) through September 30, 1998 and the fiscal year ended September 30,
1999, portfolio turnover of the Funds were as follows:
------------------------------------------------------
1997* 1998
------------------------------------------------------
Income Portfolio 81%
------------------------------------------------------
Balanced Portfolio 73%
------------------------------------------------------
Growth Portfolio 77%
------------------------------------------------------
*Annualized
-50-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares and has agreed to use its best efforts to sell shares of the Funds. See
the Prospectuses for information on how to invest. Shares of the Funds are
offered on a continuous basis and may be purchased through authorized investment
dealers or directly by contacting Foundation Funds or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares, Class C Shares and Consultant Class Shares. 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 Manager or any of
the Manager'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 Classes, 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. Foundation Funds 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.
Foundation Funds reserves the right to reject any order for the purchase of its
shares of a Fund if in the opinion of management such rejection is in the Fund's
best interest. If a purchase is canceled because your check is returned unpaid,
you are responsible for any loss incurred. A Fund 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.
A Fund 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.
A Fund 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, a Fund
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.
-51-
<PAGE>
Each Fund 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. Foundation Funds and the
Distributor intend to operate in compliance with these rules.
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. Class A Shares are subject to 12b-1 Plan expenses
for the life of the investment. See the table in the Fund Classes' Prospectus.
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.
Consultant Class Shares of Delaware S&P 500 Index Fund are purchased at
net asset value without the imposition of a front-end or contingent deferred
sales charge. Consultant Class Shares are subject to 12b-1 Plan expenses for the
life of the investment.
See Plans Under Rule 12b-1 for the Fund Classes and Consultant Class
under Purchasing Shares, and Determining Offering Price and Net Asset Value in
this Part B.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares, Institutional Class shares or Consultant
Class Shares, a shareholder submits a specific request. Certificates are not
issued in the case of Class B Shares or Class C 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 by Delaware
Service Company, Inc. (the "Transfer Agent"). 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
-52-
<PAGE>
the account to the Transfer Agent requesting the certificate. No charge is
assessed by 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 Fund 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.
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 Fund 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 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 Funds, 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 and 12b-1
Plan expenses applicable to Consultant Class 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 Fund Classes.
Dividends, if any, paid on each Class of a Fund 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 each Class will bear the amount of
-53-
<PAGE>
12b-1 Plan expenses payable under its respective 12b-1 Plan. 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 Fund Classes'
Prospectuses, 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 Prospectuses, 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.
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 Fund. 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
-54-
<PAGE>
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 a Fund, 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 Fund 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 Fund.
See Automatic Conversion of Class B Shares below. 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.
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 Fund 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
-55-
<PAGE>
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 Fund 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 Fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of the Fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of the 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 Fund 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.
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.
-56-
<PAGE>
Plans Under Rule 12b-1 for the Fund Classes and Consultant Class
Pursuant to Rule 12b-1 under the 1940 Act, Foundation Funds has adopted
a separate plan for each of Class A Shares, Class B Shares, Class C Shares and
Consultant Class Shares (the "Plans"). Each Plan permits the Fund to pay for
certain distribution, promotional and related expenses involved in the marketing
of only the Class of shares to which the Plan applies. The Plans do not apply to
Institutional Classes of shares. Such shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution and
marketing of shares of Institutional Class Shares. Shareholders of Institutional
Classes may not vote on matters affecting the Plans.
The Plans permit a Fund, pursuant to its Distribution Agreement, to pay
out of the assets of Class A Shares, Class B Shares, Class C Shares and
Consultant Class 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, holding special promotions for
specified periods of time and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of shares of the
Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
a Fund may make payments from the 12b-1 Plan fees of its respective Classes
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to service agreements with
Foundation Funds. 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.
The maximum aggregate fee payable by the Fund under the Plans, and the
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of average
daily net assets of each of Class A Shares and Consultant Class 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 the Class B Shares' and Class C Shares' average daily net
assets for the year. Foundation Funds's Board of Trustees may reduce these
amounts at any time.
Pursuant to Board action, the maximum aggregate fee payable by Class A
Shares and Consultant Class is 0.25%. While this describes the current basis for
calculating the fees which will be payable under the Class A Shares Plans, such
Plans permit a full 0.30% on all Class A Shares' assets to be paid at any time
following appropriate Board approval.
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 Fund Classes. Subject to seeking best
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans.
-57-
<PAGE>
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 all been
approved by the Board of Trustees of Foundation Funds, including a majority of
the trustees who are not "interested persons" (as defined in the 1940 Act) of
Foundation Funds 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 Trustees in the
same manner as specified above.
Each year, the trustees must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares, Class C Shares and Consultant Class Shares and that there is a
reasonable likelihood of the Plan relating to a Class providing a benefit to
that Class. The Plans and the Distribution Agreement, as amended, may be
terminated with respect to a Class at any time without penalty by a majority of
those trustees who are not "interested persons" or by a majority vote of the
relevant Class' outstanding voting securities. Any amendment materially
increasing the percentage payable under the Plans must likewise be approved by a
majority vote of the relevant Class' outstanding voting securities, as well as
by a majority vote of those trustees who are not "interested persons." With
respect to each Class A Shares' Plan, any material increase in the maximum
percentage payable thereunder must also be approved by a majority of the
outstanding voting securities of the Fund's B Class. Also, any other material
amendment to the Plans must be approved by a majority vote of the trustees
including a majority of the noninterested trustees of Foundation Funds having no
interest in the Plans. In addition, in order for the Plans to remain effective,
the selection and nomination of trustees who are not "interested persons" of
Foundation Funds must be effected by the trustees 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 Trustees for their review.
-58-
<PAGE>
The following table sets for 12b-1 payments for the fiscal year ended
September 30, 1999.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Income Portfolio Balanced Portfolio Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising Class A Class B Class C Class A Class B Class C Class A Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------------
Annual/Semi-Annual
Reports
- ----------------------------------------------------------------------------------------------------------------------------------
Broker Trails
- ----------------------------------------------------------------------------------------------------------------------------------
Broker Sales
Charges
- ----------------------------------------------------------------------------------------------------------------------------------
Dealer Service
Expenses
- ----------------------------------------------------------------------------------------------------------------------------------
Interest on
Broker Sales
Charges
- ----------------------------------------------------------------------------------------------------------------------------------
Commissions to
Wholesalers
- ----------------------------------------------------------------------------------------------------------------------------------
Promotional-Broker
Meetings
- ----------------------------------------------------------------------------------------------------------------------------------
Promotional-Other
- ----------------------------------------------------------------------------------------------------------------------------------
Prospectus
Printing
- ----------------------------------------------------------------------------------------------------------------------------------
Telephone
- ----------------------------------------------------------------------------------------------------------------------------------
Wholesaler
Expenses
- ----------------------------------------------------------------------------------------------------------------------------------
Other
- ----------------------------------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-59-
<PAGE>
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 Fund 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.
-60-
<PAGE>
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of a Fund 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 Manager, 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 Manager 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. Such purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may not be resold except
to the issuer. Such purchasers may also be required to sign or deliver such
other documents as the Fund may reasonably require to establish eligibility for
purchase at net asset value. 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 Fund; 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 a fund in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has
-61-
<PAGE>
properly represented in writing to Retirement Financial Services, Inc. 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.
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.
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 Fund
account in connection with loans originated from accounts previously maintained
by another investment firm will also be invested at net asset value.
Foundation Funds 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.
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 Waiver
-62-
<PAGE>
of Limited Contingent Deferred Sales Charge Class A Shares under Redemption and
Exchange, 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.
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 by
any such purchaser previously enumerated 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 Foundation Funds 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 Fund 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. For purposes
of satisfying an investor's obligation under a Letter of Intention, Class B
Shares and Class C Shares of a Fund and the corresponding classes of shares of
other funds in the Delaware Investments family which offer such shares may be
aggregated with Class A Shares of the Fund and the corresponding class of shares
of the other funds in the Delaware Investments family.
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
-63-
<PAGE>
of any class. Class B Shares and Class C Shares of the Fund 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 a Fund, 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 Delaware Investment Advisers, the Manager's affiliate, or any of the
Manager's other affiliates in a stable value account may be combined with other
Delaware Investments fund holdings.
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 a Fund, 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 $10,000 and
subsequently purchases $40,000 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 and Class B Shares of the Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family 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 the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase
-64-
<PAGE>
requirements and must be in states where shares of such other funds may be sold.
This reinvestment 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 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. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. It is
recommended that a tax adviser be consulted with respect to such transactions.
Any reinvestment directed to a fund in which the investor does not then
have an account will be treated like all other initial purchases of the fund'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 Fund's shareholder servicing agent, about the
applicability of the Class A Limited CDSC in connection with the features
described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares, 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 Fund 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 Fund in which they are investing in connection
with each purchase. See Retirement Plans for the Fund Classes under Investment
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 the 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.
-65-
<PAGE>
Institutional Class
The Institutional Class of the Fund 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 Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, 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.
Consultant Class
Shares of the Consultant Class of Delaware S&P 500 Index Fund
are available for purchase at net asset value, without the imposition of a
front-end or contingent deferred sales charge but are subject to Rule 12b-1
expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders of Class A, B, C and
Consultant Class Shares 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 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 the Institutional Classes 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 and of distributions from realized securities profits, if any, 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, Class C Shares and Consultant Class Shares may
-66-
<PAGE>
automatically reinvest dividends and/or distributions in any of the mutual funds
in the Delaware Investments, including the Fund, 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 Fund in which the investor
does not then have an account will be treated like all other initial purchases
of the Fund'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 Fund,
provided an account has been established. Dividends from Class A Shares and
Consultant Class 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.
-67-
<PAGE>
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 a Fund. 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 Fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of the Fund 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 Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of the Fund 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 Fund 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
Fund and Class C Shares of the Fund 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 Fund 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 Fund.
Permissible exchanges into Class A Shares of the Fund 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 Fund 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 Fund 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 Fund 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.
-68-
<PAGE>
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 Fund 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 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 Fund 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 Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. The Fund 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 Foundation Funds for proper
instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize the Fund 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 Fund
account, you must have your signature guaranteed. The Fund 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 Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes 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.
-69-
<PAGE>
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
Fund Classes' 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.
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 Funds and Consultant Class Shares
of Delaware S&P 500 Index Fund may be used in the same Strategy with class A
shares and 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 Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the
-70-
<PAGE>
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.
Retirement Plans for the Fund Classes
An investment in the Funds 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.
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 Manager 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.
-71-
<PAGE>
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
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.
-72-
<PAGE>
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
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.
-73-
<PAGE>
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 Fund.
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.
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.
-74-
<PAGE>
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 are 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 for the Fund Classes.
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 for
the Fund Classes.
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 Fund. 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 for the Fund Classes.
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.
-75-
<PAGE>
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund, its agent or certain other authorized persons.
See Distribution and Service under Asset Allocation Agreements. Orders for
purchases of Class B Shares, Class C Shares, Institutional Class Shares and
Consultant Class Shares are effected at the net asset value per share next
calculated after receipt of the order by the Fund in which shares are being
purchased, its agent or certain other authorized persons. Selling dealers have
the responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable 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 for days on which 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, the Funds will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in each
Fund's financial statements and is incorporated by reference into Part B.
Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the portfolio, deducting any
liabilities and dividing by the number of shares outstanding. Expenses and fees
are accrued daily. In determining a Fund's total net assets, portfolio
securities listed or traded on a national securities exchange, except for bonds,
are valued at the last sale price on the exchange upon which such securities are
primarily traded. Securities not traded on a particular day, over-the-counter
securities and government and agency securities are valued at the mean value
between bid and asked prices. Money market instruments having a maturity of less
than 60 days are valued at amortized cost. Debt securities (other than
short-term obligations) are valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Foreign currencies and the prices of foreign securities denominated
in foreign currencies are translated to U.S. Dollars based on rates in effect as
of 12 p.m. Eastern time. Use of a pricing service has been approved by the Board
of Trustees. Prices provided by a pricing service take into account appropriate
factors such as institutional trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data. If no quotations are available, all other securities and assets are
valued at fair value as determined in good faith and in a method approved by the
Board of Trustees.
Each Class of each Fund will bear, pro-rata, all of the common expenses
of its respective Fund. The net asset values of all outstanding shares of each
class of a Fund will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in that Fund represented by the value
of shares of that class. All income earned and expenses incurred by a Fund will
be borne on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in that Fund represented by the value of shares of such
Classes, except that the Institutional Class will not incur any of the expenses
under the Trust's 12b-1 Plans and Class A Shares, Class B Shares and Class C
Shares of each Fund alone will bear the 12b-1 Plan expenses payable under their
respective Plans. Due to the specific distribution expenses and other costs that
will be allocable to each class, the NAV of each class of a Fund will vary.
-76-
<PAGE>
REDEMPTION AND EXCHANGE
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
each fund 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 a Fund 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. See the Prospectuses. 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, a Fund
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 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. Holders of Class A, B, C and
Consultant Class Shares may
-77-
<PAGE>
request a redemption or an exchange by calling the Shareholder Service Center at
800-523-1918. Holders of Institutional Class Shares may request a redemption or
an exchange by calling a Client Services Representative at 800-510-4015. A Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Fund, offers to repurchase Fund 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 Fund, 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. Each Fund 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 Fund 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 a Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement); 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.
A Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund 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.
-78-
<PAGE>
You can avoid this potential delay if you purchase shares by wiring Federal
Funds. Each Fund 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, a
Fund 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 Fund 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
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund 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, Foundation
Funds has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which a Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of such Fund during any 90-day period for
any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
-79-
<PAGE>
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) 5% if shares are redeemed within
one year of purchase; (ii) 4% if shares are redeemed during the second year
after 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 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 Fund Classes and the
Consultant Class, there is currently a $7.50 bank wiring cost, neither the Fund
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 a Fund, the Fund'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
-80-
<PAGE>
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 a Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to your Fund 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, a Fund requires 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"). A Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. A Fund 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, Institutional Class and Consultant
Class 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 your Fund (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, Institutional Class Shares or
Consultant Class 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 Fund in which you have your account
in writing that you do not wish to have such services available with respect to
your account. A Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Fund by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund 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
-81-
<PAGE>
not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by the
Fund Classes and the Consultant Class 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 that 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 Fund Class and Consultant Class
redemption 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 each Fund, 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 each Fund 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 Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund 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
-82-
<PAGE>
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"), a Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. Each Fund 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 Fund within two weeks of an earlier
exchange request out of such Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund'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)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Small Cap Value Fund, (4) Delaware Limited-Term Government Fund, (5)
Delaware Trend Fund, (6) Delaware Cash Reserve Fund, (7) Delaware Delchester
Fund and (8) Delaware 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. Each Fund 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).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in 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 a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund 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, Class C Shares and
Consultant Class 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 a
Fund does 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 a Fund'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
-83-
<PAGE>
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 the Fund managed by the
Manager 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 Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. See Waiver of
Contingent Deferred Sales Charges, below.
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. A Fund 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.
-84-
<PAGE>
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
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
Fund account, you must have your signature guaranteed. The Funds do 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
Classes. 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 Fund 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.
-85-
<PAGE>
Waivers of Contingent Deferred Sales Charges
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 a Fund'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; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, 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 disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) 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 a
Fund'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 a registered owner, or a registered joint owner, 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 Fund'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 a registered owner, or a
registered joint owner, of the account (in the case of accounts established
under the Uniform Gifts to
-86-
<PAGE>
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.
* * *
In addition, the CDSC will be waived on Class A Shares, 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.
-87-
<PAGE>
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
The Income and Balanced Portfolio will normally make payments from net
investment income, if any, on a quarterly basis. The Growth Portfolio will
normally make payments from net investment income, if any, on a annual basis.
The S&P 500 Index Fund will normally make payments from net investment income,
if am\ny, on a quarterly basis. Payments from net realized securities profits of
a Fund, if any, will normally be distributed annually in the quarter following
the close of the fiscal year.
Each Class of shares of a Fund will share proportionately in the
investment income and expenses of that Fund, except that Class A Shares, Class B
Shares, Class C Shares and Consultant Class alone will incur distribution fees
under their respective 12b-1 Plans.
Dividends are automatically reinvested in additional shares of the same
Class of the respective Fund at net asset value, unless, in the case of
shareholders of the Fund Classes, an election to receive dividends in cash has
been made. Payment by check of cash dividends will ordinarily be mailed within
three business days after the payable date. Dividend payments of $1.00 or less
will be automatically reinvested, notwithstanding a shareholder's election to
receive dividends in cash. If such a shareholder's dividends increase to greater
than $1.00, the shareholder would have to file a new election in order to begin
receiving dividends in cash again. If a shareholder redeems an entire account,
all dividends accrued to the time of the withdrawal will be paid by separate
check at the end of that particular monthly dividend period, consistent with the
payment and mailing schedule described above.
Any check in payment of dividends or other distributions which cannot
be delivered by the United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. A Fund may deduct from a shareholder's account the costs of
the Fund's effort to locate a shareholder if a shareholder's mail is returned by
the United States Post Office or the Fund is otherwise unable to locate the
shareholder or verify the shareholder's mailing address. These costs may include
a percentage of the account when a search company charges a percentage fee in
exchange for their location services.
TAXES
Dividends from investment income and short-term capital gains
distributions are treated by shareholders as ordinary income for federal income
tax purposes. Distributions of long-term capital gains, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time an
investor has held such shares, and these gains are currently taxed at long-term
capital gain rates described below. The tax status of dividends and
distributions paid to shareholders will not be affected by whether they are paid
in cash or in additional shares. Persons not subject to tax will not be required
to pay taxes on distributions. Each Fund is treated as a single tax entity and
capital gains for each Fund will be calculated separately.
A portion of each Fund'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 Fund that so qualifies will be
designated each year in a notice mailed to a Fund's shareholders, and cannot
exceed the gross amount of dividends received by a Fund from domestic (U.S.)
corporations that would have qualified for the dividends-received deduction in
the hands of a Fund if the Fund was a regular corporation. The availability of
the dividends-received deduction is subject to certain
-88-
<PAGE>
holding period and debt financing restrictions imposed under the Code on the
corporation claiming the deduction. Under the 1997 Act, the amount that a Fund
may designate as eligible for the dividends-received deduction will be reduced
or eliminated if the shares on which the dividends earned by a Fund were
debt-financed or held by a Fund 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 Fund 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 after the ex-dividend date, then
the dividends-received deduction for Fund 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. Advice
as to the tax status of each year's dividends and distributions, when paid, will
be mailed annually. For the fiscal year ended September 30, 1999, [none] of the
Funds' dividends from net investment income qualified for the dividends-received
deduction.
Under the 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, a Fund 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:
"Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of the
holders are taxed at the 20% rate when distributed to shareholders (8% for
individual investors in the 15% bracket).
"Short-term capital gains": gains on securities sold by the Fund that
do not meet the long-term holding period are considered short-term capital gains
and are taxed as ordinary income.
"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.
-89-
<PAGE>
If you redeem some or all of your shares in a Fund, and then reinvest
the sales proceeds in such Fund or in another Delaware Investments fund within
90 days of buying the original shares, the sales charge that would otherwise
apply to your reinvestment may be reduced or eliminated. The IRS will require
you to report gain or loss on the redemption of your original shares in a Fund.
In doing so, all or a portion of the sales charge that you paid for your
original shares in the Fund will be excluded from your tax basis in the shares
sold (for the purpose of determining gain or loss upon the sale of such shares).
The portion of the sales charge excluded will equal the amount that the sales
charge is reduced on your reinvestment. Any portion of the sales charge excluded
from your tax basis in the shares sold will be added to the tax basis of the
shares you acquire from your reinvestment.
Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, each Fund
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 Fund must meet certain specific requirements, including:
(i) Each Fund 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 Fund's total assets,
and, with respect to 50% of a Fund'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 Fund's total assets;
(ii) Each Fund 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; and
(iii) Each Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years.
The Code requires each Fund 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 Fund)
to shareholders by December 31 of each year in order to avoid federal excise
taxes. Each Fund intends as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by shareholders 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, a Fund must recognize gain (but not loss) on any constructive sale
of an appreciated financial position in stock, a partnership interest or certain
debt instruments. Each Fund 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
-90-
<PAGE>
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--Each Fund is
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to a
Fund:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund 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
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 Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by such Fund.
If a Fund's Section 988 losses exceed such Fund's other investment
company taxable income during a taxable year, a Fund 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 for 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 Fund 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 Fund 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
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund'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 Fund will be required to record at 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 Fund'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.
-91-
<PAGE>
Each Fund 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
Fund at the end of its fiscal year are invested in securities of foreign
corporations, such Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by such Fund. 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 Fund); 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 Fund 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 such Fund).
If a Fund 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 Fund 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 such Fund. In this case, these
taxes will be taken as a deduction by a Fund, 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 Fund. 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 Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by a Fund. 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. You should note that this simplified procedure
will not be available until calendar year 1998.
Investment in Passive Foreign Investment Company Securities--Each Fund
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 Fund receives an "excess distribution" with respect
to PFIC stock, such Fund itself may be subject to U.S. federal income tax on a
portion of the distribution, whether or not the corresponding income is
distributed by that Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
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 Fund.
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 Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, such Fund 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 a Fund'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. A Fund would also be allowed an ordinary
-92-
<PAGE>
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 Fund
were to make this second PFIC election, tax at the Fund 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 Fund (if any), the amounts distributable to you by
such Fund, 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 the Fund acquires shares in that corporation. While a
Fund 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 Fund, 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 Fund's income available for distribution to you, and may cause some
or all of such Fund's previously distributed income to be classified as a return
of capital.
Shareholders will be notified annually by the Trust as to the federal
income tax status of dividends and distributions paid by their Fund.
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.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
-93-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Funds, subject to the
supervision and direction of the Trust's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On September 30, 1999, the Manager and
its affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in assets in
the various institutional or separately managed (approximately $00,000,000,000)
and investment company (approximately $00,000,000,000) accounts.
The Investment Management Agreement for Income Portfolio and Balanced
Portfolio is dated April 1, 1999 and was approved by shareholders on March 17,
1999. The Investment Management Agreement for Growth Portfolio is dated April
15, 1999 and was approved by shareholders on April 13, 1999. The Investment
Management Agreement for Delaware S&P 500 Index Fund is dated December 27, 1999
and was approved by the initial shareholder on __________. The Agreements have
an initial term of two years and may be renewed each year only so long as such
renewal and continuance are specifically approved at least annually by the Board
of Trustees or by vote of a majority of the outstanding voting securities of the
Fund to which the Agreement relates, and only if the terms and the renewal
thereof have been approved by the vote of a majority of the trustees of the
Trust 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 trustees of
the Trust or by the Manager. Each Agreement will terminate automatically in the
event of its assignment.
The Manager is paid an annual a fee equal to 0.25% (currently waived to
0.10%) of average daily net assets of each of the Income Portfolio, Balanced
Portfolio and Growth Portfolio.
The Manager is paid an annual a fee equal to _____% of average daily
net assets of the Delaware S&P 500 Index Fund.
On September 30, 1999, the total net assets of the Balanced Fund,
Growth Fund and Income Fund were $0,000,000, $0,000,000, and $000,000,
respectively. Investment management fees incurred, paid and waived for the
fiscal period December 31, 1997 through September 30, 1998 and for the fiscal
year ended September 30, 1999 with respect to the Income, Balanced and Growth
Portfolios:
1997 1998
Balanced Portfolio $623 earned
$-0- paid
$623 waived
Growth Portfolio $522 earned
$-0- paid
$522 waived
Income Portfolio $244 earned
$-0- paid
$244 waived
Under the general supervision of the Board of Directors, the Manager
makes all investment decisions which are implemented by the Funds. The Manager
pays the salaries of all directors, officers and employees who are affiliated
with both the Manager and the Funds.
-94-
<PAGE>
Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreements, the
Funds are responsible for all of their own expenses. Among others, these include
a Fund'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.
The Manager has elected voluntarily to waive that portion, if any, of
the annual Investment Management Fees payable by the Income, Balanced and Growth
Portfolio and to pay each Funds' expenses to the extent necessary to ensure that
the "Total Operating Expenses" of the such Funds do not exceed 0.55% (exclusive
of taxes, interest, brokerage commissions, extraordinary expenses and applicable
12b-1 expenses) through June 30, 1999. The Manager has contracted to waive that
portion, if any, of the annual Asset Allocation Fees payable by such Funds and
to pay the Funds' expenses to the extent necessary to ensure that the "Total
Operating Expenses" of the Funds do not exceed 0.55% (exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and applicable 12b-1
expenses) through September 30, 2000.
State Street Global Advisors, Two International Place, Boston, MA
02110, serves as Sub-Adviser to Delaware S&P 500 Index Fund. As sub-adviser,
State Street is responsible for day-to-day management of the Fund's assets.
State Street currently manages large institutional accounts and collective
investment funds. As of September 30, 1999, State Street had assets of
$____________ under management. For its services to the Fund, the Manager will
pay State Street an annual fee equal to _______.
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 1818 Market
Street, Philadelphia, PA 19103, serves as the national distributor of each
Fund's shares under separate Distribution Agreements. The Distributor is an
affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by the Funds on behalf of their respective
Class A Shares, Class B Shares, Class C Shares and Consultant Class Shares under
their 12b-1 Plans. The Distributor is an indirect, wholly owned subsidiary of
DMH, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Funds' shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement. The Transfer Agent also provides
accounting services to the Funds pursuant to the terms of a separate Fund
Accounting Agreement. The Transfer Agent is also an indirect, wholly owned
subsidiary of Delaware Management Holdings, Inc.
-95-
<PAGE>
The Funds 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 Funds. For purposes of pricing, the Funds
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.
-96-
<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of the Trust are managed under the direction
of its Board of Trustees.
Certain officers and directors of the Trust hold identical positions in
each of the other funds in the Delaware Investments family. On November 30,
1999, the Trust's officers and trustees owned [less than 1%] of the outstanding
shares of each Class of each Fund.
As of November 30, 1999, management believes the following accounts
held 5% or more of the outstanding shares of a Class of the Funds. With the
exception of DMC Profit Sharing Plans, the Funds have no knowledge of beneficial
ownership.
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Income Portfolio Shiawassee Community TCH CU MPPP
Class A Shares Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Profit Sharing Plan for Richard Scott
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708
Pension Plan for Richard Scott
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708
Florence Wiseman
904 East King Street
Owosso, MI 48867
Waltz Brothers 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Anna M. Garber
92 Strasburg Pike
Lancaster, PA 17602
Blast, Inc. 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
</TABLE>
-97-
<PAGE>
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
J. Mark Waltz
1833 West Crescent
Park Ridge, IL 60068
Cappy E. Sumler
1510 East 81st
Kansas, MO 64131
Kay Prezzato
400 Gilbert Street
Owosso, MI 48867
Income Portfolio R. James Benninghoff
Class B Shares 5601 Cold Water Road
Fort Wayne, IN 46825
Arden L. Nicholls, TTEE
Arden L. Nicholls Family Trust
195 East Edgehill Drive
Providence, UT 84332
The SIMPLE IRA Account of
Roberts Photography, Inc.
Amy L. Roberts
1414 Lakeland Cv.
Fort Wayne, IN 46825
The Roth IRA of Philip R. Bader
1184 West Sutton Road
Metamora, MI 48455
The Roth IRA of Susan C. Bader
1184 West Sutton Road
Metamora, MI 48455
Income Portfolio M. Pauline Wissler
Class C Shares 227 Millwood Road
Lancaster, PA 17602
H. Dale Zimmerman
Norma J. Zimmerman JT WROS
775 Stone Hill Road
Shoemakersville, PA 19555
</TABLE>
-98-
<PAGE>
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Ruby D. Miller
6451 County Road
Millersburg, OH 44654
DMTC Custodian for the IRA of
Amos A. Bricker
2754 Mount Pleasant Road
Mount Joy, PA 17552
Income Portfolio Delaware Management Business Trust
Institutional Class Attn: Joseph Hastings
1818 Market Street, Ste. 1600
Philadelphia, PA 19103
Balanced Portfolio John J. Hoober 401(k) Plan
Class A Shares Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Glenn A. Shively and
Deborah Z. Shively, JT WROS
1401 Le Boutillier Road
Malvern, PA 19355
Shiawassee Community TCH CU MPPP
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
David L. Martin
c/o John J. Hoober, Inc.
Box 39
3216 Mill Lane
Gordonville, PA 17529
Blast, Inc. 401(k) Plan
Attn: Retirement Plans
1818 Marker Street
Philadelphia, PA 19103
Jeffrey D. Martin
c/o John J. Hoober, Inc.
Box 39
3216 Mill Lane
Gordonville, PA 17529
</TABLE>
-99-
<PAGE>
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
NFSC/FMTC IRA
For the Benefit of Jan B. Buckingham
1102 Glenwood Avenue
Nashville, TN 37204
Balanced Portfolio Sarah A. Anthony
Class B Shares RR 3 Box 137
Kunkletown, PA 18058
Attn: Mutual Funds
BHC Securities, Inc.
One Commerce Square
2005 Market Street - Ste. 1200
Philadelphia, PA 19103
DMTC For the Rollover IRA of
Dewey H. Moon
2832 Fannie Thompson Road
Monroe, GA 30656
DMTC Custodian for the IRA of
Alfred R. Kroening
304 East Arlington Street
Bangor, MI 49013
Nancy J. Boyle and
William W. Boyle, JT WROS
1355 Mohawk Drive
Port Charlotte, FL 33952
Balanced Portfolio Diabetes Foundation of Rhode Island, Inc.
Class C Shares 1007 Waterman Avenue
East Providence, RI 02914
Elaine J. Avery
1789 East 91st Street
Brooklyn, NY 11236
DMTC For the Rollover IRA of
Joan F. Sylvander
1757 East 26th Street
Brooklyn, NY 11229
DMTC For the Rollover IRA of
Catherine A. Horch
133 Henry St. - Apt. 8
Brooklyn, NY 11201
</TABLE>
-100-
<PAGE>
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
DMTC For the Rollover IRA of
Josephine Benfatti
2017 Kimball Street
Brooklyn, NY 11234
Paul K. Graybill and
Grace H. GraybilL, TEN ENT
4 Bomberger Road
Lititz, PA 17543
Balanced Portfolio Delaware Management Business Trust
Institutional Class Attn: Joseph Hastings
1818 Market Street - Ste. 1600
Philadelphia, PA 19103
Growth Portfolio Ecko Tool & Die, Inc. 401(k) Plan
Class A Shares Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Angelheart Designs, Inc. 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Blast, Inc. 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
DMTC Profit Sharing Plan for
Richard Scott
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708
B&S Cable 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
DMTC Pension Plan for
Richard Scott
For the Benefit of Richard Scott
P.O. Box 80845 - College Station
Fairbanks, AK 99708
</TABLE>
-101-
<PAGE>
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Philip J. Lowe
2946 Donelson Road
Jamestown, NY 14750
Resources Trust Company, Custodian
For the Benefit of Allan Karson
Allan Karson Assoc., Inc.
P.O. Box 5900
Denver, CO 80217
Waltz Bros. 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Mark A. Peterson
3087 Donelson Road
Jamestown, NY 14701
Growth Portfolio DMTC For the Rollover IRA of
Class B Shares Louis E. Meador
1301 Camden Place
Lawrenceville, GA 30043
NFSC/FMTC IRA For the Benefit of
Joseph Morten Elkins
10602 Gray Fox Way
Savannah, GA 31406
Carolyn W. Shay
9 North Marsh Road
Savannah, GA 31406
Jonathan A. Carver and
Charles D. Carver, Sr., JT WROS
151 Amberidge Drive NW
Cartersville, GA 30120
DMTC Custodian for IRA of
Charlotte K. Sebacher
5 Meadow Way
Sharpsburg, GA 30277
Growth Portfolio Richard K. Morford
Class C Shares 1109 Tall Pines Court
Petoskey, MI 49770
</TABLE>
-102-
<PAGE>
<TABLE>
<CAPTION>
Class Name of Address of Account Share Amount Percentage
- ----- -------------------------- ------------ ----------
<S> <C> <C> <C>
Shore Line Construction, Inc. 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
GenFed Federal Credit Union 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103
Judy A. Martinelli
328 Barberry Lane
Peachtree City, GA 30269
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), 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 and the Manager 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.
-103-
<PAGE>
Certain officers and trustees of the Trust hold identical positions in
each of the other funds in the Delaware Investments family. Trustees and
principal officers of the Trust 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 trustee is One Commerce Square, Philadelphia, PA 19103.
-104-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (62) Chairman and Trustee and/or Director of Foundation Funds and each of the other 32
investment companies in the Delaware Investments family.
Chairman and Director of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
Prior to January 1, 1999, Mr. Stork was Chairman and Trustee and/or Director of
the Fund and each of the other investment companies in the Delaware Investments
family and Delaware Capital Management, Inc.; Chairman, President, Chief
Executive Officer and Director 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, Chief Executive Officer and Director of
Delaware International Advisers Ltd., Delaware International Holdings Ltd. and
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 Delaware
Investments.
</TABLE>
_____________
*Trustee affiliated with the Foundation Funds' investment manager and considered
an "interested person" as defined in the 1940 Act.
-105-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
*David K. Downes (59) President, Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer and Trustee and/or Director of Foundation Funds and each of the other 32
investment companies in the Delaware Investments family.
President and Director of Delaware Management Company, Inc.
President, Chairman, Chief Executive Officer and Director of Delaware Service
Company, Inc. and Delaware Capital Management, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.
President of Delaware Management Company (a series of Delaware Management
Business Trust).
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 Delaware Investments.
</TABLE>
_____________
*Trustee affiliated with Foundation Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
-106-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (59) Executive Vice President and Chief Investment Officer, Equities of Foundation
Funds, each of the other 32 investment companies in the Delaware Investments
family and Delaware Management Company (a series of Delaware Management Business
Trust).
Executive Vice President and Trustee of Delaware Management Business Trust
Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.
Executive Vice President/Chief Investment Officer, Equities and Director of
Delaware Management Company, Inc.
Chief Executive Officer/Chief Investment Officer, Equities of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive capacities
at different times within Delaware Investments.
- -----------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of
Foundation Funds and each of the other 32 investment companies in the Delaware
Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO Corporation.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust) and Delaware
Capital Management, Inc.
From 1987 to 1999, Mr. McMeekin was employed in various executive capacities by
Lincoln Investment Management, Inc.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-107-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery (41) Executive Vice President and General Counsel of Foundation Funds and each of the
other 32 investment companies in the Delaware Investments family
Executive Vice President and General Counsel of 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 and/or Trustee of Delaware
Management Trust Company, DMH Corp., Delaware Management Company, Inc., Delaware
Capital Management, Inc., Delaware Distributors, Inc., Delaware International
Advisers Ltd., Delaware International Holdings Ltd., Founders Holdings, Inc.,
Delvoy, Inc., Delaware Service Company, Inc., Delaware Management Business Trust
and Retirement Financial Services, Inc.
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 Delaware Investments organization.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-108-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Walter P. Babich (71) Trustee and/or Director of Foundation Funds and each of the other 32 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 (62) Trustee and/or Director of Foundation Funds and 18 other investment companies in
the Delaware Investments family.
Partner, Complete Care Services.
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.
- -----------------------------------------------------------------------------------------------------------------
Anthony D. Knerr (60) Trustee and/or Director of Foundation Funds and each of the 32 other 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.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-109-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Ann R. Leven (58) Trustee and/or Director of Foundation Funds and each of the other 32 other
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) Trustee and/or Director of Foundation Funds and each of the other 32 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) Trustee and/or Director of Foundation Funds and each of the other 32 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.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-110-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Jan L. Yeomans (50) Trustee and/or Director of Foundation Funds and each of the other 32 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.
- -----------------------------------------------------------------------------------------------------------------
Eric E. Miller (45) Senior Vice President/Deputy General Counsel and Secretary of Foundation Funds
and each of the other 32 investment companies in the Delaware Investments
family.
Senior Vice President/Deputy General Counsel and Assistant Secretary of Delaware
Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware Management Company,
Inc., Delaware Management Business Trust, Delaware Management Company (a series
of Delaware Management Business Trust), Delaware Investment Advisers (a series
of Delaware Management Business Trust), Delaware Service Company, Inc., Delaware
Capital Management, Inc., Retirement Financial Services, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P. and Founders Holdings, Inc.
During the past five years, Mr. Miller has served in various executive
capacities at different times within the Delaware organization.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-111-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of Foundation Funds and each of the
other 32 investment companies in the Delaware Investments family and Delaware
Investment Advisers (a series of Delaware Management Business Trust).
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., Delaware Management Business Trust and Founders Holdings, Inc.
Chief Financial Officer/Treasurer of Retirement Financial Services, Inc.
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.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-112-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Michael P. Bishof (37) Senior Vice President and Treasurer of Foundation Funds and each of the other 32
investment companies in the Delaware Investments family and Founders Holdings,
Inc.
Senior Vice President/Investment Accounting of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Service Company, Inc., and Delaware Capital Management, Inc.
Senior Vice President and Treasurer/Manager, Investment Accounting of Delaware
Distributors, L.P. and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
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.
- -----------------------------------------------------------------------------------------------------------------
J. Paul Dokas (39) Vice President/Portfolio Manager of Foundation Funds and each of the other 32
investment companies in the Delaware Investments family, Delaware Management
Company, Inc., 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. Dokas was a Director of Trust
Investments for Bell Atlantic Corporation in Philadelphia, where he held various
positions from 1985 to 1997.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-113-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation expected to be
received from the Trust during its fiscal year and the total compensation
expected to be received from all investment companies in the Delaware
Investments family for which he or she serves as a director or trustee 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 as of
September 30, 1999. Only the independent trustees of the Trust receive
compensation from the Trust.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Pension or Total Compensation
Retirement Benefits from the Investment
Aggregate Accrued Estimated Annual Companies in
Compensation from as Part of Benefits Delaware
Name(3) Foundation Funds Fund Expenses Upon Retirement(1) Investments(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter P. Babich None $38,000
- -----------------------------------------------------------------------------------------------------------------------
John H. Durham None $31,180
- -----------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr None $38,000
- -----------------------------------------------------------------------------------------------------------------------
Ann R. Leven None $38,000
- -----------------------------------------------------------------------------------------------------------------------
Thomas F. Madison None $38,000
- -----------------------------------------------------------------------------------------------------------------------
Charles E. Peck None $38,000
- -----------------------------------------------------------------------------------------------------------------------
Jan L. Yeomans(4) None $38,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Trustees/Directors, each disinterested trustee/director 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 trustee/director for a period equal to the
lesser of the number of years that such person served as a trustee/director
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 trustees/directors of each investment company at the time of such
person's retirement. If an
-114-
<PAGE>
eligible trustee/director retired as of June 30, 1999, he or she would be
entitled to annual payments totaling the amount noted above, in the
aggregate, from all of the investment companies in the Delaware Investments
family for which he or she served as trustee/director, based on the number
of investment companies in the Delaware Investments family as of that date.
(2) Each independent trustee/director (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a
trustee/director 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
trustee/director for 19 investment companies in Delaware Investments, plus
$1,810 for each Board Meeting attended. Ann R. Leven, Charles E. Peck,
Anthony D. Knerr and Thomas F. Madison 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 served as an independent trustee of Foundation Funds
during its last fiscal year for the period July 1, 1998 through March 17,
1999, the date on which he retired. For this period, Mr. Longstreth received
$1,583 from Foundation Funds and $47,631 for all investment companies in the
Delaware Investments family.
(4) Jan L. Yeomans joined the Boards of all investment companies in the Delaware
Investments family in March 1999 for some funds and in April 1999 for other
funds.
-115-
<PAGE>
GENERAL INFORMATION
Foundation Funds, which was organized as a Delaware Business Trust on
October 24, 1997, is an open-end management investment company. Delaware
Foundation Funds Income Portfolio, Delaware Foundation Funds Balanced Portfolio
and Delaware Foundation Funds Growth Portfolio are nondiversified as defined by
the Investment Company Act of 1940 (the "1940 Act"). Delaware S&P 500 Index Fund
is diversified as defined by the 1940 Act.
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds available
from the Delaware Investments family. An affiliate of the Manager also manages
private investment accounts. While investment decisions of the Funds 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 Funds.
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 A.
Access persons and advisory persons of the funds in the Delaware
Investments family, as those terms are defined in SEC Rule 17j-1 under the 1940
Act, who provide services to the Manager or its 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 by
certain covered persons in certain securities may only be closed-out at a profit
after a 60-day holding period has elapsed; and; 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 Fund and for the
other mutual funds in the Delaware Investments family. The Distributor received
net commissions from each Fund on behalf of Class A Shares, after reallowances
to dealers, as follow:
Balanced Portfolio
Total
Amount of Amounts Net
Underwriting Reallowed Commission to
Fiscal Period Commission to Dealers the Distributor
------------- ------------ ----------- ----------------
12/31/97 - 9/30/98 $18,454 $15,121 $3,333
-116-
<PAGE>
Growth Portfolio
Total
Amount of Amounts Net
Underwriting Reallowed Commission to
Fiscal Period Commission to Dealers the Distributor
------------- ------------ ----------- ----------------
12/31/97-9/30/98 $7,704 $6,391 $1,313
Income Portfolio
Total
Amount of Amounts Net
Underwriting Reallowed Commission to
Fiscal Period Commission to Dealers the Distributor
------------- ------------ ----------- ----------------
12/31/97-9/30/98 $1,047 $855 $192
The Distributor received in the aggregate Limited CDSC or other CDSC
payments with respect to Class A Shares, Class B Shares and Class C Shares as
follows:
Balanced Portfolio
Class A Shares Class B Shares Class C Shares
Fiscal Period Limited CDSC PaymentsCDSC Payments
CDSC Payments
12/31/97-9/30/98 $-0- $-0- $-0-
Growth Portfolio
Class A Shares Class B Shares Class C Shares
Fiscal Period Limited CDSC PaymentsCDSC Payments
CDSC Payments
12/31/97-9/30/98 $-0- $438 $19
Income Portfolio
Class A Shares Class B Shares Class C Shares
Fiscal Period Limited CDSC PaymentsCDSC Payments
CDSC Payments
12/31/97-9/30/98 $-0- $-0- $-0-
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Trust and for the
other mutual funds in the Delaware Investments family. The Transfer Agent is
paid a fee by the Funds 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 Trustees, including a majority of the disinterested trustees. The
Transfer Agent also provides accounting services to the Funds. Those services
include performing
-117-
<PAGE>
all functions related to calculating each Fund'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 each fund, including the Funds, 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 Manager and its affiliates own the names "Delaware Group" and
"Foundation Funds." Under certain circumstances, including the termination of
the Trust's advisory relationships with the Manager or its distribution
relationships with the Distributor, the Manager and its affiliates could cause
the Trust to delete the words "Delaware Group" and "Foundation Funds" from the
Trust's name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 is custodian of each Fund's securities and cash. As custodian for a
Fund, Chase maintains a separate account or accounts for the Fund; receives,
holds and releases portfolio securities on account of the Fund; receives and
disburses money on behalf of the Fund; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
Capitalization
The Trust currently offers three portfolios of shares. Each Fund
currently offers four classes of shares and has a present unlimited authorized
number of shares of beneficial interest with no par value allocated to each
Class. All shares have equal voting rights, except as noted below, no preemptive
rights, are fully transferable and, when issued, are fully paid and
nonassessable.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
represent a proportionate interest in the assets of each Fund of the Trust and
have the same voting and other rights and preferences, except that shares of
Institutional Classes may not vote on matters affecting the Funds' Distribution
Plans under Rule 12b-1. Similarly, as a general matter, shareholders of Class A
Shares, Class B Shares and Class C Shares may vote only on matters affecting the
12b-1 Plan that relates to the class of shares that they hold. However,
shareholders of Class B Shares must be given a vote on any material increase in
the 12b-1 fees payable by Class A Shares under the Plans for the Funds. General
expenses of each Fund will be allocated on a pro-rata basis to the Classes
according to asset size, except that expenses of the 12b-1 Plans of Class A
Shares, Class B Shares and Class C Shares will be allocated solely to those
classes.
Noncumulative Voting
The Trust's shares have noncumulative voting rights which means that
the holders of more than 50% of the shares of the Trust 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.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
-118-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Foundation Funds (the "Trust") and, in its capacity as such, audits the annual
financial statements of Foundation Funds. Income Portfolio's, Balanced
Portfolio's and Growth Portfolio's Statements of Net Assets, Statements of
Assets and Liabilities, Statements of Operations, Financial Highlights and Notes
to Financial Statements, as well as the report of Ernst & Young LLP, independent
auditors, for the fiscal year ended September 30, 1999 are included in the
Trust's Annual Report to shareholders. The financial statements and financial
highlights, the notes relating thereto and the report of Ernst & Young LLP
listed above are incorporated by reference from the Annual Report into this Part
B. Delaware S&P 500 Index Fund has not commenced operations as of the date of
this Part B.
-119-
<PAGE>
APPENDIX A--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.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware 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.
Delaware 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.
Delaware 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. Delaware 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. Delaware 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. Delaware 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.
Delaware 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. Delaware 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. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds
Delaware American Government Bond 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.
Delaware 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.
Delaware Cash Reserve Fund 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.
-120-
<PAGE>
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Delaware 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.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware 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. Delaware 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.
Delaware 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.
Delaware 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. Delaware 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"). Delaware 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. Delaware 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. Delaware 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.
Delaware 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.
Delaware 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.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware 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. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware 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.
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-
-121-
<PAGE>
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 U.S. 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 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 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 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.
Delaware 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 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 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
-122
<PAGE>
Fund will seek to select investments that will enable its shares to be exempt
from the Florida intangible personal property tax. Delaware 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 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 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 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 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 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 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 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 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 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
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. Delaware 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 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 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 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.
Delaware 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. Delaware 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. Delaware 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 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 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.
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.
-123-
<PAGE>
Each of the summaries above is qualified in its entirety by the
information contained in the Portfolio's prospectus(es).
-124-
<PAGE>
PART C
Other Information
-----------------
Item 23. Exhibits
(a) Declaration of Trust.
---------------------
(1) Declaration of Trust incorporated into this
filing by reference to the initial registration
statement on Form N-1A filed on October 24, 1997.
(b) By-Laws.
--------
(1) By-Laws incorporated into this filing by
reference to the initial registration
statement on Form N-1A filed on October
24, 1997.
(c) Copies of All Instruments Defining the Rights of Holders.
---------------------------------------------------------
(1) Declaration of Trust. Declaration of
Trust (October 1997) incorporated into
this filing by reference to the initial
registration statement on Form N-1A
filed on October 24, 1997.
(2) By-Laws. By-Laws incorporated into this
filing by reference to the initial
registration statement on Form N-1A
filed on October 24, 1997.
(d) Investment Management Agreements.
---------------------------------
(1) Executed Investment Management Agreement
(April 1, 1999) between Delaware
Management Company and the Registrant on
behalf of the Delaware Balanced
Portfolio and Delaware Income Portfolio
attached as Exhibit.
(2) Executed Amendment No. 1 to the
Investment Management Agreement (April
15, 1999) between Delaware Management
Company and the Registrant adding the
Delaware Growth Portfolio to the
Investment Management Agreement dated
April 1, 1999 attached as Exhibit.
(3) Form of Asset Allocation Agreement
(1998) between Delaware Management
Company and the Registrant on behalf of
The Asset Allocation Portfolio
incorporated into this filing by
reference to Post-Effective Amendment
No. 2 filed on June 17, 1998.
(4) Form of Amendment No. 2 to the
Investment Management Agreement (1999)
between Delaware Management Company and
the Registrant adding the Delaware S&P
500 Index Fund to the Investment
Management Agreement dated April 1, 1999
attached as Exhibit.
(5) Form of Sub-Advisory Agreement (1999)
between Delaware Management Company and
on behalf of the Delaware S&P 500 Index
Fund attached as Exhibit.
<PAGE>
(e) (1) Distribution Agreements.
(i) Executed Distribution Agreement (December 18, 1997)
between Delaware Distributors, L.P. and the Registrant
on behalf of the Delaware Balanced Portfolio
incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30,
1997.
(ii) Executed Distribution Agreement (December 18, 1997)
between Delaware Distributors, L.P. and the Registrant
on behalf of the Delaware Growth Portfolio
incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30,
1997.
(iii) Executed Distribution Agreement (December 18, 1997)
between Delaware Distributors, L.P. and the Registrant
on behalf of the Delaware Income Portfolio
incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30,
1997.
(iv) Form of Distribution Agreement (1998) between Delaware
Distributors, L.P. and the Registrant on behalf of The
Asset Allocation Portfolio incorporated into this
filing by reference to Post-Effective Amendment No. 2
filed on June 17, 1998.
(v) Form of Distribution Agreement (1999) between Delaware
Distributors, L.P. and the Registrant on behalf of
Delaware S&P 500 Index Fund attached as Exhibit.
(2) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) (Module) incorporated into this filing
by reference to the initial registration statement on
Form N-1A filed on October 24, 1997.
(3) Dealer's Agreement. Dealer's Agreement (as amended
November 1995) (Module) incorporated into this filing
by reference to the initial registration statement on
Form N-1A filed on October 24, 1997.
(4) Mutual Fund Agreement for the Delaware Group of Funds
(as amended November 1995) (Module) incorporated into
this filing by reference to the initial registration
statement on Form N-1A filed on October 24, 1997.
(f) Inapplicable.
(g) Custodian Agreement.
--------------------
(1) Custodian Agreement (Module) with The Chase Manhattan
Bank incorporated into this filing by reference to the
initial registration statement on Form N-1A filed on
October 24, 1997.
(i) Letter to add the Delaware
Income Portfolio, the Delaware
Balanced Portfolio and the
Growth Portfolio to the
Custodian Agreement with The
Chase Manhattan Bank
incorporated into this filing
by reference to Post-Effective
Amendment No. 4 filed on
November 30, 1998.
<PAGE>
(ii) Form of Letter to add The Asset
Allocation Portfolio to the
Custodian Agreement with The
Chase Manhattan Bank
incorporated into this filing
by reference to Post-Effective
Amendment No. 2 filed on June
17, 1998.
(iii) Form of Letter to add Delaware
S&P 500 Index Fund to the
Custodian Agreement with The
Chase Manhattan Bank attached
as Exhibit.
(h) Other Material Contracts.
(1) Shareholders Services Agrements.
(i) Executed Shareholders Services
Agreement (December 18, 1997)
between Delaware Service
Company, Inc. and the
Registrant on behalf of the
Delaware Income Portfolio,
Balanced Portfolio and Delaware
Growth Portfolio incorporated
into this filing by reference
to Pre-Effective Amendment No.
1 filed on December 30, 1997.
(ii) Form of Shareholder Services
Agreement (1998) between
Delaware Service Company, Inc.
and the Registrant on behalf of
The Asset Allocation Portfolio
incorporated into this filing
by reference to Post-Effective
Amendment No. 2 filed on June
17, 1998.
(iii) Form of Shareholder Services
Agreement (1999) between
Delaware Service Company, Inc.
and the Registrant on behalf of
Delaware S&P 500 Index Fund
attached as Exhibit.
(2) Executed Fund Accounting Agreement (Module) (August
19, 1996) with Delaware Service Company, Inc.
incorporated into this filing by reference to the
initial registration statement on Form N-1A filed on
October 24, 1997 and Post-Effective Amendment No. 6
filed on January 21, 1999.
(i) Opinion of Counsel. Incorporated into this filing by reference
to Post Effective Amendment No. 4 filed November 30, 1998.
(j) Consent of Auditors. To be filed by Amendment.
(k) Inapplicable.
(l) Subscription Agreement. Incorporated into this filing by
reference to Post-Effective Amendment No. 2 filed January 21,
1998.
(m) Plans under Rule 12b-1.
(1) Executed Plan under Rule 12b-1 for Class A of Delaware
Balanced Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
(2) Executed Plan under Rule 12b-1 for Class B of Delaware
Balanced Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
<PAGE>
(3) Executed Plan under Rule 12b-1 for Class C of Delaware
Balanced Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30,1997.
(4) Executed Plan under Rule 12b-1 for Class A of Delaware
Growth Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
(5) Executed Plan under Rule 12b-1 for Class B of Delaware
Growth Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
(6) Executed Plan under Rule 12b-1 for Class C of Delaware
Growth Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
(7) Executed Plan under Rule 12b-1 for Class A of Delaware
Income Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
(8) Executed Plan under Rule 12b-1 for Class B of Delaware
Income Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
<PAGE>
(9) Executed Plan under Rule 12b-1 for Class C of Delaware
Income Portfolio incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed on
December 30, 1997.
(10) Form of Plan under Rule 12b-1 for Class A of Delaware
S&P 500 Index Fund attached as Exhibit.
(11) Form of Plan under Rule 12b-1 for Class B of Delaware
S&P 500 Index Fund attached as Exhibit.
(12) Form of Plan under Rule 12b-1 for Class C of Delaware
S&P 500 Index Fund attached as Exhibit.
(13) Form of Plan under Rule 12b-1 for the Consultant Class
of Delaware S&P 500 Index Fund attached as Exhibit.
(n) Plan Under Rule 18f-3. Incorporated into this filing by
reference to the initial registration statement on Form N-1A
filed on October 24, 1997.
(1) Amended Appendix A to Plan under Rule 18f-3
incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed on December 30,
1997.
(2) Form of Amended Appendix A to Plan under Rule 18-3
attached as Exhibit.
<PAGE>
(p) Other: Trustees' Power of Attorney. Attached as Exhibit.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification. Incorporated into this filing by reference to
the initial registration statement on Form N-1A filed on October 24,
1997.
Item 26. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company (the "Manager"), a series of Delaware
Management Business Trust, serves as investment manager to the Registrant and
also serves as investment manager or sub-adviser to certain of the other funds
in the Delaware Investments family (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III, Delaware
Group Equity Funds IV, Inc., Delaware Group Equity Funds V, Inc., Delaware Group
Government Fund, Delaware Group Income Funds, Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware Group
Tax-Free Fund, Delaware Group State Tax-Free Income Trust, Delaware Group
Tax-Free Money Fund, Delaware Group Premium Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group Adviser
Funds, Inc., Delaware Group Dividend and Income Fund, Inc., Delaware Group
Global Dividend and Income Fund, Inc., Voyageur Intermediate Tax-Free Funds,
Voyageur Tax-Free Funds, Voyageur Funds, Inc., Voyageur Insured Funds, Voyageur
Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur
Mutual Funds III, Inc., Voyageur Arizona Municipal Income Fund, Inc., Voyageur
Colorado Insured Municipal Income Fund, Inc., Voyageur Florida Insured Municipal
Income Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur Minnesota
Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund III, Inc.). In
addition, certain officers of the Manager also serve as directors/trustees of
the other funds in the Delaware Investments family, and certain officers are
also officers of these other funds. A company indirectly owned by the Manager's
indirect parent company acts as principal underwriter to the mutual funds in the
Delaware Investments family (see Item 29 below) and another such company acts as
the shareholder services, dividend disbursing, accounting servicing and transfer
agent for all of the mutual funds in the Delaware Investments family.
<PAGE>
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
David K. Downes President of Delaware Management Company (a series of Delaware Management Business
Trust); Executive Vice President, Chief Operating Officer and Chief Financial Officer of
Delaware Management Holdings, Inc.; Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of DMH Corp.; Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Director of Delvoy, Inc.; President and
Director of Delaware Management Company, Inc.; Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Trustee of Delaware Management Business Trust;
Executive Vice President, Chief Operating Officer and Chief Financial Officer of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Chairman,
President, Chief Executive Officer and Director of Delaware Service Company, Inc.;
President, Chief Executive Officer and Director of Delaware Capital Management, Inc.;
Chairman and Director of Retirement Financial Services, Inc.; Chairman and Director of
Delaware Management Trust Company; Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware Distributors, Inc.; Executive Vice
President, Chief Operating Officer and Chief Financial Officer of Delaware Distributors,
L.P.; President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.; Director of Delaware International Advisers Ltd.;
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director
of Founders Holdings, Inc.; Executive Vice President, Chief Operating Officer and Chief
Financial Officer of Founders CBO Corporation; President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and Trustee/Director of each fund in the
Delaware Investments family.
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton Place,
Newtown Square, PA
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management Company (a series of
Delaware Management Business Trust); Executive Vice President and General Counsel of
Delaware Management Holdings, Inc.; Executive Vice President, General Counsel and
Director of DMH Corp.; Executive Vice President, General Counsel and Director of Delvoy,
Inc.; Executive Vice President, General Counsel and Director of Delaware Management
Company, Inc.; Executive Vice President, General Counsel and Trustee of Delaware
Management Business Trust; Executive Vice President and General Counsel of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Executive Vice
President, General Counsel and Director of Delaware Service Company, Inc.; Executive Vice
President, General Counsel and Director of Delaware Capital Management, Inc.; Executive
Vice President, General Counsel and Director of Retirement Financial Services, Inc.;
Executive Vice President, General Counsel and Director of Delaware Management Trust
Company; Executive Vice President, General Counsel and Director of Delaware Distributors,
Inc.; Executive Vice President and General Counsel of Delaware Distributors, L.P.;
Executive Vice President, General Counsel and Director of Delaware International Holdings
Ltd.; Director of Delaware International Advisers Ltd.; Executive Vice President, General
Counsel and Director of Founders Holdings, Inc.; Executive Vice President and General
Counsel of Founders CBO Corporation; Executive Vice President and General Counsel of each
fund in the Delaware Investments family.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton, PA; Director
and Member of Executive Committee of Stonewall Links, Inc. since 1991, Bulltown Rd.,
Elverton, PA
- ------------------------------- -------------------------------------------------------------------------------------------
Richard G. Unruh 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.; Executive Vice President and Trustee of Delaware
Management Business Trust; Chief Executive Office, Chief Investment Officer/DIA Equity of
Delaware Investment Advisers (a series of Delaware Management Business Trust; Executive
Vice President of Delaware Capital Management, Inc.; Director of Delaware Investment
Advisers Ltd.; Executive Vice President, Chief Investment Officer/Equity of each fund in
the Delaware Investments family.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since 1989,
2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of Finance Committee,
AAA Mid Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia, PA; Board of
Directors, Metron, Inc. since 1995, 11911 Freedom Drive, Reston, VA
- ------------------------------- -------------------------------------------------------------------------------------------
H. Thomas McMeekin(1) Executive Vice President of Delaware Management Business Trust; Executive Vice
President/Chief Investment Officer DMC-Fixed Income of Delaware Management Company (a
series of Delaware Management Business Trust); Executive Vice President of Delaware
Capital Management, Inc.; Executive Vice President and Director of Delaware Management
Holdings, Inc.; Executive Vice President and Chief Investment Officer, Fixed Income of
each Fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
William E. Dodge(2) Executive Vice President of Delaware Management Company (a series of Delaware Management
Trust Company); Executive Vice President of Delaware Management Business Trust; President
of Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------- -------------------------------------------------------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of Delaware
Management Business Trust; Senior Vice President/Operations of Delaware Service Company,
Inc.; Senior Vice President/Operations of Retirement Financial Services, Inc.; Senior Vice
President/Operations of Delaware Management Trust Company.
- ------------------------------- -------------------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Head of Equity Trading of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President/Head of Equity Trading of Delaware Capital Management, Inc.
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Trustee of Delaware Management Business Trust;
Senior Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Senior Vice President/Senior Portfolio Manager of
Delaware Capital Management, Inc.; Senior Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice President/Global
Marketing and Client Services of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- ------------------------------- -------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/Corporate Controller of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Treasurer/Corporate
Controller of Delaware Management Holdings, Inc.; Senior Vice
President/Treasurer/Corporate Controller of DMH Corp; Senior Vice
President/Treasurer/Corporate Controller of Delvoy, Inc.; Senior Vice
President/Treasurer/Corporate Controller of Delaware Management Company, Inc.; Senior
Vice President/Treasurer/Corporate Controller of Delaware Management Business Trust;
Senior Vice President/Treasurer/Corporate Controller of Delaware Service Company, Inc.;
Senior Vice President/Treasurer/Corporate Controller of Delaware Capital Management,
Inc.; Senior Vice President/Treasurer/Corporate Controller of Retirement Financial
Services, Inc.; Executive Vice President/Corporate Controller/Treasurer of Delaware
Management Trust Company; Senior Vice President/Treasurer/Corporate Controller of
Delaware Distributors, L.P.; Senior Vice President/Treasurer/Corporate Controller of
Delaware International Holdings; Senior Vice President/Treasurer/Corporate Controller of
Founders Holdings, Inc.; Senior Vice President/ Assistant Treasurer Founders CBO
Corporation; Senior Vice President/Corporate Controller of each fund in the Delaware
Investments family
- ------------------------------- -------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Human Resources of Delaware
Management Holdings, Inc.; Senior Vice President/Human Resources of DMH Corp.; Senior
Vice President/Human Resources of Delvoy, Inc.; Senior Vice President/Human Resources
of Delaware Management Company, Inc.; Senior Vice President/Human Resources of Delaware
Management Business Trust; Senior Vice President/Human Resources of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Senior Vice President/Human
Resources of Delaware Service Company, Inc.; Senior Vice President/Human Resources of
Delaware Capital Management, Inc.; Senior Vice President/Human Resources of Delaware
Retirement Financial Services, Inc.; Senior Vice President/Human Resources of Delaware
Management Trust Company; Senior Vice President/Human Resources of Delaware
Distributors, Inc.; Senior Vice President/Human Resources of Delaware Distributors,
L.P.; Senior Vice President/Human Resources of each fund in the Delaware Investments
family.
- ------------------------------- -------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware
Management Company (a series of Delaware Management Business Trust); Senior Vice
President, Assistant Secretary and Deputy General Counsel of Delaware Management
Holdings, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
DMH Corp.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Delaware Management Business Trust; Senior Vice President, Assistant Secretary and Deputy
General Counsel of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Senior Vice President, Assistant Secretary and Deputy General Counsel of
Retirement Financial Services, Inc.; Senior Vice President, Assistant Secretary and
Deputy General Counsel of Delaware Distributors, Inc.; Senior Vice President, Assistant
Secretary and Deputy General Counsel of Delaware Distributors, L.P.; Senior Vice
President, Secretary and Deputy General Counsel of Delaware Management Trust Company;
Senior Vice President, Secretary and Deputy General Counsel of Delaware International
Holdings Ltd.; Senior Vice President, Secretary and Deputy General Counsel of Delvoy,
Inc.; Senior Vice President, Secretary and Deputy General Counsel of Delaware Management
Company, Inc.; Senior Vice President, Secretary and Deputy General Counsel of Delaware
Service Company, Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Capital Management, Inc.; Secretary of Founders CBO Corporation; Senior Vice
President, Assistant Secretary and Deputy General Counsel of Founders Holdings, Inc.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of each fund in the
Delaware Investments family.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane, Philadelphia, PA.
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
Eric E. Miller Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware
Management Company (a series of Delaware Management Business Trust); Senior Vice
President, Assistant Secretary and Deputy General Counsel of Delaware Management
Holdings, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
DMH Corp.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Delvoy, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Assistant Secretary and Deputy
General Counsel of Delaware Management Business Trust; Senior Vice President, Assistant
Secretary and Deputy General Counsel of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Senior Vice President, Assistant Secretary and
Deputy General Counsel of Delaware Service Company, Inc.; Senior Vice President,
Assistant Secretary and Deputy General Counsel of Delaware Capital Management, Inc.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Retirement
Financial Services, Inc.; Senior Vice President, Assistant Secretary and Deputy General
Counsel of Delaware Distributors, Inc.; Senior Vice President, Assistant Secretary and
Deputy General Counsel of Delaware Distributors, L.P.; Senior Vice President, Assistant
Secretary and Deputy General Counsel of Founders Holdings, Inc.; Senior Vice President,
Secretary and Deputy General Counsel of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Senior Vice President, Chief Information Officer
of Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior
Vice President, Chief Information Officer of Delaware Service Company, Inc.; Senior Vice
President, Chief Information Officer of Delaware Capital Management Company, Inc.; Senior
Vice President, Chief Information Officer of Retirement Financial Services, Inc.; Senior
Vice President, Chief Information Officer of Delaware Distributors, L.P.
- ------------------------------- -------------------------------------------------------------------------------------------
Gary T. Abrams(3) Vice President/Equity Trading of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Equity Trading of Delaware Investment Advisers
(a series of Delaware Management Business Trust)
- ------------------------------- -------------------------------------------------------------------------------------------
Christopher S. Adams Vice President/Business Manager, Equity of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Business Manager, Equity of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------- -------------------------------------------------------------------------------------------
Robert L. Arnold Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of Delaware Capital Management, Inc., Vice President/Portfolio Manager of each
fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------- -------------------------------------------------------------------------------------------
Richard E. Beister Vice President/Trading Operations of Delaware Management Company (a series of Delaware
Management Business Trust)
- ------------------------------- -------------------------------------------------------------------------------------------
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Compliance Director of Delaware Management
Holdings, Inc.; Vice President/Compliance Director of DMH Corp.; Vice
President/Compliance Director of Delvoy, Inc.; Vice President/Compliance Director of
Delaware Management Company, Inc.; Vice President/Compliance Director of Delaware
Management Business Trust; Vice President/Compliance Director of Delaware Investment
Advisers (a series of Delaware Management Business Trust);Vice President/Compliance
Director of Delaware Service Company, Inc.; Vice President/Compliance Director of
Delaware Capital Management, Inc.; Vice President/Compliance Director of Retirement
Financial Services, Inc.; Vice President/Compliance Director/Assistant Secretary of
Delaware Management Business Trust; Vice President/Compliance Director of Delaware
Distributors, Inc.; Vice President/Compliance Director of Delaware Distributors, L.P.;
Vice President/Compliance Director of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Client Services of Delaware Investment Advisers
(a series of Delaware Management Business Trust);Vice President/Client Services of each
fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust).
- ------------------------------- -------------------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Delaware Capital Management, Inc.; Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
James P. Dokas Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/ Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware Management
Business Trust);Vice President/Taxation of Delaware Management Holdings, Inc.; Vice
President/Taxation of DMH Corp.; Vice President/Taxation of Delvoy, Inc.; Vice
President/Taxation of Delaware Management Company, Inc.; Vice President/Taxation of
Delaware Management Business Trust; Vice President/Taxation of Delaware Investment
Advisers (a series of Delaware Management Business Trust);Vice President/Taxation of
Delaware Service Company, Inc.; Vice President/Taxation of Delaware Capital Management,
Inc.; Vice President/Taxation of Retirement Financial Services, Inc.; Vice
President/Taxation of Delaware Distributors, Inc.; Vice President/Taxation of Delaware
Distributors, L.P.; Vice President/Taxation of Founders Holdings, Inc.; Vice
President/Taxation of Founders CBO Corporation;
Vice President/Taxation of each fund in the
Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Performance Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Performance Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------- -------------------------------------------------------------------------------------------
Gerald S. Frey Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Investment Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Investment
Accounting of Delaware Service Company, Inc.; Vice President/Investment Accounting of
each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Equity Trading of Delaware Investment Advisers
(a series of Delaware Management Business Trust).
- ------------------------------- -------------------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Brian T. Hannon Vice President of Delaware Management Company (a series of Delaware Management Business
Trust); Vice President of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of each fund in the Delaware
Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Jeffrey W. Hynoski Vice President/Analyst of Delaware Management Company (a series of Delaware Management
Business Trust);Vice President/Analyst of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Analyst of each fund in the Delaware
Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Karina J. Ivstan Vice President/Strategic Planning of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Strategic Planning of Delaware Management
Holdings, Inc.; Vice President/Strategic Planning of Delaware Management Business Trust;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Strategic Planning of Delaware Service Company, Inc.; Vice President/Strategic
Planning of Delaware Capital Management, Inc.; Vice President/Strategic Planning of
Retirement Financial Services, Inc.; Vice President/Strategic Planning of Delaware
Management Trust Company; Vice President/Strategic of Delaware Distributors, L.P.; Vice
President/Strategic Planning of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware Management Company
(a series of Delaware Management Business Trust)
- ------------------------------- -------------------------------------------------------------------------------------------
Steven T. Lampe Vice President/Research Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Philip Y. Lin Vice President, Assistant Secretary and Associate General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President, Assistant
Secretary and Associate General Counsel of Delaware Investment Advisers (a series of
Delaware Management Business Trust);Vice President, Assistant Secretary and Associate
General Counsel of Delaware Service Company, Inc.; Vice President, Assistant Secretary
and Associate General Counsel of Delaware Capital Management, Inc.; Vice President,
Assistant Secretary and Associate General Counsel of Retirement Financial Services, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware Management
Trust Company; Vice President, Assistant Secretary and Associate General Counsel of
Delaware Distributors, L.P.; Vice President, Assistant Secretary and Associate General
Counsel of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
Michael D. Mabry Vice President, Assistant Secretary and Associate General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President, Assistant
Secretary and Associate General Counsel of Delaware Investment Advisers (a series of
Delaware Management Business Trust);Vice President, Assistant Secretary and Associate
General Counsel of Delaware Service Company, Inc.; Vice President, Assistant Secretary
and Associate General Counsel of Delaware Capital Management, Inc.; Vice President,
Assistant Secretary and Associate General Counsel of Retirement Financial Services, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware
Distributors, L.P.; Vice President, Assistant Secretary and Associate General Counsel of
each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of Founders Holdings, Inc., President and Director of
Founders CBO Corporation; Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Francis X. Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (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; Vice President/Senior Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Robert A. Norton, Jr. Vice President/Research Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust).
- ------------------------------- -------------------------------------------------------------------------------------------
David P. O'Connor Vice President, Assistant Secretary and Associate General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Vice President, Assistant
Secretary and Associate General Counsel of Delaware Investment Advisers (a series of
Delaware Management Business Trust);Vice President, Assistant Secretary and Associate
General Counsel of Delaware Service Company, Inc.; Vice President, Assistant Secretary
and Associate General Counsel of Delaware Capital Management, Inc.; Vice President,
Assistant Secretary and Associate General Counsel of Retirement Financial Services, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware
Distributors, L.P.; Vice President, Assistant Secretary and Associate General Counsel of
each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Assistant
Controller of Delaware Management Trust Company; Vice President/Assistant Controller of
Delaware International Holdings Ltd.
- ------------------------------- -------------------------------------------------------------------------------------------
Richard D. Siedel Vice President/Assistant Controller/Manager Payroll of Delaware Management Company (a
series of Delaware Management Business Trust).
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Delaware Management Company and its affiliates and other
Address* Positions and Offices Held
- ------------------------------- -------------------------------------------------------------------------------------------
<S> <C>
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Facilities and
Administration Services of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Facilities and Administration Services of Delaware
Service Company, Inc.; Vice President/Facilities and Administration Services of Delaware
Distributors, L.P.
- ------------------------------- -------------------------------------------------------------------------------------------
Thomas J. Trottman Vice President/Senior Corporate Bond Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Senior Corporate Bond Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Corporate Bond Analyst of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
Lori P. Wachs Vice President/Assistant Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Assistant Portfolio Manager of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Assistant Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------- -------------------------------------------------------------------------------------------
</TABLE>
*Business Address is 1818 Market Street, Philadelphia, PA 19103.
- --------------------------------------------------------------------------------
1 PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to present.
EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln National
Corporation 1992 to present.
2 PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin &
Palmer Associates, Wilmington, DE 1996-1998.
3 ASSISTANT VICE PRESIDENT, SENIOR TRADER, Mitchell Hutchins Asset Management
May 1996 - Feb.1997.
- --------------------------------------------------------------------------------
(b) State Street Global Advisors ("State Street") serves as sub-adviser
to the Registrant on behalf of Delaware S&P 500 Index Fund. State Street
currently manages large institutional accounts and collective investment funds.
The following persons serving as directors or officers of the Manager have held
the following positions during the past two years:
<TABLE>
<CAPTION>
- ------------------------------------------------ --------------------------------------------
Name and Principal Business Address* Positions and Offices with State Street
- ------------------------------------------------ --------------------------------------------
<S> <C>
Tenley E. Albright, MD Director
- ------------------------------------------------ --------------------------------------------
Joseph A. Baute Director
- ------------------------------------------------ --------------------------------------------
I. MacAlister Booth Director
- ------------------------------------------------ --------------------------------------------
Marshall N. Carter Chariman and CEO
- ------------------------------------------------ --------------------------------------------
James I. Cash, Jr. Director
- ------------------------------------------------ --------------------------------------------
Truman S. Casner Director
- ------------------------------------------------ --------------------------------------------
Nader F. Darehshori Director
- ------------------------------------------------ --------------------------------------------
Arthur L. Goldstein Director
- ------------------------------------------------ --------------------------------------------
David P. Gruber Director
- ------------------------------------------------ --------------------------------------------
John M. Kucharski Director
- ------------------------------------------------ --------------------------------------------
Charles R. LaMantia Director
- ------------------------------------------------ --------------------------------------------
David B. Perini Director
- ------------------------------------------------ --------------------------------------------
Dennis J. Picard Director
- ------------------------------------------------ --------------------------------------------
Alfred Poe Director
- ------------------------------------------------ --------------------------------------------
Bernard W. Reznicek Director
- ------------------------------------------------ --------------------------------------------
David A. Spina President and Chief Operating Officer
- ------------------------------------------------ --------------------------------------------
Diana Chapman Walsh Director
- ------------------------------------------------ --------------------------------------------
Robert E. Weissman Director
- ------------------------------------------------ --------------------------------------------
Dale L. Carleton Vice Chariman
- ------------------------------------------------ --------------------------------------------
Ronald E. Logue Vice Chairman
- ------------------------------------------------ --------------------------------------------
Nicholas A. Lopardo Vice Chairman
- ------------------------------------------------ --------------------------------------------
Maureen Scannell Bateman Executive Vice President/General Counsel
- ------------------------------------------------ --------------------------------------------
Joseph W. Chow Executive Vice President
- ------------------------------------------------ --------------------------------------------
Susan Comeau Executive Vice President
- ------------------------------------------------ --------------------------------------------
John Fiore Executive Vice President and Chief
Information Officer
- ------------------------------------------------ --------------------------------------------
Timothy B. Harbert Executive Vice President
- ------------------------------------------------ --------------------------------------------
Ronald L. O'Kelley Executive Vice President, Treasurer and
Chief Financial Officer
- ------------------------------------------------ --------------------------------------------
Albert E. Petersen Executive Vice President
- ------------------------------------------------ --------------------------------------------
William M. Reghitto Executive Vice President
- ------------------------------------------------ --------------------------------------------
Stanley W. Shelton Executive Vice President
- ------------------------------------------------ --------------------------------------------
John R. Towers Executive Vice President
- ------------------------------------------------ --------------------------------------------
</TABLE>
*Business Address is Two International Place Boston, MA 02110.
<PAGE>
Item 27. Principal Underwriters.
-----------------------
(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
- ------------------------------------------ --------------------------------------- ----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Delaware Investment Advisers Limited Partner None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- ------------------------------------------ --------------------------------------- ----------------------------------------
David K. Downes Executive Vice President/Chief President and Chief Executive
Operating Officer/Chief Financial Officer/Chief Financial Officer/Chief
Officer Operating Officer and Trustee
- ------------------------------------------ --------------------------------------- ----------------------------------------
Richard J. Flannery Executive Vice President/General Executive Vice President/General
Counsel Counsel
- ------------------------------------------ --------------------------------------- ----------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
- ------------------------------------------ --------------------------------------- ----------------------------------------
Michael P. Bishof Senior Vice Senior Vice President/Treasurer
President/Treasurer/Investment
Accounting
- ------------------------------------------ --------------------------------------- ----------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- ------------------------------------------ --------------------------------------- ----------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/ Senior Vice President/Corporate
Corporate Controller
- ------------------------------------------ --------------------------------------- ----------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- ------------------------------------------ --------------------------------------- ----------------------------------------
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales, IPI Channel
- ------------------------------------------ --------------------------------------- ----------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------ --------------------------------------- ----------------------------------------
Mac Macaulliffe Senior Vice President/Divisional None
Sales Manager
- ------------------------------------------ --------------------------------------- ----------------------------------------
J. Chris Meyer Senior Vice President/Director, None
Product Management
- ------------------------------------------ --------------------------------------- ----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------ --------------------------------------- ----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S> <C> <C>
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- ------------------------------------------ --------------------------------------- ----------------------------------------
Stephen C. Nell Senior Vice President/National None
Retirement Sales
- ------------------------------------------ --------------------------------------- ----------------------------------------
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
- ------------------------------------------ --------------------------------------- ----------------------------------------
Christopher H. Price Senior Vice President/Channel Manager None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Thomas E. Sawyer Senior Vice President/Director, None
National Sales
- ------------------------------------------ --------------------------------------- ----------------------------------------
James L. Shields Senior Vice President/Chief None
Information Officer
- ------------------------------------------ --------------------------------------- ----------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- ------------------------------------------ --------------------------------------- ----------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, South East None
Region
- ------------------------------------------ --------------------------------------- ----------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Gabriella Bercze Vice President/Wholesaler, Financial None
Institution
- ------------------------------------------ --------------------------------------- ----------------------------------------
Larry D. Bridwell Vice President/Financial Institutions None
Wholesaler
- ------------------------------------------ --------------------------------------- ----------------------------------------
Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- ------------------------------------------ --------------------------------------- ----------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Larry Carr Vice President/VA Sales Manager None
- ------------------------------------------ --------------------------------------- ----------------------------------------
William S. Carroll Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Matthew Coldren Vice President/National Accounts None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Patrick A Connelly Vice President/RIA Sales None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Jessie V. Emery Vice President/Marketing None
Communications
- ------------------------------------------ --------------------------------------- ----------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- ------------------------------------------ --------------------------------------- ----------------------------------------
Edward A. Foley Vice President/Marketing None
Communications
- ------------------------------------------ --------------------------------------- ----------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Douglas R. Glennon Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Darryl S. Grayson Vice President/Director, Internal None
Sales
- ------------------------------------------ --------------------------------------- ----------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Ronald A. Haimowitz Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
John R. Herron Vice President/VA Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------ --------------------------------------- ----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S> <C> <C>
Steven N. Horton Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Dinah J. Huntoon Vice President/Product Manager, None
Equities
- ------------------------------------------ --------------------------------------- ----------------------------------------
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic Planning
- ------------------------------------------ --------------------------------------- ----------------------------------------
Christopher L. Johnston Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Michael J. Jordan Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Ellen M. Krott Vice President/Marketing None
- ------------------------------------------ --------------------------------------- ----------------------------------------
John Leboeuf Vice President/VA Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
SooHee Lee Vice President/Fixed Income & None
International Product Management
- ------------------------------------------ --------------------------------------- ----------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------ --------------------------------------- ----------------------------------------
John R. Logan Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------ --------------------------------------- ----------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------ --------------------------------------- ----------------------------------------
Theodore T. Malone Vice President/IPI Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Debbie Marler Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Gregory J. McMillan Vice President/National Accounts None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Scott L. Metzger Vice President/Business Development None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Jamie L. Meyer Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Roger J. Miller Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Christopher W. Moore Vice President/VA Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Andrew F. Morris Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Patrick L. Murphy Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Scott E. Naughton Vice President/IPI Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------ --------------------------------------- ----------------------------------------
Julie A. Nye Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- ------------------------------------------ --------------------------------------- ----------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------ --------------------------------------- ----------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Otis S. Page Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------ --------------------------------------- ----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S> <C> <C>
Mark A. Pletts Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Erik R. Preus Vice President/Wrap Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Philip G. Rickards Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Laura E. Roman Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Robert A. Rosso Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Richard Salus Vice President/Assistant Controller None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Gordon E. Searles Vice President/Client Services None
- ------------------------------------------ --------------------------------------- ----------------------------------------
James R. Searles Vice President/VA Sales Manager None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- ------------------------------------------ --------------------------------------- ----------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- ------------------------------------------ --------------------------------------- ----------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Kimberly Spangler Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Stephanie R. Szabo Vice President/Retirement Marketing None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Michael T. Taggart Vice President/Facilities and None
Administration Services
- ------------------------------------------ --------------------------------------- ----------------------------------------
Julia R. Vander-Els Vice President/Retirement Plan None
Communications
- ------------------------------------------ --------------------------------------- ----------------------------------------
Wayne W. Wagner Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
John A. Wells Vice President/Marketing Technology None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Courtney S. West Vice President/Institutional Sales None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------ --------------------------------------- ----------------------------------------
Scott Whitehouse Vice President/Wholesaler None
- ------------------------------------------ --------------------------------------- ----------------------------------------
Theodore V. Wood Vice President/Technical Systems None
Officer
- ------------------------------------------ --------------------------------------- ----------------------------------------
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Inapplicable.
<PAGE>
Item 28. Location of Accounts and Records.
---------------------------------
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 29. Management Services. None.
Item 30. Undertakings.
(a) Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
this City of Philadelphia, Commonwealth of Pennsylvania on this 16th day of
September, 1999.
DELAWARE GROUP FOUNDATION FUNDS
By /s/ David K. Downes
------------------------------------------
David K. Downes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------- --------------------------------------- ------------------
<S> <C> <C>
/s/ David K. Downes President/Chief Executive Officer September 16, 1999
- ----------------------- Chief Operating Officer/Chief Financial
David K. Downes Officer (Principal Executive Officer/
Principal Financial Officer and Principal
Accounting Officer) and Trustee
/s/ Wayne A. Stork Trustee September 16, 1999
- -----------------------
Wayne A. Stork
/s/ John H. Durham Trustee September 16, 1999
- -----------------------
John H. Durham
/s/ Anthony D. Knerr Trustee September 16, 1999
- -----------------------
Anthony D. Knerr
/s/ Walter P. Babich Trustee September 16, 1999
- -----------------------
Walter P. Babich
/s/ Charles E. Peck Trustee September 16, 1999
- -----------------------
Charles E. Peck
/s/ Ann R. Leven Trustee September 16, 1999
- ----------------------
Ann R. Leven
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.D1 Investment Management Agreement (April 1, 1999)
EX-99.D2 Amendment No. 1 to the Investment Management Agreement (April 15, 1999)
EX-99.D4 Form of Amendment No. 2 to the Investment Management Agreement (1999) adding Delaware S&P 500 Index Fund
EX-99.D5 Form of Sub-Advisory Agreement (1999) on behalf of Delaware S&P 500 Index Fund
EX-99.E1v Form of Distribution Agreement on behalf of Delaware S&P 500 Index Fund
EX-99.G1(iii) Form of Letter to add the Delaware S&P 500 Index Fund to the Custodian Agreement
EX-99.HI(iii) Form of Shareholders Services Agreement on behalf of Delaware S&P 500 Index Fund
EX-99.M10 Plan under Rule 12b-1 for Delaware S&P 500 Index Fund Class A
EX-99.M11 Plan under Rule 12b-1 for Delaware S&P 500 Index Fund Class B
EX-99.M12 Plan under Rule 12b-1 for Delaware S&P 500 Index Fund Class C
EX-99.M13 Plan under Rule 12b-1 for Delaware S&P 500 Index Fund Class C
EX-99N2 Form of Amended Appendix A to Plan under Rule 18f-3
EX-99.P Power of Attorney
</TABLE>
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP FOUNDATION FUNDS, a
Delaware business trust (the "Trust") severally on behalf of each series of
shares of beneficial interest of the Trust that is listed on Exhibit A to this
Agreement, as that Exhibit may be amended from time to time (each such series of
shares is hereinafter referred to as a "Portfolio" and, together with other
series of shares listed on such Exhibit, the "Portfolios"), and DELAWARE
MANAGEMENT COMPANY, a series of Delaware Management Business Trust, a Delaware
business trust (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, each Portfolio engages in the business of investing and
reinvesting its assets in securities; and
WHEREAS, the Investment Manager is registered under the Investment
Advisers Act of 1940 as an investment adviser and engages in the business of
providing investment management services; and
WHEREAS, the Trust, severally on behalf of each Portfolio, and the
Investment Manager desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Trust hereby employs the Investment Manager to manage the
investment and reinvestment of each Portfolio's assets and to administer the
Trust's affairs, subject to the direction of the Trust's Board of Trustees and
officers for the period and on the terms hereinafter set forth. The Investment
Manager hereby accepts such employment and agrees during such period to render
the services and assume the obligations herein set forth for the compensation
herein provided. The Investment Manager shall for all purposes herein be deemed
to be an independent contractor, and shall, unless otherwise expressly provided
and authorized, have no authority to act for or represent the Trust in any way,
or in any way be deemed an agent of the Trust. The Investment Manager shall
regularly make decisions as to what securities and other instruments to purchase
and sell on behalf of each Portfolio and shall effect the purchase and sale of
such investments in furtherance of each Portfolio's objectives and policies and
shall furnish the Board of Trustees of the Trust with such information and
reports regarding each Portfolio's investments as the Investment Manager deems
appropriate or as the Trustees of the Trust may reasonably request.
2. The Trust shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto, including, but not
in limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of shares,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' and Trustees' meetings; miscellaneous office expenses; brokerage
commissions; custodian fees; legal and accounting fees; taxes; and federal and
state registration fees. Directors, trustees, officers and employees of the
Investment Manager may be directors, trustees, officers and employees of any of
the investment companies within the Delaware Investments family (including the
Trust). Directors, trustees, officers and employees of the Investment Manager
who are directors, trustees, officers and/or employees of these investment
companies shall not receive any compensation from such companies for acting in
such dual capacity.
<PAGE>
In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Trust and Investment Manager may share
facilities common to each, which may include legal and accounting personnel,
with appropriate proration of expenses between them.
3. (a) Subject to the primary objective of obtaining the best
execution, the Investment Manager will place orders for the purchase and sale of
portfolio securities and other instruments with such broker/dealers selected who
provide statistical, factual and financial information and services to the
Trust, to the Investment Manager, to any sub-adviser (as defined in Paragraph 5
hereof, a "Sub-Adviser") or to any other fund for which the Investment Manager
or any Sub-Adviser provides investment advisory services and/or with
broker/dealers who sell shares of the Trust or who sell shares of any other
investment company (or series thereof) for which the Investment Manager or any
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of any investment companies or series thereof for which the Investment
Manager or Sub-Adviser provide investment advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the Rules of the Securities and
Exchange Commission and NASD Regulation, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above
and subject to such policies and procedures as may be adopted by the Board of
Trustees and officers of the Trust, the Investment Manager may cause a Portfolio
to pay a member of an exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction, in such instances where the Investment Manager has determined in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member, broker or
dealer, viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Trust on behalf of the
Portfolios and to other investment companies (or series thereof) and other
advisory accounts for which the Investment Manager or any Sub-Adviser exercises
investment discretion.
4. As compensation for the services to be rendered to a particular
Portfolio by the Investment Manager under the provisions of this Agreement, that
Portfolio shall pay monthly to the Investment Manager exclusively from that
Portfolio's assets, a fee based on the average daily net assets of that
Portfolio during the month. Such fee shall be calculated in accordance with the
fee schedule applicable to that Portfolio as set forth in Exhibit A hereto,
which Exhibit may be amended from time to time as provided in Paragraphs 10(b)
and (c) of this Agreement.
If this Agreement is terminated prior to the end of any calendar month
with respect to a particular Portfolio, the management fee for such Portfolio
shall be prorated for the portion of any month in which this Agreement is in
effect with respect to such Portfolio according to the proportion which the
number of calendar days during which the Agreement is in effect bears to the
number of calendar days in the month, and shall be payable within 10 calendar
days after the date of termination.
5. The Investment Manager may, at its expense, select and contract with
one or more investment advisers registered under the Investment Advisers Act of
1940 ("Sub-Advisers") to perform some or all of the services for a Portfolio for
which it is responsible under this Agreement. The Investment Manager will
compensate any Sub-Adviser for its services to the Portfolio. The Investment
Manager may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected and the
requisite approval of the Portfolio's shareholders is obtained. The Investment
Manager will continue to have responsibility for all advisory services furnished
by any Sub-Adviser.
-2-
<PAGE>
6. The services to be rendered by the Investment Manager to the Trust
on behalf of each Portfolio under the provisions of this Agreement are not to be
deemed to be exclusive, and the Investment Manager shall be free to render
similar or different services to others so long as its ability to render the
services provided for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Trust or to any other investment company, corporation, association, firm or
individual.
8. It is understood and agreed that so long as the Investment Manager
and/or its advisory affiliates shall continue to serve as the investment adviser
to any of the Trust's Portfolios, other investment companies as may be sponsored
or advised by the Investment Manager or its affiliates shall have the right
permanently to adopt and to use the words "Delaware," "Delaware Investments" or
"Delaware Group" in their names and in the names of any series or class of
shares of such funds.
9. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as the Investment
Manager to the Trust on behalf of any Portfolio, the Investment Manager shall
not be subject to liability to the Trust or to any Portfolio or to any
shareholder of the Trust for any action or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security, or otherwise.
10. (a) This Agreement shall be executed and become effective as of the
date written below, and shall become effective with respect to a particular
Portfolio as of the effective date set forth in Exhibit A for that Portfolio,
only if approved by the vote of a majority of the outstanding voting securities
of that Portfolio. It shall continue in effect for an initial period of two
years for each Portfolio and may be renewed thereafter only so long as such
renewal and continuance is specifically approved at least annually by the Board
of Trustees or by the vote of a majority of the outstanding voting securities of
that Portfolio and only if the terms and the renewal hereof have been approved
by the vote of a majority of the Trustees of the Trust who are not parties
hereto or interested persons of any such party ("Independent Trustees"), cast in
person at a meeting called for the purpose of voting on such approval.
(b) Except as provided in Paragraph 10(c) below, no amendment to
this Agreement (or to Exhibit A hereto) shall be effective with respect to any
Portfolio unless approved by: (i) a majority of the Trustees of the Trust,
including a majority of Independent Trustees; and (ii) a majority of the
outstanding voting securities of the particular Portfolio. Any such amendment
that pertains to a Portfolio will not change, or otherwise affect the
applicability of, this Agreement with respect to other Portfolios.
(c) The Agreement (and Exhibit A hereto) may be amended with
respect to a Portfolio without the approval of a majority of the outstanding
voting securities of that Portfolio if the amendment relates solely to a
management fee reduction or other change that is permitted or not prohibited
under federal law, rule, regulation or SEC staff interpretation thereof to be
made without shareholder approval. This Agreement may be amended from time to
time to add or remove one or more Portfolios, or to reflect changes in
management fees, by an amendment to Exhibit A hereto executed by the Trust and
the Investment Manager. Any such amendment that pertains to a Portfolio will not
change, or otherwise affect the applicability of, this Agreement with respect to
other Portfolios.
-3-
<PAGE>
(d) This Agreement may be terminated as to any Portfolio by the
Trust at any time, without the payment of a penalty, on sixty days' written
notice to the Investment Manager of the Trust's intention to do so, pursuant to
action by the Board of Trustees of the Trust or pursuant to the vote of a
majority of the outstanding voting securities of the affected Portfolio. The
Investment Manager may terminate this Agreement at any time, without the payment
of a penalty, on sixty days' written notice to the Portfolio of its intention to
do so. Upon termination of this Agreement, the obligations of all the parties
hereunder shall cease and terminate as of the date of such termination, except
for any obligation to respond for a breach of this Agreement committed prior to
such termination, and except for the obligation of the Trust on behalf of a
Portfolio to pay to the Investment Manager the fee provided in Paragraph 4
hereof, prorated to the date of termination. This Agreement shall automatically
terminate in the event of its assignment.
11. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
12. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested persons"; and "assignment"
shall havemeaning defined in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized officers and duly attested as of
the 1st day of April, 1999.
<TABLE>
<CAPTION>
DELAWARE MANAGEMENT COMPANY, DELAWARE GROUP
a series of Delaware Management Business Trust FOUNDATION FUNDS on behalf
of the Portfolios listed on Exhibit A
<S> <C>
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
Attest: Attest:
--------------------------- ---------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
</TABLE>
-4-
<PAGE>
EXHIBIT A
THIS EXHIBIT to the Investment Management Agreement between DELAWARE
GROUP FOUNDATION FUNDS and DELAWARE MANAGEMENT COMPANY, a series of Delaware
Management Business Trust entered into as of the 1st day of April, 1999 (the
"Agreement") lists the Portfolios for which the Investment Manager provides
investment management services pursuant to this Agreement, along with the
management fee rate schedule for each Portfolio and the date on which the
Agreement became effective for each Portfolio.
- --------------------------------------------------------------------------------
Portfolio Name Effective Date Management Fee Schedule
-------------- -------------- (as a percentage of
average daily net assets)
Annual Rate
-----------
- --------------------------------------------------------------------------------
Balanced Portfolio April 1, 1999 0.25%
- --------------------------------------------------------------------------------
Income Portfolio April 1, 1999 0.25%
- --------------------------------------------------------------------------------
-5-
<PAGE>
AMENDMENT NO. 1 TO
EXHIBIT A
OF THE INVESTMENT MANAGEMENT AGREEMENT
THIS EXHIBIT to the Investment Management Agreement dated April 1, 1999
(the "Agreement") between DELAWARE GROUP FOUNDATION FUNDS and DELAWARE
MANAGEMENT COMPANY, a series of Delaware Management Business Trust, amended as
of the 15th day of April, 1999 to add the Growth Portfolio, lists the Portfolios
for which the Investment Manager provides investment management services
pursuant to the Agreement, along with the management fee rate schedule for each
Portfolio and the date on which the Agreement became effective for each
Portfolio.
- --------------------------------------------------------------------------------
Portfolio Name Effective Date Management Fee Schedule
-------------- -------------- (as a percentage of
average daily net assets
Annual Rate
------------------------
- --------------------------------------------------------------------------------
Balanced Portfolio April 1, 1999 0.25%
- --------------------------------------------------------------------------------
Growth Portfolio April 15, 1999 0.25%
- --------------------------------------------------------------------------------
Income Portfolio April 1, 1999 0.25%
- --------------------------------------------------------------------------------
DELAWARE MANAGEMENT DELAWARE GROUP
COMPANY, a series of Delaware FOUNDATION FUNDS
Management Business Trust
By:___________________________ By:______________________________
Name:_________________________ Name:____________________________
Title:________________________ Title:___________________________
Attest:_______________________ Attest:__________________________
Name:_________________________ Name:____________________________
Title:________________________ Title:___________________________
<PAGE>
AMENDMENT NO. 2 TO
EXHIBIT A
OF THE INVESTMENT MANAGEMENT AGREEMENT
THIS EXHIBIT to the Investment Management Agreement dated April 1, 1999
(the "Agreement") between DELAWARE GROUP FOUNDATION FUNDS and DELAWARE
MANAGEMENT COMPANY, a series of Delaware Management Business Trust, amended as
of the 27th day of December 1999 to add the Delaware S&P 500 Index Fund, lists
the Portfolios for which the Investment Manager provides investment management
services pursuant to the Agreement, along with the management fee rate schedule
for each Portfolio and the date on which the Agreement became effective for each
Portfolio.
- --------------------------------------------------------------------------------
Portfolio Name Effective Date Management Fee Schedule
-------------- -------------- (as a percentage of
average daily net assets
Annual Rate
------------------------
- --------------------------------------------------------------------------------
Delaware Balanced Portfolio April 1, 1999 0.25%
- --------------------------------------------------------------------------------
Delaware Growth Portfolio April 15, 1999 0.25%
- --------------------------------------------------------------------------------
Delaware Income Portfolio April 1, 1999 0.25%
- --------------------------------------------------------------------------------
Delaware S&P 500 Index Fund December 27, 1999
- --------------------------------------------------------------------------------
DELAWARE MANAGEMENT DELAWARE GROUP
COMPANY, a series of Delaware FOUNDATION FUNDS
Management Business Trust
By:___________________________ By:______________________________
Name:_________________________ Name:____________________________
Title:________________________ Title:___________________________
Attest:_______________________ Attest:__________________________
Name:_________________________ Name:____________________________
Title:________________________ Title:___________________________
<PAGE>
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between [MANAGER NAME] ("Investment Manager"),
and [SUB-ADVISER NAME] ("Sub-Adviser").
WITNESSETH:
WHEREAS, [COMPANY NAME], a [______________] ("Company"), has been
organized and operates as an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Investment Manager and the Company on behalf of the [FUND
NAME] ("Fund") have entered into an agreement ("Investment Management
Agreement") whereby the Investment Manager will provide investment advisory
services to the Company on behalf of the Fund; and
WHEREAS, the Investment Management Agreement permits the Investment
Manager to hire one or more sub-advisers to assist the Investment Manager in
providing investment advisory services to the Company on behalf of the Fund; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended, and
engage in the business of providing investment management services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Investment Manager hereby employs the Sub-Adviser, subject
always to the Investment Manager's control and supervision, to manage the
investment and reinvestment of that portion of the Fund's assets as the
Investment Manager shall designate from time to time and to furnish the
Investment Manager with investment recommendations, asset allocation advice,
research, economic analysis and other investment services with respect to
securities in which the Fund may invest, subject to the direction of the Board
and officers of the Company for the period and on the terms hereinafter set
forth. The Sub-Adviser hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Company
in any way, or in any way be deemed an agent of the Company. The Sub-Adviser
shall regularly make decisions as to what securities to purchase and sell on
behalf of the Fund with respect to that portion of the Fund's assets designated
by the Investment Manager, shall effect the purchase and sale of such
investments in furtherance of the Fund's objectives and policies and shall
furnish the Board of [Directors/Trustees] of the Company with such information
and reports regarding its activities as the Investment Manager deems appropriate
or as the [Directors/Trustees] of the Company may reasonably request in the
performance of its duties and obligations under this Agreement. The Sub-Adviser
shall act in conformity with the [Articles of Incorporation/Agreement and
Declaration of Trust], By-Laws and Prospectus of the Company and with the
instructions and directions of the Investment Manager and of the Board of
[Directors/Trustees] of the Company and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986 and all other
applicable federal and state laws and regulations consistent with the provisions
of Section 15(c) of the 1940 Act.
<PAGE>
2. Under the terms of the Investment Management Agreement, the Company
shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures; dealing
with its own shareholders; the payment of dividends; transfer of stock,
including issuance and repurchase of shares; preparation of share certificates;
reports and notices to shareholders; calling and holding of shareholders'
meetings; miscellaneous office expenses; brokerage commissions; custodian fees;
legal and accounting fees; taxes; and federal and state registration fees.
Without limiting the foregoing, except as the Investment Manager and the
Sub-Adviser may agree in writing from time to time, the Sub-Adviser shall have
no responsibility for record maintenance and preservation obligations under
Section 31 of the 1940 Act.
Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds which have employed the
Sub-Adviser as sub-adviser or investment manager. Directors, officers and
employees of the Sub-Adviser who are [Directors/Trustees], officers and/or
employees of the Company, shall not receive any compensation from the Company
for acting in such dual capacity.
In the conduct of the respective business of the parties hereto and
in the performance of this Agreement, the Company, the Investment Manager and
the Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) Subject to the primary objective of obtaining the best
execution, the Sub-Adviser may place orders for the purchase and sale of
portfolio securities and other instruments with such broker/dealers who provide
statistical, factual and financial information and services to the Company, to
the Investment Manager, to the Sub-Adviser or to any other fund for which the
Investment Manager or Sub-Adviser provides investment advisory services and/or
with broker/dealers who sell shares of the Company or who sell shares of any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services. Broker/dealers who sell shares of the funds for which the
Investment Manager or Sub-Adviser provides advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the rules of the Securities and
Exchange Commission and NASD Regulation, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
[Directors/Trustees] and officers of the Company, the Sub-Adviser may cause the
Company to pay a member of an exchange, broker or dealer an amount of commission
for effecting a securities transaction in excess of the amount of commission
another member of an exchange, broker or dealer would have charged for effecting
that transaction, in such instances where the Sub-Adviser has determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Sub-Adviser's
overall responsibilities with respect to the Company on behalf of the Fund and
to other funds and other advisory accounts for which the Investment Manager or
the Sub-Adviser exercises investment discretion.
4. As compensation for the services to be rendered to the Company for
the benefit of the Fund by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub-Adviser:
[(The following language is used for funds that do not have an
asset-based sub-advisory fee rate:) a monthly fee equal to [ %] of the fees paid
to the Investment Manager under the Investment Management Agreement.]
-2-
<PAGE>
[(The following language is used for funds that have an asset-based
sub-advisory fee rate:) a monthly fee equal to [insert asset-based fee rate];
provided however, that the Sub-Adviser shall waive all or a portion of the fees
payable under this Agreement to the extent necessary to bear its proportionate
share of any management fee waiver undertaken by the Investment Manager. The
amount of such waiver by the Sub-Adviser shall be calculated by multiplying the
dollar amount of the management fees waived by the investment manager by the
percentage that the then-current sub-advisory fee rate represents of the
then-current investment management fee rate.]
If this Agreement is terminated prior to the end of any calendar
month, the Sub-Advisory fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within 10 days after the date
of termination.
5. The services to be rendered by the Sub-Adviser to the Company for
the benefit of the Fund under the provisions of this Agreement are not to be
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby; provided, however,
except for advisory arrangements implemented prior to the date of this
Agreement, during the term of this Agreement the Sub-Adviser will not, without
the written consent of the Investment Manager, which consent will not be
unreasonably withheld, render such services to an investment company (or
portfolio thereof) which the Investment Manager reasonably determines would be
in competition with and which has investment policies similar to those of the
Company.
6. Subject to the limitation set forth in Paragraph 5, the Sub-Adviser,
its directors, officers, employees, agents and shareholders may engage in other
businesses, may render investment advisory services to other investment
companies, or to any other corporation, association, firm or individual, and may
render underwriting services to the Company or to any other investment company,
corporation, association, firm or individual.
The Investment Manager agrees that it shall not use the
Sub-Adviser's name or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Fund's shareholders, without the
prior written consent of the Sub-Adviser.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as Sub-Adviser to the
Company on behalf of the Fund, the Sub-Adviser shall not be subject to liability
to the Company or to the Fund, to the Investment Manager or to any shareholder
of the Company for any action or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security, or otherwise.
8. (a) This Agreement shall be executed and become effective as of the
date written below if approved by the vote of a majority of the outstanding
voting securities of the Fund. It shall continue in effect for a period of two
years and may be renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by the Board of [Directors/Trustees]
or by the vote of a majority of the outstanding voting securities of the Fund
and only if the terms and the renewal hereof have been approved by the vote of a
majority of the [Directors/Trustees] of the Company who are not parties hereto
or interested persons of any such party ("Independent [Directors/Trustees]"),
cast in person at a meeting called for the purpose of voting on such approval.
-3-
<PAGE>
(b) No amendment to this Agreement shall be effective unless
approved by: (i) a majority of the [Directors/Trustees] of the Company,
including a majority of Independent [Directors/Trustees]; and (ii) a majority of
the outstanding voting securities of the Fund. Notwithstanding the foregoing,
the Agreement may be amended without the approval of a majority of the
outstanding voting securities of the Fund if the amendment relates solely to a
management fee reduction or other change that is permitted or not prohibited
under federal law, rule, regulation or SEC staff interpretation thereof to be
made without shareholder approval.
(c) This Agreement may be terminated by the Investment Manager or
the Company at any time, without the payment of a penalty, on sixty days'
written notice to the Sub-Adviser, of the Investment Manager's or the Company's
intention to do so, in the case of the Company pursuant to action by the Board
of [Directors/Trustees] of the Company or pursuant to the vote of a majority of
the outstanding voting securities of the Fund. The Sub-Adviser may terminate
this Agreement at any time, without the payment of a penalty on sixty days'
written notice to the Investment Manager and the Company of its intention to do
so. Upon termination of this Agreement, the obligations of all the parties
hereunder shall cease and terminate as of the date of such termination, except
for any obligation to respond for a breach of this Agreement committed prior to
such termination, and except for the obligation of the Investment Manager to pay
to the Sub-Adviser the fee provided in Paragraph 4 hereof, prorated to the date
of termination. This Agreement shall automatically terminate in the event of its
assignment. This Agreement shall automatically terminate upon the termination of
the Investment Management Agreement.
9. This Agreement shall extend to and bind the successors of the
parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested person"; and "assignment"
shall have the meaning defined in the Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their duly authorized officers and duly attested as of the _____
day of ___________________, _____.
[SUB-ADVISER NAME] [INVESTMENT MANAGER NAME]
By:___________________________________ By:_______________________________
Name: Name:
Title: Title:
Attest:________________________________ Attest:___________________________
Agreed to and accepted as of the day and year first above written:
[COMPANY NAME]
on behalf of the [FUND NAME]
By:______________________________
Attest:__________________________
-4-
<PAGE>
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this 27th day of
December, 1999 by and between DELAWARE GROUP FOUNDATION FUNDS, a Delaware
business trust (the "Trust"), for the DELAWARE S&P 500 INDEX FUND series (the
"Series"), and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware
limited partnership.
WITNESSETH
----------
WHEREAS, the Trust is an investment company regulated by Federal and
State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of the securities of investment companies and, in connection
therewith and acting solely as agent for such investment companies and not as
principal, advertising, promoting, offering and selling their securities to the
public, and
WHEREAS, the Distributor previously served as the national distributor
for the predecessor to the Trust and the Trust has designated the Distributor to
act as the national distributor for the Trust as of the date of this Agreement;
and
WHEREAS, the Trust desires to enter into a new agreement with the
Distributor as of the date hereof, pursuant to which the Distributor shall
continue to be the national distributor of the Series' Delaware S&P 500 Index
Fund A Class ("Class A Shares"), Delaware S&P 500 Index Fund B Class ("Class B
Shares"), Delaware S&P 500 Index Fund C Class ("Class C Shares"), Delaware S&P
500 Index Fund Institutional Class ("Institutional Class Shares") and Delaware
S&P 500 Index Fund Consultant Class ("Consultant Class Shares"), which Trust,
Series and classes may do business under these or such other names as the Board
of Trustees may designate from time to time, on the terms and conditions set
forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Trust hereby engages the Distributor to promote the distribution
of the Series' shares and, in connection therewith and as agent for
the Trust and not as principal, to advertise, promote, offer and
sell the Series' shares to the public.
2. (a) The Distributor agrees to serve as distributor of the Series'
shares and, as agent for the Trust and not as principal, to
advertise, promote and use its best efforts to sell the Series'
shares wherever their sale is legal, either through dealers or
otherwise, in such places and in such manner, not inconsistent
with the law and the provisions of this Agreement and the
Trust's Registration Statement under the Securities Act of 1933,
including the Prospectuses contained therein and the Statement
of Additional Information contained therein, as may be mutually
determined by the Trust and the Distributor from time to time.
(b) For the Institutional Class Shares, the Distributor will bear
all costs of financing any activity which is primarily intended
<PAGE>
to result in the sale of that class of shares, including, but
not necessarily limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and
mailing of sales literature and distribution of that class of
shares.
(c) For its services as agent for the Class A Shares, Class B
Shares, and Class C Shares, the Distributor shall be entitled to
compensation on each sale or redemption, as appropriate, of
shares of such classes equal to any front-end or deferred sales
charge described in the Prospectus from time to time and may
allow concessions to dealers in such amounts and on such terms
as are therein set forth.
(d) For the Class A Shares, Class B Shares, and Class C Shares, the
Trust shall, in addition, compensate the Distributor for its
services as provided in the Distribution Plan as adopted on
behalf of the Class A Shares, Class B Shares, and Class C
Shares, respectively, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plans"), copies of which as
presently in force are attached hereto as, respectively, Exhibit
"A," "B," and "C."
(e) For the Consultant class, the Fund shall compensate the
Distributor for its services as such is provided in the
Distribution Plan as adopted by the Fund pursuant to Investment
Company Act Rule 12b-1 (the "Plan"), a copy of which as
presently in force is attached hereto as Exhibit "D".
3. (a) The Trust agrees to make available for sale by the Trust through
the Distributor all or such part of the authorized but unissued
shares of beneficial interest of the Series as the Distributor
shall require from time to time and, except as provided in
Paragraph 3(b) hereof, the Trust will not sell Series' shares
other than through the efforts of the Distributor.
(b) The Trust reserves the right from time to time (1) to sell and
issue shares other than for cash; (2) to issue shares in
exchange for substantially all of the assets of any corporation
or trust, or in exchange of shares of any corporation or trust;
(3) to pay stock dividends to its shareholders, or to pay
dividends in cash or shares of beneficial interest at the option
of its shareholders, or to sell shares of beneficial interest to
existing shareholders to the extent of dividends payable from
time to time in cash, or to split up or combine its outstanding
shares; (4) to offer shares for cash to its shareholders as a
whole, by the use of transferable rights or otherwise, and to
sell and issue shares pursuant to such offers; and (5) to act as
its own distributor in any jurisdiction in which the Distributor
is not registered as a broker-dealer.
4. The Trust warrants the following:
(a) The Trust is, or will be, a properly registered investment
company, and any and all Series' shares which it will sell
through the Distributor are, or will be, properly registered
with the Securities and Exchange Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of any
instrument by which the Trust is bound, nor do they violate any
law or regulation of any body having jurisdiction over the Trust
or its property.
-2-
<PAGE>
5.(a) The Trust will supply to the Distributor a conformed copy of the
Registration Statement and all amendments thereto, including all
exhibits and each Prospectus and Statement of Additional
Information.
(b) The Trust will register or qualify the Series' shares for sale
in such states as is deemed desirable.
(c) The Trust, without expense to the Distributor:
(1) will give and continue to give such financial statements and
other information as may be required by the SEC or the
proper public bodies of the states in which the Series'
shares may be qualified;
(2) from time to time, will furnish to the Distributor as soon
as reasonably practicable true copies of its periodic
reports to shareholders;
(3) will promptly advise the Distributor in person or by
telephone or telegraph, and promptly confirm such advice in
writing, (a) when any amendment or supplement to the
Registration Statement becomes effective, (b) of any request
by the SEC for amendments or supplements to the Registration
Statement or the Prospectuses or for additional information,
and (c) of the issuance by the SEC of any Stop Order
suspending the effectiveness of the Registration Statement,
or the initiation of any proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order suspending
the effectiveness of the Registration Statement, will make
every reasonable effort to obtain the lifting of such order
at the earliest possible moment;
(5) will from time to time, use its best effort to keep a
sufficient supply of Series' shares authorized, any
increases being subject to the approval of shareholders as
may be required;
(6) before filing any further amendment to the Registration
Statement or to any Prospectus, will furnish to the
Distributor copies of the proposed amendment and will not,
at any time, whether before or after the effective date of
the Registration Statement, file any amendment to the
Registration Statement or supplement to any Prospectus of
which the Distributor shall not previously have been advised
or to which the Distributor shall reasonably object (based
upon the accuracy or completeness thereof) in writing;
(7) will continue to make available to its shareholders (and
forward copies to the Distributor) of such periodic, interim
and any other reports as are now, or as hereafter may be,
required by the provisions of the Investment Company Act of
1940; and
-3-
<PAGE>
(8) will, for the purpose of computing the offering price of
Series' shares, advise the Distributor within one hour after
the close of the New York Stock Exchange (or as soon as
practicable thereafter) on each business day upon which the
New York Stock Exchange may be open of the net asset value
per share of the Series' shares of beneficial interest
outstanding, determined in accordance with any applicable
provisions of law and the provisions of the Agreement and
Declaration of Trust, as amended, of the Trust as of the
close of business on such business day. In the event that
prices are to be calculated more than once daily, the Trust
will promptly advise the Distributor of the time of each
calculation and the price computed at each such time.
6. The Distributor agrees to submit to the Trust, prior to its use, the
form of all sales literature proposed to be generally disseminated
by or for the Distributor, all advertisements proposed to be used by
the Distributor, all sales literature or advertisements prepared by
or for the Distributor for such dissemination or for use by others
in connection with the sale of the Series' shares, and the form of
dealers' sales contract the Distributor intends to use in connection
with sales of the Series' shares. The Distributor also agrees that
the Distributor will submit such sales literature and advertisements
to the NASD, SEC or other regulatory agency as from time to time may
be appropriate, considering practices then current in the industry.
The Distributor agrees not to use such form of dealers' sales
contract or to use or to permit others to use such sales literature
or advertisements without the written consent of the Trust if any
regulatory agency expresses objection thereto or if the Trust
delivers to the Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the
offering price per share mutually agreed upon by the parties hereto
and, as described in the Trust's Prospectuses, as amended from time
to time, determined in accordance with any applicable provision of
law, the provisions of its Agreement and Declaration of Trust and
the Conduct Rules of NASD Regulation, Inc.
8. The responsibility of the Distributor hereunder shall be limited to
the promotion of sales of Series' shares. The Distributor shall
undertake to promote such sales solely as agent of the Trust, and
shall not purchase or sell such shares as principal. Orders for
Series' shares and payment for such orders shall be directed to the
Trust's agent, Delaware Service Company, Inc. for acceptance on
behalf of the Trust. The Distributor is not empowered to approve
orders for sales of Series' shares or accept payment for such
orders. Sales of Series' shares shall be deemed to be made when and
where accepted by Delaware Service Company, Inc. on behalf of the
Trust.
9. With respect to the apportionment of costs between the Trust and the
Distributor of activities with which both are concerned, the
following will apply:
(a) The Trust and the Distributor will cooperate in preparing the
Registration Statements, the Prospectuses, the Statement of
-4-
<PAGE>
Additional Information, and all amendments, supplements and
replacements thereto. The Trust will pay all costs incurred in
the preparation of the Trust's Registration Statement, including
typesetting, the costs incurred in printing and mailing
Prospectuses and Annual, Semi-Annual and other financial reports
to its own shareholders and fees and expenses of counsel and
accountants.
(b) The Distributor will pay the costs incurred in printing and
mailing copies of Prospectuses to prospective investors.
<PAGE>
(c) The Distributor will pay advertising and promotional expenses,
including the costs of literature sent to prospective
investors.
(d) The Trust will pay the costs and fees incurred in registering
or qualifying the Series' shares with the various states and
with the SEC.
(e) The Distributor will pay the costs of any additional copies of
Trust financial and other reports and other Trust literature
supplied to the Distributor by the Trust for sales promotion
purposes.
10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor
of its obligations under this Agreement.
11. The Trust agrees to indemnify, defend and hold harmless from the
assets of the Series the Distributor and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
Securities Act of 1933, from and against any and all losses,
damages, or liabilities to which, jointly or severally, the
Distributor or such controlling person may become subject, insofar
as the losses, damages or liabilities arise out of the performance
of its duties hereunder, except that the Trust shall not be liable
for indemnification of the Distributor or any controlling person
thereof for any liability to the Trust or its security holders to
which they would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
their duties under this Agreement.
12. Copies of financial reports, Registration Statements and
Prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish to
the other will be duly delivered or furnished, if delivered to such
party at its address shown below during regular business hours, or
if sent to that party by registered mail or by prepaid telegram
filed with an office or with an agent of Western Union or another
nationally recognized telegraph service, in all cases within the
time or times herein prescribed, addressed to the recipient at 1818
Market Street, Philadelphia, Pennsylvania 19103, or at such other
address as the Trust or the Distributor may designate in writing
and furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in
the Investment Company Act of 1940, by the Distributor and shall
terminate automatically in the event of its attempted assignment by
the Distributor. This Agreement shall not be assigned by the Trust
-5-
<PAGE>
without the written consent of the Distributor signed by its duly
authorized officers and delivered to the Trust. Except as
specifically provided in the indemnification provision contained in
Paragraph 11 herein, this Agreement and all conditions and
provisions hereof are for the sole and exclusive benefit of the
parties hereto and their legal successors and no express or implied
provision of this Agreement is intended or shall be construed to
give any person other than the parties hereto and their legal
successors any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provisions herein contained.
14. (a) This Agreement shall remain in force for a period of two years
from the date hereof and from year to year thereafter, but only
so long as such continuance is specifically approved at least
annually by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Series and only if the
terms and the renewal thereof have been approved by the vote of
a majority of the Trustees of the Trust who are not parties
hereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval.
(b) The Distributor may terminate this Agreement on written notice
to the Trust at any time in case the effectiveness of the
Registration Statement shall be suspended, or in case Stop
Order proceedings are initiated by the SEC in respect of the
Registration Statement and such proceedings are not withdrawn
or terminated within thirty days. The Distributor may also
terminate this Agreement at any time by giving the Trust
written notice of its intention to terminate the Agreement at
the expiration of three months from the date of delivery of
such written notice of intention to the Trust.
(c) The Trust may terminate this Agreement at any time on at least
thirty days' prior written notice to the Distributor (1) if
proceedings are commenced by the Distributor or any of its
partners for the Distributor's liquidation or dissolution or
the winding up of the Distributor's affairs; (2) if a receiver
or trustee of the Distributor or any of its property is
appointed and such appointment is not vacated within thirty
days thereafter; (3) if, due to any action by or before any
court or any federal or state commission, regulatory body, or
administrative agency or other governmental body, the
Distributor shall be prevented from selling securities in the
United States or because of any action or conduct on the
Distributor's part, sales of the shares are not qualified for
sale. The Trust may also terminate this Agreement at any time
upon prior written notice to the Distributor of its intention
to so terminate at the expiration of three months from the date
of the delivery of such written notice to the Distributor.
-6-
<PAGE>
15. The validity, interpretation and construction of this Agreement,
and of each part hereof, will be governed by the laws of the
Commonwealth of Pennsylvania.
16. In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the
remainder of the Agreement, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
Attest:
______________________________ By:__________________________________
Name: Name:
Title: Title:
DELAWARE GROUP FOUNDATION FUNDS
for the DELAWARE S&P 500 INDEX FUND SERIES
Attest:
______________________________ By:__________________________________
Name: Name:
Title: Title:
-7-
<PAGE>
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series") on behalf of the Delaware S&P 500 Index Fund A Class ("Class"),
which Trust, Series and Class may do business under these or such other names as
the Board of Trustees of the Trust may designate from time to time. The Plan has
been approved by a majority of the Board of Trustees, including a majority of
the Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Trustees"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Trustees included a
determination that in the exercise of reasonable business judgment and in light
of their fiduciary duties, there is a reasonable likelihood that the Plan will
benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Plan provides that:
l. The Trust shall pay to the Distributor a monthly fee not to exceed
0.30% (3/10 of l%) per annum of the Series' average daily net assets represented
by shares of the Class (the "Maximum Amount") as may be determined by the
Trust's Board of Trustees from time to time. Such monthly fee shall be reduced
by the aggregate sums paid by the Trust on behalf of the Series to persons other
than broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares of
the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
A-1
<PAGE>
(b) The Service Providers shall use the monies paid respectively to
them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable, and as a fee for (l) assisting such
customers in maintaining proper records with the Trust, (2) answering questions
relating to their respective accounts, and (3) aiding in maintaining the
investment of their respective customers in the Class.
3. The Distributor shall report to the Trust at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Trust monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Trustees of the Trust with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Trust's payments and whether the Plan should be continued.
4. The officers of the Trust shall furnish to the Board of Trustees of
the Trust, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Trust in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Trustees of
the Trust, and of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph l hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1999
<PAGE>
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series") on behalf of the Delaware S&P 500 Index Fund B Class (the
"Class"), which Trust, Series and Class may do business under these or such
other names as the Board of Trustees of the Trust may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Trustees included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Plan provides that:
1. (a) The Trust shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Trust's Board of
Trustees from time to time.
(b) In addition to the amounts described in (a) above, the Trust
shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
B-1
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Trust; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Trust at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Trust monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Trustees of
the Trust with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Trust's payments and whether the Plan should
be continued.
4. The officers of the Trust shall furnish to the Board of Trustees of
the Trust, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Trust of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Trustees of the Trust, and
of the non-interested Trustees, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
B-2
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1999
B-3
<PAGE>
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series) on behalf of the Delaware S&P 500 Index Fund C Class (the
"Class"), which Trust, Series and Class may do business under these or such
other names as the Board of Trustees of the Trust may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Trustees included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Plan provides that:
1. (a) The Trust shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Trust's Board of
Trustees from time to time.
(b) In addition to the amounts described in paragraph 1(a) above,
the Trust shall pay: (i) to the Distributor for payment to dealers or others or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
C-1
<PAGE>
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Trust; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Trust at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Trust monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Trustees of
the Trust with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Trust's payments and whether the Plan should
be continued.
4. The officers of the Trust shall furnish to the Board of Trustees of
the Trust, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Trust of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Trustees of the Trust, and
of the non-interested Trustees, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
C-2
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1999
C-3
<PAGE>
EXHIBIT D
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND CONSULTANT CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series) on behalf of the Delaware S&P 500 Index Fund Consultant Class (the
"Class"), which Trust, Series and Class may do business under these or such
other names as the Board of Trustees of the Trust may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Trustees included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Distributor may enter into agreements with other registered
broker-dealers substantially in the form of the Dealer Agreement approved by the
Trust in the implementation of this Plan and of the Distribution Agreement
between it and the Trust. The Trust may, in addition, enter into arrangements
with persons other than broker-dealers which are not "affiliated persons" or
"interested persons" of the Trust, DMC or the Distributor to provide to the
Trust services in the Trust's marketing of the shares of the Class, such
arrangements to be reflected by Service Agreements.
The Plan provides that:
1. The Trust shall pay a monthly fee not to exceed 0.3% (3/10 of
1%) per annum of the Trust's average daily net assets represented by shares of
the Class (the "Maximum Amount") as may be determined by the Trust's Board of
Trustees from time to time. Such monthly fee shall be reduced by the aggregate
sums paid by the Trust to persons other than broker-dealers (the "Service
Providers") pursuant to Service Agreements referred to above.
D-1
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1 above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
(b) The Service Providers shall use the monies paid respectively to
them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable, and as a fee for (l) assisting such
customers in maintaining proper records with the Trust, (2) answering questions
relating to their respective accounts, and (3) aiding in maintaining the
investment of their respective customers in the Trust.
3. The Distributor shall report to the Trust at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Trust monthly and in writing of the amounts each
claims under the Service Agreement and the Plan; both the Distributor and the
Service Providers shall furnish the Board of Trustees of the Trust with such
other information as the Board may reasonably request in connection with the
payments made under the Plan and the use thereof by the Distributor and the
Service Providers, respectively, in order to enable the Board to make an
informed determination of the amount of the Trust's payments and whether the
Plan should be continued.
4. The officers of the Trust shall furnish to the Board of Trustees of
the Trust, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Trust of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Trustees of the Trust, and
of the non-interested Trustees, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph l thereof without approval by
the shareholders of the Class.
7. The Distribution Agreement between the Trust and the Distributor,
and the Service Agreements between the Trust and the Service Providers, shall
specifically have a copy of this Plan attached to, and its terms and provisions
incorporated respectively by reference in, such agreements.
8. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
9. So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
D-2
<PAGE>
10. The definitions contained in Sections 2(a)(3), 2(a)(4), 2(a)(19)
and 2(a)(42) of the Act shall govern the meaning of "affiliated person,"
"assignment," "interested person(s)" and "vote of a majority of the outstanding
voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
December 27, 1999
D-3
<PAGE>
As of December , 1999
VIA UPS OVERNIGHT
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996, as amended November 20,
1997 between The Chase Manhattan Bank and those registered investment companies
(and on behalf of certain series thereof), listed on Schedule A attached thereto
("Agreement")
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Group Foundation Funds for the benefit of the Delaware S&P
500 Index Fund (the "Series") hereby appoints The Chase Manhattan Bank to
provide custodial services for the Series under and in accordance with the terms
of the Agreement and accordingly, requests that the Series be added to Schedule
A to the Agreement effective December , 1999. Kindly acknowledge your agreement
to provide such services and to add the Series to Schedule A by signing in the
space provided below.
DELAWARE GROUP FOUNDATION FUNDS
on behalf of Delaware S&P 500 Index Fund
By: ----------------------------------------
David K. Downes
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
By:
Its:
<PAGE>
DELAWARE GROUP FOUNDATION FUNDS
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 27th day of December, 1997 by and
between DELAWARE GROUP FOUNDATION FUNDS (the "Fund"), a Delaware business trust,
for the Delaware S&P 500 Index Fund series ("the Series"), and DELAWARE SERVICE
COMPANY, INC. ("DSC"), a Delaware Corporation, each having its principal office
and place of business at 1818 Market Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Fund and
Delaware Management Company, Inc. provide that the Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the costs
incurred in: the maintenance of its corporate existence; the maintenance of its
own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfers of stock, including issuance and redemption of
shares; reports and notices to stockholders; calling and holding of stockholder
meetings; miscellaneous office expenses; brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, the Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto.
(b) The By-Laws of the Fund;
<PAGE>
(c) Any resolution or other action of the Fund or the Board of
Trustees of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Series or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of Trustees
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The forms of share certificates of the Series in the forms
approved by the Board of Trustees of the Fund;
(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
(j) A certified copy of any resolution of the Board of
Trustees of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Trustees of the Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Fund or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting such
change;
(b) Written instructions from an authorized officer implementing
such change; and
(c) An opinion of counsel to the Fund as to the validity of such
action, if requested by DSC.
<PAGE>
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series' shares
which it issues will be properly registered and lawfully issued under applicable
federal and state laws.
(b) The provisions of this contract do not violate the terms of any
instrument by which the Fund is bound; nor do they violate any law or regulation
of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities and Exchange Act of 1934 and is duly authorized to serve,
and may lawfully serve as such.
(b) The provisions of this contract do not violate the terms
of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the total
shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by debiting
transferor-stockholder accounts and crediting such shares to accounts created
and/or maintained for transferee-stockholders; if applicable, issue and/or
cancel stock certificates.
<PAGE>
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash due
and paid, shares issued and to be issued, cash remitted and to be remitted and
shares debited and credited to accounts; provide such notices, instructions or
authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem Series'
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Series, DSC shall disburse and
cause to be disbursed to stockholders of each Series dividends, capital gains
distributions or any payments from other sources as directed by the Fund. In
connection therewith, but not in the limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of each
Series, as aforesaid, for which Series' shares are to be issued and authorized
and instruct the issuance of Series' shares therefor in accordance with Section
IV hereof.
(d) Prepare and mail or deliver such forms and notices pertaining
to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Series, DSC shall provide
those services ancillary to, but in implementation of, the services provided
under Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
<PAGE>
(a) Except where instructed in writing by the Fund not to do so,
and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of stockholders
and their agents.
(c) As instructed by the Fund, prepare and mail stockholder account
information, mail Series stockholder reports and Series prospectuses.
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to investors
and stockholders of each Series, including retirement plans, including
activities not otherwise provided in Section I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds in the Delaware
Investments family and to others, and may be used to perform other services for
the Fund, the other funds in the Delaware Investments family and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
<PAGE>
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds in the Delaware Investments family (DSC
having been originally established to provide the services hereunder for the
funds in the Delaware Investments family), advantages and benefits to the Fund
in the employment of DSC hereunder can be available which may not generally be
available to it from others providing similar services.
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Trustees of the Fund, including a
majority who are not parties to this Agreement or interested person of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Series and their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of Trustees
of the Fund at least annually and may be reviewed and approved more frequently
at the request of either party. The Board may request, and DSC shall provide,
such information as the Board may reasonably require to evaluate the basis of
and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigation or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Trustees of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
<PAGE>
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Trustees of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
By: _________________________________
Name:
Title:
Attest: ____________________________
Name:
Title:
DELAWARE GROUP FOUNDATION FUNDS
for Delaware S&P 500 Index Fund
By: ________________________________
Name:
Title:
Attest: ____________________________
Name:
Title:
<PAGE>
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series") on behalf of the Delaware S&P 500 Index Fund A Class ("Class"),
which Trust, Series and Class may do business under these or such other names as
the Board of Trustees of the Trust may designate from time to time. The Plan has
been approved by a majority of the Board of Trustees, including a majority of
the Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Trustees"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Trustees included a
determination that in the exercise of reasonable business judgment and in light
of their fiduciary duties, there is a reasonable likelihood that the Plan will
benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Plan provides that:
l. The Trust shall pay to the Distributor a monthly fee not to exceed
0.30% (3/10 of l%) per annum of the Series' average daily net assets represented
by shares of the Class (the "Maximum Amount") as may be determined by the
Trust's Board of Trustees from time to time. Such monthly fee shall be reduced
by the aggregate sums paid by the Trust on behalf of the Series to persons other
than broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares of
the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
A-1
<PAGE>
(b) The Service Providers shall use the monies paid
respectively to them to reimburse themselves for the actual costs they have
incurred in confirming that their customers have received the Prospectus and
Statement of Additional Information, if applicable, and as a fee for (l)
assisting such customers in maintaining proper records with the Trust, (2)
answering questions relating to their respective accounts, and (3) aiding in
maintaining the investment of their respective customers in the Class.
3. The Distributor shall report to the Trust at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Trust monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Trustees of the Trust with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Trust's payments and whether the Plan should be continued.
4. The officers of the Trust shall furnish to the Board of Trustees of
the Trust, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Trust in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Trustees of
the Trust, and of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph l hereof without
approval by the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1999
A-2
<PAGE>
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series") on behalf of the Delaware S&P 500 Index Fund B Class (the
"Class"), which Trust, Series and Class may do business under these or such
other names as the Board of Trustees of the Trust may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Trustees included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Plan provides that:
1. (a) The Trust shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Trust's Board of
Trustees from time to time.
(b) In addition to the amounts described in (a) above, the Trust
shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
B-1
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Trust; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Trust at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Trust monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Trustees of
the Trust with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Trust's payments and whether the Plan should
be continued.
4. The officers of the Trust shall furnish to the Board of Trustees of
the Trust, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Trust of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Trustees of the Trust, and
of the non-interested Trustees, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
e spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
B-2
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1999
B-3
<PAGE>
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series) on behalf of the Delaware S&P 500 Index Fund C Class (the
"Class"), which Trust, Series and Class may do business under these or such
other names as the Board of Trustees of the Trust may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Trustees included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Plan provides that:
1. (a) The Trust shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Trust's Board of
Trustees from time to time.
(b) In addition to the amounts described in paragraph 1(a) above,
the Trust shall pay: (i) to the Distributor for payment to dealers or others or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
C-2
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Trust; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Trust at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Trust monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Trustees of
the Trust with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Trust's payments and whether the Plan should
be continued.
4. The officers of the Trust shall furnish to the Board of Trustees of
the Trust, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Trust of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Trustees of the Trust, and
of the non-interested Trustees, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Trustees or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
C-3
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1999
C-4
<PAGE>
EXHIBIT D
DISTRIBUTION PLAN
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE S&P 500 INDEX FUND
DELAWARE S&P 500 INDEX FUND CONSULTANT CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Foundation Funds (the "Trust"), for the Delaware S&P 500 Index Fund series
(the "Series) on behalf of the Delaware S&P 500 Index Fund Consultant Class (the
"Class"), which Trust, Series and Class may do business under these or such
other names as the Board of Trustees of the Trust may designate from time to
time. The Plan has been approved by a majority of the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Trustees included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Trust is a business trust organized under the laws of the State of
Delaware, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, a series of Delaware Management Business Trust, serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Trust on behalf of the Series
("Distribution Agreement").
The Distributor may enter into agreements with other registered
broker-dealers substantially in the form of the Dealer Agreement approved by the
Trust in the implementation of this Plan and of the Distribution Agreement
between it and the Trust. The Trust may, in addition, enter into arrangements
with persons other than broker-dealers which are not "affiliated persons" or
"interested persons" of the Trust, DMC or the Distributor to provide to the
Trust services in the Trust's marketing of the shares of the Class, such
arrangements to be reflected by Service Agreements.
The Plan provides that:
1. The Trust shall pay a monthly fee not to exceed 0.3% (3/10
of 1%) per annum of the Trust's average daily net assets represented by shares
of the Class (the "Maximum Amount") as may be determined by the Trust's Board of
Trustees from time to time. Such monthly fee shall be reduced by the aggregate
sums paid by the Trust to persons other than broker-dealers (the "Service
Providers") pursuant to Service Agreements referred to above.
C-5
<PAGE>
2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph 1 above to furnish, or cause or encourage others to
furnish, services and incentives in connection with the promotion, offering and
sale of Class shares and, where suitable and appropriate, the retention of Class
shares by shareholders.
(b) The Service Providers shall use the monies paid
respectively to them to reimburse themselves for the actual costs they have
incurred in confirming that their customers have received the Prospectus and
Statement of Additional Information, if applicable, and as a fee for (l)
assisting such customers in maintaining proper records with the Trust, (2)
answering questions relating to their respective accounts, and (3) aiding in
maintaining the investment of their respective customers in the Trust.
3. The Distributor shall report to the Trust at least monthly
on the amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Trust monthly and in writing of the amounts each
claims under the Service Agreement and the Plan; both the Distributor and the
Service Providers shall furnish the Board of Trustees of the Trust with such
other information as the Board may reasonably request in connection with the
payments made under the Plan and the use thereof by the Distributor and the
Service Providers, respectively, in order to enable the Board to make an
informed determination of the amount of the Trust's payments and whether the
Plan should be continued.
4. The officers of the Trust shall furnish to the Board of
Trustees of the Trust, for their review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
5. This Plan shall take effect at such time as the Distributor
shall notify the Trust of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Trustees of
the Trust, and of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested Trustees or by vote of a majority of the
outstanding voting securities of the Class.
(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph l thereof without
approval by the shareholders of the Class.
7. The Distribution Agreement between the Trust and the
Distributor, and the Service Agreements between the Trust and the Service
Providers, shall specifically have a copy of this Plan attached to, and its
terms and provisions incorporated respectively by reference in, such agreements.
8. All material amendments to this Plan shall be approved by
the non-interested Trustees in the manner described in paragraph 5 above.
9. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested Trustees shall be committed to the
discretion of such non-interested Trustees.
C-6
<PAGE>
10. The definitions contained in Sections 2(a)(3), 2(a)(4),
2(a)(19) and 2(a)(42) of the Act shall govern the meaning of "affiliated
person," "assignment," "interested person(s)" and "vote of a majority of the
outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
December 27, 1999
C-7
<PAGE>
APPENDIX A
(As revised 1999)
List of Funds and Their Classes
-------------------------------
<PAGE>
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Investments Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on Exhibit
A, David K. Downes, Wayne A. Stork and Walter P. Babich and any one of them
acting singly, his or her true and lawful attorneys-in-fact, in his or her name,
place, and stead, to execute and cause to be filed with the Securities and
Exchange Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as any of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 16th day of July, 1999.
/s/ Walter P. Babich /s/ Thomas F. Madison
- --------------------- -----------------------
Walter P. Babich Thomas F. Madison
/s/ David K. Downes /s/ Charles E. Peck
- --------------------- -----------------------
David K. Downes Charles E. Peck
/s/ Anthony D. Knerr /s/ Wayne A. Stork
- --------------------- -----------------------
Anthony D. Knerr Wayne A. Stork
/s/ Ann R. Leven /s/ Jan L. Yeomans
- --------------------- -----------------------
Ann R. Leven Jan L. Yeomans
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE INVESTMENTS FUNDS
DELAWARE GROUP EQUITY FUNDS I
DELAWARE GROUP EQUITY FUNDS II
DELAWARE GROUP EQUITY FUNDS III
DELAWARE GROUP EQUITY FUNDS IV
DELAWARE GROUP EQUITY FUNDS V
DELAWARE GROUP INCOME FUNDS
DELAWARE GROUP GOVERNMENT FUND
DELAWARE GROUP CASH RESERVE
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DELAWARE GROUP TAX-FREE FUND
DELAWARE GROUP TAX-FREE MONEY FUND
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS
DELAWARE GROUP ADVISER FUNDS
DELAWARE POOLED TRUST
DELAWARE GROUP PREMIUM FUND
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS
VOYAGEUR INSURED FUNDS
VOYAGEUR INTERMEDIATE TAX FREE FUNDS
VOYAGEUR INVESTMENT TRUST
VOYAGEUR MUTUAL FUNDS
VOYAGEUR MUTUAL FUNDS II
VOYAGEUR MUTUAL FUNDS III
VOYAGEUR TAX FREE FUNDS
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Investments Funds listed on Exhibit A to the Power of Attorney, hereby
constitutes and appoints on behalf of each of the Funds listed on Exhibit A,
David K. Downes, Wayne A. Stork and Walter P. Babich and any one of them acting
singly, his true and lawful attorneys-in-fact, in his name, place, and stead, to
execute and cause to be filed with the Securities and Exchange Commission and
other federal or state government agency or body, such registration statements,
and any and all amendments thereto as any of such designees may deem to be
appropriate under the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, and all other applicable federal and state securities
laws.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
this 16th day of July, 1999.
/s/ John H. Durham
- --------------------
John H. Durham
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I
DELAWARE GROUP EQUITY FUNDS II
DELAWARE GROUP EQUITY FUNDS III
DELAWARE GROUP EQUITY FUNDS IV
DELAWARE GROUP EQUITY FUNDS V
DELAWARE GROUP INCOME FUNDS
DELAWARE GROUP GOVERNMENT FUND
DELAWARE GROUP CASH RESERVE
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DELAWARE GROUP TAX-FREE FUND
DELAWARE GROUP TAX-FREE MONEY FUND
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS
DELAWARE GROUP ADVISER FUNDS
DELAWARE POOLED TRUST
DELAWARE GROUP PREMIUM FUND
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
