Delaware Balanced Fund
Supplement to Statement of Additional Information dated
December 28, 1999
The following supplements the section of the Statement of
Additional Information entitled Investment Policies:
In addition to the fixed-income securities in which Delaware
Balanced Fund invests as described in the Prospectuses, the Fund
may also invest in split-rated bonds and in high-yield, high risk
bonds (commonly known as "junk bonds"). A split bond rating
occurs when separate rating agencies, such as Standard & Poor's
("S&P") and Moody's Investors Service, Inc. ("Moody's") give
different ratings to the same issue or issuer. The split-rated
and high-yield, high risk bonds in which the Fund may invest are
rated, or in the case of split-rated bonds, may have one or more
ratings lower than BBB by S&P, Baa by Moody's and/or rated
similarly by another recognized rating agency (or, if unrated,
the Manager determines to be of comparable quality). The Fund
anticipates investing in such split-rated or high-yield, high
risk bonds in limited situations, such as when the Manager
believes that they are likely to be upgraded due to a future
corporate event. Investing in high-yield, high risk bonds
involves certain risks as discussed below. The Fund limits its
purchases of high-yield, high risk bonds to no more than 5% of
net assets.
The Risks of Investing in High-Yield, High Risk Fixed-Income
Securities - High-yield, high risk fixed-income securities are
considered to be of poor standing and predominantly speculative
and entails certain risks, including the risk of loss of
principal, which may be greater than the risks involved with
investing in investment grade securities. Such securities are
sometimes issued by companies whose earnings at the time of
issuance are less than the projected debt service on the high-
yield securities.
The medium- and low-grade bonds in which the Fund may invest
may be issued as a consequence of corporate restructurings, such
as leveraged buy-outs, mergers, acquisitions, debt
recapitalizations or similar events. Also, these bonds are often
issued by smaller, less creditworthy companies or by highly
leveraged (indebted) firms, which are generally less able than
more financially stable firms to make scheduled payments of
interest and principal. The risks posed by bonds issued under
such circumstances are substantial.
The economy and interest rates may affect these high yield,
high risk securities differently than other securities. Prices
have been found to be less sensitive to interest rate changes
than higher rated investments, but more sensitive to adverse
economic changes or individual corporate developments. Also,
during an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service
principal and interest payment obligations, to meet projected
business goals and to obtain additional financing. Changes by
recognized rating agencies in their rating of any security and in
the ability of an issuer to make payments of interest and
principal will also ordinarily have a more dramatic effect on the
values of these investments than on the values of higher-rated
securities. Such changes in value will not affect cash income
derived from these securities, unless the issuers fail to pay
interest or dividends when due. Such changes will, however,
affect the Fund's net asset value per share.
