<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-14363
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. -----
-----
Post-Effective Amendment No. 17 X
---- -----
AND
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-----
Amendment No. 17
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DELAWARE GROUP PREMIUM FUND, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- -------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: May 1, 1996
-----------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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X on May 1, 1996 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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Registrant has registered an indefinite amount of securities
under the Securities Act of 1933
pursuant to Section 24(f) of the Investment Company
Act of 1940. The Rule 24f-2 Notice for Registrant's
most recent fiscal year was filed on February 27, 1996.
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
--- C O N T E N T S ---
This Post-Effective Amendment No. 17 to Registration File No. 33-14363
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectus
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
CROSS-REFERENCE SHEET
---------------------
PART A
------
<TABLE>
<CAPTION>
Item No. Description Location in Prospectus
- -------- ----------- ----------------------
<S> <C> <C>
1 Cover Page ........................................................ Cover
2 Synopsis .......................................................... Summary Information
3 Condensed Financial Information ................................... Financial Highlights
4 General Description of Registrant ................................. Investment Objectives and
Policies, Description of
Fund Shares
5 Management of the Fund ............................................ Management of the Fund
6 Capital Stock and Other Securities ................................ Dividends and Distributions,
Taxes, Description of
Fund Shares
7 Purchase of Securities Being Offered .............................. Cover, Purchase and Redemption,
Calculation of Offering Price and
Net Asset Value Per Share,
Management of the Fund
8 Redemption or Repurchase .......................................... Purchase and Redemption
9 Legal Proceedings ................................................. None
</TABLE>
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
CROSS-REFERENCE SHEET
---------------------
PART B
------
<TABLE>
<CAPTION>
Location in Statement of
Item No. Description Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page ........................................................ Cover
11 Table of Contents ................................................. Table of Contents
12 General Information and History ................................... General Information
13 Investment Objectives and Policies ................................ Investment Objectives
and Policies
14 Management of the Registrant ...................................... Officers and Directors
15 Control Persons and Principal Holders of Securities ............... Officers and Directors
16 Investment Advisory and Other Services ............................ Investment Management
Agreements, Officers and
Directors, General Information,
Financial Statements
17 Brokerage Allocation .............................................. Trading Practices and Brokerage
18 Capital Stock and Other Securities ................................ Capitalization and Noncumulative
Voting (under General
Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered ..................................................... Offering Price
20 Tax Status ........................................................ Accounting and Tax Issues,
Taxes
21 Underwriters ...................................................... Investment Management
Agreements
22 Calculation of Performance Data ................................... Performance Information
23 Financial Statements .............................................. Financial Statements
</TABLE>
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
CROSS-REFERENCE SHEET
---------------------
PART C
------
<TABLE>
<CAPTION>
Item No. Description Location in Part C
- -------- ----------- -------------------
<S> <C> <C>
24 Financial Statements and Exhibits........................................... Item 24
25 Persons Controlled by or under Common
Control with Registrant.................................................. Item 25
26 Number of Holders of Securities............................................. Item 26
27 Indemnification............................................................. Item 27
28 Business and Other Connections of Investment Adviser........................ Item 28
29 Principal Underwriters...................................................... Item 29
30 Location of Accounts and Records............................................ Item 30
31 Management Services......................................................... Item 31
32 Undertakings................................................................ Item 32
</TABLE>
<PAGE>
PROSPECTUS
MAY 1, 1996
DELAWARE GROUP PREMIUM FUND, INC.
1818 Market Street, Philadelphia, PA 19103
Delaware Group Premium Fund, Inc. (the "Fund") is a diversified, open-end
management investment company which is intended to meet a wide range of
investment objectives with its ten separate Portfolios. Each Portfolio
("Series") is in effect a separate fund issuing its own shares. The shares of
the Fund are sold only to separate accounts of life insurance companies ("life
companies"). The separate accounts are used in conjunction with variable annuity
contracts and variable life insurance policies ("variable contracts"). The
separate accounts invest in shares of the various Series in accordance with
allocation instructions received from contract owners. The investment objectives
and principal policies of the Series are described below. See Investment
Objectives and Policies. Although each Series will constantly strive to attain
its objective, there can be no assurance that it will be attained.
This Prospectus sets forth information that you should read and consider
before you invest. Please retain it for future reference. A Statement of
Additional Information ("Part B" of the Fund's registration statement), dated
May 1, 1996, as it may be amended from time to time, contains additional
information about the Fund and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling 1-800-441-7468. The Series' financial statements
appear in the Fund's Annual Report, which will accompany any response to
requests for Part B.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
Equity/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. This Series has the same
objective and investment disciplines as the Decatur Total Return Fund of
Delaware Group Decatur Fund, Inc., a separate Delaware Group fund, in that it
invests generally, but not exclusively, in common stocks and income-producing
securities convertible into common stocks, consistent with the Series'
objective.
High Yield Series--seeks as high a current income as possible by
investing in rated and unrated corporate bonds (including high-yield bonds
commonly known as junk bonds), U.S. Government securities and commercial paper.
This Series has the same objective and investment disciplines as Delaware Group
Delchester High-Yield Bond Fund, Inc., a separate Delaware Group fund. An
investment in this Series may involve greater risks than an investment in a
portfolio comprised primarily of investment grade bonds.
<PAGE>
Capital Reserves Series--seeks a high stable level of current income
while minimizing fluctuations in principal by investing in a diversified
portfolio of short- and intermediate-term securities.
Money Market Series--seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. This Series has the same objective and investment
disciplines as Delaware Group Cash Reserve, Inc., a separate Delaware Group
fund. The shares of the Money Market Series are neither insured nor guaranteed
by the U.S. Government and there is no assurance that the Series will be able to
maintain a stable net asset value of $10.00 per share.
Growth Series--seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. This Series has the same objective and investment
disciplines as Delaware Group DelCap Fund, Inc., a separate Delaware Group fund,
in that it invests in common stocks and other securities including but not
limited to, convertible securities, warrants, preferred stocks, bonds and
foreign securities, consistent with the Series' objective.
Multiple Strategy 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. This Series has the same
objective and investment disciplines as the Delaware Fund of Delaware Group
Delaware Fund, Inc., a separate Delaware Group fund, in that, as a "balanced"
fund, the Series, consistent with its objective, invests at least 25% of its
assets in fixed income securities and the remainder primarily in equity
securities.
International Equity Series--seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers
providing the potential for capital appreciation and income. This Series has the
same objective and investment disciplines as the International Equity Series of
Delaware Group Global & International Funds, Inc., a separate Delaware Group
fund, in that it invests in a broad range of equity securities of foreign
issuers, including common stocks, preferred stocks, convertible securities and
warrants, consistent with the Series' objective.
Value Series--seeks capital appreciation by investing in small- to
mid-cap common stocks whose market value appears 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. This Series has the same objective
and investment disciplines as Delaware Group Value Fund, Inc., a separate
Delaware Group fund.
Emerging Growth 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. This Series has
the same objective and investment disciplines as Delaware Group Trend Fund,
Inc., a separate Delaware Group fund.
Global Bond Series--seeks current income consistent with preservation of
principal by investing primarily in fixed income securities that may also
provide the potential for capital appreciation. This Series is a global fund, as
such, at least 65% of the Series' assets will be invested in fixed income
securities of issuers organized or having a majority of their assets in or
deriving a majority of their operating income in at least three different
countries, one of which may be the United States. This Series has the same
objective and investment disciplines as the Global Bond Series of Delaware Group
Global & International Funds, Inc., a separate Delaware Group fund.
<PAGE>
TABLE OF CONTENTS
Cover Page...............................................................
Summary Information......................................................
Financial Highlights.....................................................
Investment Objectives and Policies.......................................
Introduction......................................................
Equity/Income Series..............................................
High Yield Series.................................................
Capital Reserves Series...........................................
Money Market Series...............................................
Growth Series.....................................................
Multiple Strategy Series..........................................
International Equity Series.......................................
Value Series......................................................
Emerging Growth Series............................................
Global Bond Series................................................
Other Considerations..............................................
Purchase and Redemption..................................................
Dividends and Distributions..............................................
Taxes....................................................................
Calculation of Offering Price and Net Asset Value Per Share..............
Management of the Fund...................................................
Performance Information...........................................
Distribution and Service..........................................
Expenses..........................................................
Description of Fund Shares........................................
Appendix A--Ratings for High Yield Series................................
<PAGE>
SUMMARY INFORMATION
Capitalization
The Fund has a present authorized capitalization of five hundred million
shares of capital stock with a $.01 par value per share, with fifty million
shares allocated to each of the Fund's ten Series. See Description of Fund
Shares under Management of the Fund.
Investment Managers
Delaware Management Company, Inc. ("Delaware Management") furnishes
investment management services to the Equity/Income, High Yield, Capital
Reserves, Money Market, Growth, Multiple Strategy, Value and Emerging Growth
Series, subject to the supervision and direction of the Fund's Board of
Directors. Under the Investment Management Agreement between Delaware Management
and these eight Series, the annual compensation paid to Delaware Management is
equal to, respectively, .60%, .60%, .60%, .50%, .75%, .60%, .75% and .75% of the
average daily net assets of the Series, less, in the case of the Equity/Income,
High Yield, Capital Reserves, Money Market, Growth and Multiple Strategy Series,
a proportionate share of all directors' fees paid to the unaffiliated directors
of the Fund. Delaware Management has elected voluntarily to waive its management
fee and to reimburse the respective Series to the extent necessary to maintain a
limit on the total operating expenses of each of these Series for a limited
period. See Management of the Fund.
Delaware International Advisers Ltd. ("Delaware International") furnishes
investment management services to the International Equity Series and Global
Bond Series, subject to the supervision and direction of the Fund's Board of
Directors. Under the Investment Management Agreement between each Series and
Delaware International, the annual compensation paid to Delaware International
is equal to .75% of each Series' average daily net assets, less, in the case of
the International Equity Series, a proportionate share of all directors' fees
paid to the unaffiliated directors of the Fund. Delaware International has
elected voluntarily to waive its management fee and to reimburse the
International Equity and Global Bond Series to the extent necessary to maintain
a limit on the total operating expenses of each of these Series for a limited
period. See Management of the Fund.
Investment Objectives and Policies
Each of the Fund's ten Series has a different investment objective and
seeks to achieve its objective by pursuing different investment strategies. See
Cover Page of this Prospectus and Investment Objectives and Policies.
Open-End Investment Company
The Fund, which was organized as a Maryland corporation in 1987, is an
open-end registered management investment company. With the exception of the
Global Bond Series, each Series operates as a diversified fund as defined by the
Investment Company Act of 1940 (the "1940 Act"). The Global Bond Series operates
as a nondiversified fund as defined by the 1940 Act.
<PAGE>
Purchase and Redemption
Shares of the Series are sold only to separate accounts of life insurance
companies. Purchases and redemptions are made at the net asset value calculated
after receipt of the purchase or redemption order. None of the Series nor
Delaware Distributors, L.P. (the "Distributor"), assesses a charge for purchases
or redemptions. See Purchase and Redemption.
Special Considerations and Risk Factors
Prospective investors should consider a number of factors depending upon
the Series in which they propose to invest:
1. The International Equity Series invests primarily in securities issued
by non-United States companies. The Global Bond Series will invest at least 65%
of its assets in fixed income securities of issuers organized or having a
majority of their assets in or deriving a majority of their operating income in
at least three different countries, one of which may be the United States. Each
of the other eight Series may also invest a portion of their assets in
securities of such issuers and companies. Investing in securities of non-United
States companies which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts in connection with
transactions in such securities involve certain considerations comprising both
risk and opportunity not typically associated with investing in the securities
of United States companies and issuers. See Foreign Currency Transactions under
International Equity Series and Foreign Securities and Foreign Currency
Transactions and Special Risk Considerations under Other Considerations.
2. Each Series has the right to engage in certain options transactions
for hedging purposes to counterbalance portfolio volatility. The Series do not
engage in such activities for speculative purposes, but there are certain risks
associated with the use of options which a prospective investor should consider.
See Options under Other Considerations.
3. The International Equity, Value, Emerging Growth and Global Bond
Series also may engage in certain hedging transactions involving futures
contracts and options on such contracts, and in connection with such activities
will maintain certain collateral in special accounts established by futures
commission merchants in the care of the Fund's custodian bank. While the Series
do not engage in such transactions for speculative purposes, there are risks
which result from the use of these instruments which an investor should
consider. The Fund is not registered as a commodity pool operator nor is
Delaware International or Delaware Management registered as a commodities
trading adviser in reliance upon various exemptive rules. See Futures Contracts
and Options on Futures Contracts and Risk Factors under International Equity
Series and Futures Contracts and Options on Futures Contracts under Other
Considerations.
4. The objective of the High Yield Series is to seek the highest current
income which Delaware Management believes is consistent with prudent investment
management. The assets of the Series may be invested primarily in high-yield
securities (junk bonds) and greater risks may be involved in an investment in
the Series than in an investment in a mutual fund comprised primarily of
investment grade bonds. See Risk Factors under High Yield Series.
5. The Global Bond Series may invest in interest rate swaps for hedging
purposes which could subject the Series to increased risks. See Interest Rate
Swaps under Global Bond Series - Investment Strategy and Special Risk
Considerations under Other Considerations.
6. While the Global Bond Series intends to seek to qualify as a
"diversified" investment company under provisions of Subchapter M of the
Internal Revenue Code, as amended (the "Code"), the Series will not be
diversified under the 1940 Act. Thus, while at least 50% of the Series' total
assets will be represented by cash, cash items, and other securities limited in
respect of any one issuer to an amount not greater than 5% of the Series' total
assets, it will not satisfy the 1940 Act requirement in this respect, which
applies that test to 75% of the Series' assets. A nondiversified portfolio is
believed to be subject to greater risk because adverse effects on the
portfolio's security holdings may affect a larger portion of the overall assets.
<PAGE>
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FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Premium Fund, Inc. and have been audited by Ernst & Young LLP,
independent auditors. The data should be read in conjunction with the financial
statements, related notes, and the report of Ernst & Young LLP covering such
financial information and highlights, all of which are incorporated by reference
into Part B. Further information about each Series' performance is contained in
the Fund's Annual Report to shareholders. A copy of the Fund's Annual Report
(including the report of Ernst & Young LLP) may be obtain from the Fund upon
request at no charge. No shares of the Global Bond Series were sold to investors
prior to the date of this Prospectus; consequently, no financial highlights are
presented for that Series.
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<PAGE>
<TABLE>
<CAPTION>
Equity/Income Series
-------------------------------------------------------------------------------------
7/28/88(1)
Year Ended through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $11.4800 $12.5100 $11.2200 $10.7500 $ 9.2400 $11.4000 $10.1600 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income.......................... 0.4155 0.4121 0.4341 0.4155 0.4502 0.4489 0.2813 0.0934
Net Gains (Losses) on Securities
(both realized and unrealized)....... 3.5745 (0.4221) 1.2659 0.5045 1.5498 (1.9189) 1.0337 0.0666
------- -------- -------- -------- ------- ------- -------- --------
Total From Investment Operations........... 3.9900 (0.0100) 1.7000 0.9200 2.0000 (1.4700) 1.3150 0.1600
------- -------- -------- -------- ------- ------- -------- --------
Less Distributions
- ------------------
Dividends (from net investment income)......... (0.4300) (0.4200) (0.4100) (0.4500) (0.4900) (0.5600) (0.0750) none
Distributions (from capital gains)............. (0.2100) (0.6000) none none none (0.1300) none none
Returns of Capital............................. none none none none none none none none
------- -------- -------- -------- ------- ------- -------- --------
Total Distributions........................ (0.6400) (1.0200) (0.4100) (0.4500) (0.4900) (0.6900) (0.0750) none
------- -------- -------- -------- ------- ------- -------- --------
Net Asset Value, End of Period................. $14.8300 $11.4800 $12.5100 $11.2200 $10.7500 $9.2400 $11.4000 $10.1600
======== ======== ======== ======== ======== ======= ======== ========
- ------------------------------------
Total Return(2)................................ 36.12% (0.20%) 15.45%(3) 8.82%(3) 22.32% (13.31%) 13.04% 3.77%
- ------------
- ------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...... $109,003 $72,725 $65,519 $38,278 $38,840 $29,598 $12,959 $1,873
Ratio of Expenses to Average Net Assets........ 0.69% 0.71% 0.75% 0.79% 0.85% 0.96% 1.31% 2.00%
Ratio of Expenses to Average Net Assets
prior to Expense Limitation................ 0.69% 0.71% 0.76% 0.81% 0.85% 0.96% 1.31% 2.00%
Ratio of Net Investment Income to Average
Net Assets................................. 3.24% 3.63% 3.95% 3.86% 4.46% 5.80% 5.06% 6.40%
Ratio of Net Investment Income to Average
Net Assets prior to Expense Limitation..... 3.24% 3.63% 3.94% 3.84% 4.46% 5.80% 5.06% 6.40%
Portfolio Turnover Rate........................ 85% 91% 67% 72% 79% 34% 26% --
</TABLE>
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(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
<TABLE>
<CAPTION>
High Yield Series
---------------------------------------------------------------------------------------
7/28/88(1)
Year Ended through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $8.5400 $9.7700 $9.2900 $9.1300 $7.4800 $9.2000 $9.8600 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income...................... 0.8715 0.9621 0.9758 1.0224 1.0316 1.1135 1.0846 0.4754
Net Gains (Losses) on Securities
(both realized and unrealized)... 0.4000 (1.2300) 0.4800 0.1600 1.6500 (1.7200) (0.6350) (0.1400)
------- ------- ------- ------- ------- ------- ------- -------
Total From Investment Operations....... 1.2715 (0.2679) 1.4558 1.1824 2.6816 (0.6065) 0.4496 0.3354
------- ------- ------- ------- ------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income)..... (0.8715) (0.9621) (0.9758) (1.0224) (1.0316) (1.1135) (1.0846) (0.4754)
Distributions (from capital gains)......... none none none none none none (0.0250) none
Returns of Capital......................... none none none none none none none none
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions.................... (0.8715) (0.9621) (0.9758) (1.0224) (1.0316) (1.1135) (1.1096) (0.4754)
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period............. $8.9400 $8.5400 $9.7700 $9.2900 $9.1300 $7.4800 $9.2000 $9.8600
======= ======= ======= ======= ======= ======= ======= =======
- ------------------------------------
Total Return(2)............................ 15.50% (2.87%) 16.36%(3) 13.44%(3) 37.53%(3) (7.13%)(3) 4.62%(3) 8.15%(3)
- ------------
- ------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).. $56,605 $43,686 $34,915 $11,311 $5,918 $5,092 $4,427 $2,425
Ratio of Expenses to Average Net Assets.... 0.69% 0.72% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of Expenses to Average Net Assets
prior to Expense Limitation............ 0.69% 0.72% 0.82% 0.94% 1.06% 1.17% 1.50% 1.21%
Ratio of Net Investment Income to
Average Net Assets..................... 9.87% 10.56% 10.05% 10.93% 12.05% 13.30% 11.21% 11.00%
Ratio of Net Investment Income to
Average Net Assets prior to Expense
Limitation............................. 9.87% 10.56% 10.03% 10.79% 11.80% 12.93% 10.50% 10.58%
Portfolio Turnover Rate.................... 74% 47% 43% 73% 70% 115% 19% 31%
</TABLE>
- ----------------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
<TABLE>
<CAPTION>
Capital Reserves Series
--------------------------------------------------------------------------------------
7/28/88(1)
Year Ended through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $9.3000 $10.2600 $10.2000 $10.2300 $10.0400 $9.9800 $9.9700 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income...................... 0.6431 0.6355 0.6357 0.6474 0.6687 0.7325 0.8402 0.3293
Net Gains (Losses) on Securities
(both realized and unrealized)... 0.6300 (0.9050) 0.1450 0.0600 0.1900 0.0600 0.0100 (0.0300)
------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations....... 1.2731 (0.2695) 0.7807 0.7074 0.8587 0.7925 0.8502 0.2993
------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)..... (0.6431) (0.6355) (0.6357) (0.6474) (0.6687) (0.7325) (0.8402) (0.3293)
Distributions (from capital gains)......... none (0.0550) (0.0850) (0.0900) none none none none
Returns of Capital......................... none none none none none none none none
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions.................... (0.6431) (0.6905) (0.7207) (0.7374) (0.6687) (0.7325) (0.8402) (0.3293)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period............. $9.9300 $9.3000 $10.2600 $10.2000 $10.2300 $10.0400 $9.9800 $9.9700
======= ======= ======== ======== ======== ======== ======= =======
- --------------------------------------
Total Return(2)............................ 14.08% (2.68%) 7.85%(3) 7.20%(3) 8.85%(3) 8.23%(3) 8.86%(3) 7.20%(3)
- ------------
- --------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).. $27,935 $25,975 $24,173 $9,790 $4,392 $4,093 $2,575 $1,784
Ratio of Expenses to Average Net Assets.... 0.71% 0.74% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of Expenses to Average Net Assets
prior to Expense Limitation............ 0.71% 0.74% 0.85% 0.98% 1.15% 1.49% 1.80% 1.26%
Ratio of Net Investment Income to
Average Net Assets..................... 6.64% 6.57% 6.20% 6.39% 6.62% 7.32% 8.41% 7.63%
Ratio of Net Investment Income to
Average Net Assets prior to Expense
Limitation............................. 6.64% 6.57% 6.15% 6.21% 6.27% 6.62% 7.41% 7.16%
Portfolio Turnover Rate.................... 145% 219% 198% 241% 95% 38% -- --
</TABLE>
- -------------------------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
<TABLE>
<CAPTION>
Money Market Series
-------------------------------------------------------------------------------------
7/28/88(1)
Year Ended through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income...................... 0.5349 0.3614 0.2451 0.3202 0.5443 0.7306 0.8288 0.3195
Net Gains (Losses) on Securities
(both realized and unrealized)... none none none none none none none none
-------- -------- -------- -------- -------- -------- -------- --------
Total From Investment Operations....... 0.5349 0.3614 0.2451 0.3202 0.5443 0.7306 0.8288 0.3195
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends (from net investment income)..... (0.5349) (0.3614) (0.2451) (0.3202) (0.5443) (0.7306) (0.8288) (0.3195)
Distributions (from capital gains)......... none none none none none none none none
Returns of Capital......................... none none none none none none none none
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions.................... (0.5349) (0.3614) (0.2451) (0.3202) (0.5443) (0.7306) (0.8288) (0.3195)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period............. $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000 $10.0000
======== ======== ======== ======== ======== ======== ======== ========
- --------------------------------------
Total Return(2)............................ 5.48% 3.68% 2.48%(3) 3.25%(3) 5.58%(3) 7.56%(3) 8.61%(3) 7.70%(3)
- ------------
- --------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).. $16,338 $20,125 $10,245 $7,774 $7,768 $8,174 $2,109 $932
Ratio of Expenses to Average Net Assets.... 0.62% 0.66% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of Expenses to Average Net Assets
prior to Expense Limitation............ 0.62% 0.66% 0.86% 0.85% 0.99% 0.99% 2.01% 2.11%
Ratio of Net Investment Income to
Average Net Assets..... 5.35% 3.79% 2.44% 3.21% 5.45% 7.25% 8.26% 7.50%
Ratio of Net Investment Income
to Average Net Assets prior to Expense
Limitation............................. 5.35% 3.79% 2.38% 3.16% 5.26% 7.05% 7.05% 6.19%
Portfolio Turnover Rate.................... -- -- -- -- -- -- -- --
</TABLE>
- --------------------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
<TABLE>
<CAPTION>
Growth Series
--------------------------------------------------------------
7/12/91(1)
Year Ended through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.7500 $12.2400 $11.1200 $11.0300 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income.................................... 0.0720 0.0694 0.0558 0.0225 0.0098
Net Gains (Losses) on Securities
(both realized and unrealized)................. 3.3780 (0.4994) 1.2142 0.1975 1.0202
-------- -------- -------- -------- --------
Total From Investment Operations..................... 3.4500 (0.4300) 1.2700 0.2200 1.0300
-------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends (from net investment income)................... (0.0700) (0.0600) (0.0200) (0.0100) none
Distributions (from capital gains)....................... none none (0.1300) (0.1200) none
Returns of Capital....................................... none none none none none
-------- -------- -------- -------- --------
Total Distributions.................................. (0.0700) (0.0600) (0.1500) (0.1300) none
-------- -------- -------- -------- --------
Net Asset Value, End of Period........................... $15.1300 $11.7500 $12.2400 $11.1200 $11.0300
======== ======== ======== ======== ========
- --------------------------------------
Total Return(2).......................................... 29.53%(3) (3.54%)(3) 11.56%(3) 1.99%(3) 21.60%
- ------------
- --------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)................ $58,123 $39,344 $33,180 $14,251 $6,950
Ratio of Expenses to Average Net Assets.................. 0.80% 0.80% 0.80% 0.98% 1.94%
Ratio of Expenses to Average Net Assets
prior to Expense Limitation.......................... 0.85% 0.88% 1.00% 1.25% 1.94%
Ratio of Net Investment Income to Average Net Assets..... 0.61% 0.64% 0.67% 0.28% 0.33%
Ratio of Net Investment Income to Average Net Assets
prior to Expense Limitation.......................... 0.56% 0.56% 0.47% 0.01% 0.33%
Portfolio Turnover Rate.................................. 73% 43% 57% 52% 40%
</TABLE>
- --------------------------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
<PAGE>
<TABLE>
<CAPTION>
Multiple Strategy Series
---------------------------------------------------------------------------------------
7/28/88(1)
Year Ended through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $12.6800 $13.3300 $13.5500 $12.9800 $10.8400 $11.8000 $10.1600 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income...................... 0.5088 0.4373 0.3280 0.4572 1.0824 0.3411 0.1302 0.0638
Net Gains (Losses) on Securities
(both realized and unrealized)... 2.7612 (0.4473) 0.6920 1.2328 1.6676 (0.3911) 1.5498 0.0962
-------- -------- -------- -------- -------- -------- -------- --------
Total From Investment Operations....... 3.2700 (0.0100) 1.0200 1.6900 2.7500 (0.0500) 1.6800 0.1600
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends (from net investment income)..... (0.4500) (0.3400) (0.4600) (1.0600) (0.3500) (0.2700) (0.0400) none
Distributions (from capital gains)......... none (0.3000) (0.7800) (0.0600) (0.2600) (0.6400) none none
Returns of Capital......................... none none none none none none none none
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions.................... (0.4500) (0.6400) (1.2400) (1.1200) (0.6100) (0.9100) (0.0400) none
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period............. $15.5000 $12.6800 $13.3300 $13.5500 $12.9800 $10.8400 $11.8000 $10.1600
======== ======== ======== ======== ======== ======== ======== ========
- --------------------------------------
Total Return(2)............................ 26.58% (0.15%) 8.18%(3) 13.85%(3) 26.58% (0.18%) 16.60% 3.77%
- ------------
- --------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).. $63,215 $47,731 $37,235 $15,150 $12,138 $6,137 $3,182 $151
Ratio of Expenses to Average Net Assets.... 0.69% 0.70% 0.80% 0.86% 1.03% 1.35% 1.99% (4)
Ratio of Expenses to Average Net Assets
prior to Expense Limitation............ 0.69% 0.70% 0.89% 0.94% 1.03% 1.35% 1.99% (4)
Ratio of Net Investment Income to
Average Net Assets..................... 3.75% 3.71% 3.33% 3.60% 11.35% 3.84% 2.22% (4)
Ratio of Net Investment Income to
Average Net Assets prior to Expense
Limitation............................. 3.75% 3.71% 3.24% 3.52% 11.35% 3.84% 2.22% (4)
Portfolio Turnover Rate.................... 106% 140% 162% 202% 1,010% 210% 132% (4)
</TABLE>
- -------------------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
(4) The ratios of expenses and net investment income to average net assets and
portfolio turnover have been omitted as management believes that such
ratios are not meaningful due to the limited net assets of this Series.
<PAGE>
<TABLE>
<CAPTION>
International Equity Series Value Series
-------------------------------------------- -------------------------------
10/29/92(1) 12/27/93(1)
Year Ended through Year Ended through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $11.8400 $11.6200 $10.0300 $10.0000 $10.2900 $10.2100 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... 0.4194 0.2198 0.0523 0.0153 0.1918 0.1481 none
Net Gains (Losses) on Securities
(both realized and unrealized)...... 1.1906 0.0802 1.5477 0.0147 2.2082 (0.0681) 0.2100
-------- -------- -------- -------- -------- -------- --------
Total From Investment Operations.......... 1.6100 0.3000 1.6000 0.0300 2.4000 0.0800 0.2100
-------- -------- -------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends (from net investment income)........ (0.2400) (0.0700) (0.0100) none (0.1500) none none
Distributions (from capital gains)............ (0.0900) (0.0100) none none (0.0700) none none
Returns of Capital............................ none none none none none none none
-------- -------- -------- -------- -------- -------- --------
Total Distributions....................... (0.3300) (0.0800) (0.0100) none (0.2200) none none
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period................ $13.1200 $11.8400 $11.6200 $10.0300 $12.4700 $10.2900 $10.2100
======== ======== ======== ======== ======== ======== ========
- --------------------------------------
Total Return(2)............................... 13.98%(3) 2.57%(3) 15.97%(3) 1.73%(3) 23.85%(3) 0.78%(3) 2.10%(3)
- ------------
- --------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)..... $81,548 $57,649 $16,664 $177 $11,929 $6,291 $210
Ratio of Expenses to Average Net Assets....... 0.80% 0.80% 0.80% (4) 0.80% 0.80% (4)
Ratio of Expenses to Average Net Assets
prior to Expense Limitation............... 0.89% 1.01% 1.85% (4) 0.96% 1.41% (4)
Ratio of Net Investment Income to
Average Net Assets........................ 3.69% 2.63% 1.85% (4) 2.13% 2.62% (4)
Ratio of Net Investment Income to
Average Net Assets prior to Expense
Limitation................................ 3.60% 2.42% 0.80% (4) 1.97% 2.01% (4)
Portfolio Turnover Rate....................... 19% 13% 9% (4) 71% 26% (4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Emerging Growth Series
---------------------------------------
12/27/93(1)
Year Ended through
12/31/95 12/31/94 12/31/93
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $10.1600 $10.2000 $10.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... 0.0976 0.0791 none
Net Gains (Losses) on Securities
(both realized and unrealized)...... 3.8524 (0.1191) 0.2000
-------- -------- --------
Total From Investment Operations.......... 3.9500 (0.0400) 0.2000
-------- -------- --------
Less Distributions
- ------------------
Dividends (from net investment income)........ (0.0900) none none
Distributions (from capital gains)............ none none none
Returns of Capital............................ none none none
-------- -------- --------
Total Distributions....................... (0.0900) none none
-------- -------- --------
Net Asset Value, End of Period................ $14.0200 $10.1600 $10.2000
======== ======== ========
- --------------------------------------
Total Return(2)............................... 39.21%(3) (0.39%)(3) 2.00%(3)
- ------------
- --------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)..... $20,510 $7,087 $204
Ratio of Expenses to Average Net Assets....... 0.80% 0.80% (4)
Ratio of Expenses to Average Net Assets
prior to Expense Limitation............... 0.96% 1.47% (4)
Ratio of Net Investment Income to
Average Net Assets........................ 1.03% 1.63% (4)
Ratio of Net Investment Income to
Average Net Assets prior to Expense
Limitation................................ 0.87% 0.96% (4)
Portfolio Turnover Rate....................... 76% 59% (4)
</TABLE>
- -----------
(1) Date of initial public offering; total return has been annualized.
(2) Total return does not reflect expenses that apply to the Separate Accounts
or to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(3) Total return reflects the expense limitation referenced in Expenses under
Management of the Fund.
(4) The ratios of expenses and net investment income to average net assets and
portfolio turnover have been omitted as management believes that such ratios
are not meaningful due to the limited net assets of this Series.
<PAGE>
INVESTMENT OBJECTIVES AND
POLICIES
INTRODUCTION
The Fund, a corporation organized in Maryland on February 19, 1987, is a
diversified, open-end management investment company offering ten Series of
shares. The initial public offering of the Growth Series was July 2, 1991 and
the International Equity Series commenced operations on October 29, 1992. The
Value Series and the Emerging Growth Series commenced operations on December 27,
1993. The Global Bond Series was first publicly offered on May 1, 1996.
Each Series' investment objective is a fundamental policy and cannot be
changed without approval by the holders of a "majority" of that Series'
outstanding shares, as defined in the 1940 Act. Although each Series will
constantly strive to attain its objective, there can be no assurance that it
will be attained. In addition to the objective and investment techniques
described below for each Series, see Other Considerations for investment
techniques available to various Series of the Fund. Part B provides more
information on the Series' investment policies and restrictions.
EQUITY/INCOME SERIES
The objective of the Equity/Income Series is to seek to achieve long-term
growth by investing primarily in securities that provide the potential for
income and capital appreciation without undue risk to principal. The Series
seeks to provide shareholders with a current return while allowing them to
participate in the capital gains potential associated with equity investments.
Investment Strategy
The Series generally invests in common stocks and income-producing
securities that are convertible into common stocks. The portfolio manager looks
for securities having a better dividend yield than the average of the Standard &
Poor's ("S&P") 500 Stock Index, as well as capital gains potential.
All available types of appropriate securities are under continuous study.
The Series may invest in all classes of securities, bonds and preferred and
common stocks in any proportion deemed prudent under existing market and
economic conditions. In seeking to obtain its objective, the Series may hold
securities for any period of time. For temporary, defensive purposes, the Series
may hold a substantial portion of its assets in cash or short-term obligations.
Income-producing convertible securities include preferred stock and
debentures that pay a stated or variable interest rate or dividend and are
convertible into common stock at an established ratio. These securities, which
are usually priced at a premium to their conversion value, may allow the Series
to receive current income while participating to some extent in any appreciation
in the underlying common stock. The value of a convertible security tends to be
affected by changes in interest rates, as well as factors affecting the market
value of the underlying common stock.
The Series may be suitable for the patient investor interested in
long-term growth. The investor should be willing to accept the risks associated
with investments in common stocks and income-producing securities, including
those that are convertible into common stocks. The Series is suitable for
investors who want a current return with the possibility of capital
appreciation. Naturally, the Series cannot assure a specific rate of return or
that principal will be protected. The value of the Series' shares can be
expected to fluctuate depending upon market conditions. However, through the
cautious selection and supervision of its portfolio, the Series will strive to
achieve its objective of long-term growth through both income and capital
appreciation without undue risk to principal.
<PAGE>
HIGH YIELD SERIES
The objective of the High Yield Series is to seek the highest current
income which Delaware Management believes is consistent with prudent investment
management. The strategy is to invest primarily in those securities having a
liberal and consistent yield and those tending to reduce the risk of market
fluctuations. The Series will invest at least 80% of its assets at the time of
purchase in:
(1) Corporate Bonds. The Series will invest in both rated and unrated
bonds. See Appendix A to this Prospectus for information concerning ratings.
Unrated bonds may be more speculative in nature than rated bonds;
(2) Securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities; and
(3) Commercial paper of companies rated A-1 or A-2 by S&P or rated P-1 or
P-2 by Moody's Investors Service, Inc. ("Moody's").
Investment Strategy
The Series expects to invest at least 80% of its assets in securities of
the types described above. The Series must invest the remaining assets, if any,
in income-producing securities, including common stocks and preferred stocks,
some of which may have convertible features or attached warrants. For temporary
defensive purposes, the Series may hold a substantial portion of its assets in
cash or short-term obligations. In the long run, the Series' assets are expected
to be invested primarily in unrated corporate bonds and bonds rated BBB or lower
by S&P.
Risk Factors
The assets of the High Yield Series may be invested primarily in bonds
rated BBB or lower by S&P or Baa or lower by Moody's and in unrated corporate
bonds. See Appendix A to this Prospectus for more rating information. Investing
in these so-called "junk" or "high-yield" bonds entails certain risks, including
the risk of loss of principal, which may be greater than the risks involved in
investment grade bonds, and which should be considered by investors
contemplating an investment in the Series. Such bonds are sometimes issued by
companies whose earnings at the time of issuance are less than the projected
debt service on the junk bonds. In addition to the considerations discussed
elsewhere in this Prospectus, those risks include the following:
Youth and Volatility of the High-Yield Market. Although the market for
high-yield bonds has been in existence for many years, including periods of
economic downturns, the high-yield market grew rapidly during the long economic
expansion which took place in the United States during the 1980s. During that
economic expansion, the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings increased dramatically. As a
result, the high-yield market grew substantially during that economic expansion.
Although experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted economic
downturn would severely disrupt the market for high-yield bonds, would adversely
affect the value of outstanding bonds and would adversely affect the ability of
high-yield issuers to repay principal and interest. Those analysts cite
volatility experienced in the high-yield market in the past as evidence for
their position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield bonds,
an increase in the number of high-yield bond defaults and corresponding
volatility in the Series' net asset value. At times in the past, uncertainty and
volatility in the high-yield market resulted in volatility in the Series' net
asset value.
<PAGE>
Redemptions. If, as a result of volatility in the high-yield market or other
factors, the Series experiences substantial net redemptions of the Series'
shares for a sustained period of time (i.e., more shares of the Series are
redeemed than are purchased), the Series may be required to sell securities
without regard to the investment merits of the securities to be sold. If the
Series sells a substantial number of securities to generate proceeds for
redemptions, the asset base of the Series will decrease and the Series' expense
ratio may increase.
Liquidity and Valuation. The secondary market for high-yield securities is
currently dominated by institutional investors, including mutual funds and
certain financial institutions. There is generally no established retail
secondary market for high-yield securities. As a result, the secondary market
for high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions which dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse affect on the
Series' ability to dispose of particular issues, when necessary, to meet the
Series' liquidity needs or in response to a specific economic event, such as the
deterioration in the creditworthiness of the issuer. In addition, a less liquid
secondary market makes it more difficult for the Series to obtain precise
valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role in valuing
high-yield securities than is normally the case. The secondary market for
high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. The Series' privately placed
high-yield securities are particularly susceptible to the liquidity and
valuation risks outlined above.
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 bonds. For example, Congressional legislation limited the
deductibility of interest paid on certain high-yield bonds used to finance
corporate acquisitions. Also, Congressional legislation has, with some
exceptions, generally prohibited federally-insured savings and loan institutions
from investing in high-yield securities. Regulatory actions have also affected
the high-yield market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If similar legislative and regulatory actions are taken in the future, they
could result in further tightening of the secondary market for high-yield
issues, could reduce the number of new high-yield securities being issued and
could make it more difficult for the Series to attain its investment objective.
Zero Coupon Bonds and Pay-in-Kind Bonds. Although the Series does not generally
purchase a substantial amount of zero coupon bonds or pay-in-kind ("PIK") bonds,
from time to time the Fund may acquire zero coupon bonds and, to a lesser
extent, PIK bonds. Zero coupon bonds and PIK bonds are generally considered to
be more interest-sensitive than income-bearing bonds, to be more speculative
than interest-bearing bonds, and to have certain tax consequences which could,
under certain circumstances, be adverse to the Series. For example, the Series
accrues, and is required to distribute to shareholders, income on its zero
<PAGE>
coupon bonds. However, the Series may not receive the cash associated with this
income until the bonds are sold or mature. If the Series did not have sufficient
cash to make the required distribution of accrued income, the Series could be
required to sell other securities in its portfolio or to borrow to generate the
cash required.
CAPITAL RESERVES SERIES
The Capital Reserves Series' objective is to seek a high stable level of
current income while attempting to minimize fluctuations in principal and
provide maximum liquidity. The Series intends to achieve its objective by
investing its assets in a diversified portfolio of short- and intermediate-term
securities, including securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, instruments secured by such securities and
investment grade corporate notes, bonds and other debt securities. See
Diversification.
The Series is not a money market fund. A money market fund is designed for
stability of principal; consequently, the level of income fluctuates. The Series
is designed for greater stability of income at a relatively higher level;
consequently, the principal value will fluctuate over time.
Investment Strategy
The Series will attempt to provide investors with yields higher than those
available in money market vehicles by extending its portfolio maturities.
Maturity Restrictions
The Series seeks to reduce the effects of interest rate volatility on
principal by normally maintaining the average weighted maturity of the Series'
portfolio within the five- to seven-year range and not in excess of ten years.
The decision to position the portfolio at any point within this permissible
maturity range will be guided by Delaware Management's perception of the
direction of interest rates and the risks in the fixed income markets,
generally. If, in Delaware Management's judgment, interest rates are relatively
high and borrowing requirements in the economy are weakening, the manager,
generally, will extend the average weighted maturity of the Series. Conversely,
if, in its judgment, interest rates are relatively low and borrowing
requirements appear to be strengthening, it, generally, will shorten the average
weighted maturity. Delaware Management has the ability to purchase individual
securities with a remaining maturity of up to 15 years.
Quality Restrictions
The Series will invest in:
(1) securities issued or guaranteed by the U.S. Government (e.g., Treasury
Bills and Notes), its agencies (e.g., Federal Housing Administration) or
instrumentalities (e.g., Federal Home Loan Bank) or government-sponsored
corporations (e.g., Federal National Mortgage Association) and repurchase
agreements collateralized by such securities;
(2) corporate notes, bonds and other debt securities rated investment
grade (e.g., BBB or better by S&P or Baa or better by Moody's) or, if unrated,
those securities considered to be of comparable quality by Delaware Management;
(3) mortgage-backed securities, i.e., bonds collateralized by
mortgage-backed pass-through securities such as GNMA, FNMA and FHLMC, rated
investment grade (e.g., BBB or better by S&P or Baa or better by Moody's) or, if
unrated, those securities considered to be of comparable quality by Delaware
Management. See Other Considerations - Mortgage-Backed Securities;
(4) certificates of deposit and obligations of both U.S. and foreign banks
if they have assets of at least one billion dollars;
(5) commercial paper of companies rated P-1 or P-2 by Moody's and/or A-1
or A-2 by S&P; and
(6) asset-backed securities, i.e., securities backed by assets such as
home equity loans and credit card receivables rated AAA by S&P or Aaa by
Moody's. See Other Considerations - Asset-Backed Securities.
<PAGE>
Debt securities rated in the fourth category of investment grade (e.g.,
BBB by S&P or Baa by Moody's) may have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity by issuers of such debt to make principal and interest payments than is
the case with higher rated debt. To the extent that the rating of a corporate
debt security held by the Series falls below such fourth grade or Delaware
Management determines that an unrated security no longer is of comparable
quality, the Series, as soon as practicable, will dispose of such security,
unless such disposal, in the judgment of Delaware Management, would be
detrimental to the Series in light of then prevailing market conditions.
The Series may be suitable for the individual who wants relatively stable
and high income flow and the security associated with a portfolio of U.S.
Government- (or agency-) backed and other investment grade investments. The
investor should be willing to accept the risks associated with investing in
these securities. The types of securities in which the Series invests is subject
to fluctuations in net asset value, as well as yield. Therefore, the Series may
not be suitable for people whose overriding objective is stability of principal.
The market value of fixed income securities generally is affected by changes in
the level of interest rates. When interest rates rise, the share value will tend
to fall, and when interest rates fall, the share value will tend to rise.
As noted above, the Series will invest in securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities or certain
corporations sponsored or established by the U.S. Government. U.S. Treasury
securities are backed by the "full faith and credit" of the United States.
Securities issued or guaranteed by Federal agencies and U.S. Government
sponsored instrumentalities may or may not be backed by the full faith and
credit of the United States. In the case of securities not backed by the full
faith and credit of the United States, the investors must look principally to
the agency or instrumentality issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet its
commitment. Agencies which are backed by the full faith and credit of the United
States include the Export-Import Bank, Farmers Home Administration, Federal
Financing Bank, and others. Certain agencies and instrumentalities, such as the
Government National Mortgage Association (GNMA), are, in effect, backed by the
full faith and credit of the United States through provisions in their charters
that they may make "indefinite and unlimited" drawings on the Treasury, if
needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association (FNMA), are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S. Treasury
to purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the Federal Home Loan Mortgage Corporation
(FHLMC), are federally chartered institutions under U.S. Government supervision,
but their debt securities are backed only by the creditworthiness of those
institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
<PAGE>
An instrumentality of the U.S. Government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks, and the Federal National Mortgage Associations.
MONEY MARKET SERIES
As a money market fund, this Series' objective is to seek to provide
maximum current income, while preserving principal and maintaining liquidity, by
investing at least 80% of its assets in a diversified portfolio of money market
securities and managing the portfolio to maintain a constant $10 per share
value. While the Series will make every effort to maintain a fixed net asset
value of $10 per share, there can be no assurance that this objective will be
achieved.
Quality Restrictions
The Series limits its investments to those which the Board of Directors
has determined present minimal credit risks and are of high quality and which
will otherwise meet the maturity, quality and diversification conditions with
which taxable money market funds must comply.
The Series' investments include securities issued or guaranteed by the
U.S. Government (e.g., Treasury Bills and Notes) or by the credit of its
agencies or instrumentalities (e.g., Federal Housing Administration and Federal
Home Loan Bank). The Series may invest in the certificates of deposit and
obligations of both U.S. and foreign banks if they have assets of at least one
billion dollars in accordance with the maturity, quality and diversification
conditions with which taxable money market funds must comply. The Series also
may purchase commercial paper and other corporate obligations; if such a
security or, as relevant, its issuer, is considered to be rated, at the time of
the proposed purchase, it or, as relevant, its issuer, must be so rated in one
of the two highest rating categories (e.g., for commercial paper, A-2 or better
by S&P and P-2 or better by Moody's; and, for other corporate obligations, AA or
better by S&P and Aa or better by Moody's) by at least two nationally-recognized
statistical rating organizations approved by the Board of Directors or, if such
security is not so rated, the purchase of the security must be approved or
ratified by the Board of Directors in accordance with the maturity, quality and
diversification conditions with which taxable money market funds must comply.
Appendix A of Part B describes the ratings of S&P, Moody's, Duff and Phelps,
Inc. and Fitch Investors Service, Inc., four of the better-known statistical
rating organizations.
Maturity Restrictions
The Series maintains an average maturity of not more than 90 days. Also,
it does not purchase any instruments with an effective remaining maturity of
more than 13 months.
Investment Techniques
The Series intends to hold its investments until maturity, but may sell
them prior to maturity for a number of reasons. These reasons include: to
shorten or lengthen the average maturity, to increase the yield, to maintain the
quality of the portfolio or to maintain a stable share value.
If there were a national credit crisis, an issuer were to become insolvent
or interest rates were to rise, principal values could be adversely affected.
Investments in foreign banks and overseas branches of U.S. banks may be subject
to less stringent regulations and different risks than U.S. domestic banks.
<PAGE>
GROWTH SERIES
The objective of the Series is long-term capital appreciation. The Series'
strategy is to invest primarily in common stocks that, in the judgment of
Delaware Management, are of superior quality and in securities that are
convertible into such common stocks.
Investment Strategy
The Series will attempt to achieve its objective by purchasing securities
issued by companies whose earnings Delaware Management believes will grow more
rapidly than the average of those listed in the S&P 500 Stock Index. Delaware
Management's emphasis will be on the securities of companies that, in its
judgment, have the characteristics supporting such earnings growth. This
judgment will be based on, among other things, the financial strength of the
company, the expertise of its management, the growth potential of the company
within the industry and the growth potential of the industry itself. The focus
will be on those securities of companies Delaware Management believes have
established themselves within their industry while maintaining growth potential.
While management believes its objective may best be achieved by investing
in common stock, the Series may also invest in other securities including, but
not limited to, convertible securities, warrants, preferred stock, bonds and
foreign securities. Any specific investment will be dependent upon the judgment
of Delaware Management. Investments may be held for any period of time.
The Series may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depository Receipts ("ADRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. "Sponsored"
ADRs are issued jointly by the issuer of the underlying security and a
depository, whereas "unsponsored" ADRs are issued without participation of the
issuer of the deposited security. Holders of unsponsored ADRs 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.
Should the market warrant a temporary, defensive approach, the Series may
also invest in fixed income obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, as well as corporate bonds of
investment quality rated Baa or above by Moody's or BBB or above by S&P.
The Series may be suitable for the patient investor interested in
long-term capital appreciation. Providing current income is not an objective of
the Series and any income produced is expected to be minimal. The investor
should be willing to accept the risks associated with investments in domestic
and international securities. Ownership of Series shares reduces the bookkeeping
and administrative inconveniences connected with direct purchases of these
securities. Because the net asset value may fluctuate at times in response to
market conditions, the Series is not appropriate for a short-term investor.
MULTIPLE STRATEGY SERIES
The Multiple Strategy Series seeks to provide a balance of capital
appreciation, income and preservation of capital by strategically allocating its
assets among fixed income and equity securities, that, in the judgment of
Delaware Management, are believed to have the best potential for achieving the
Series' objective.
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Investment Strategy
The Series seeks a balance of capital appreciation, income and
preservation of capital. As a "balanced" fund, the Series will generally invest
at least 25% of its assets in fixed income securities, including U.S. Government
securities and corporate bonds. The balance of the portfolio will be allocated
to equity securities principally, including convertible securities, and also to
cash and cash equivalents. If the Series invested in convertible securities, the
value of the convertible security would be allocated to its fixed income
component and its conversion rights component for purposes of the 25% fixed
income allocation.
The Series uses a dividend-oriented valuation strategy to select
individual securities in which it will invest. In seeking capital appreciation,
the Series invests primarily in common stocks of established companies believed
to have a potential for long-term capital growth. In seeking current income and
preservation of capital, in addition to capital appreciation, the Series invests
in various types of fixed income securities, including U.S. Government and
government agency securities and corporate bonds. The Series intends to invest
in bonds that are rated in the top four grades by a nationally-recognized rating
agency (i.e., Moody's or S&P) at the time of purchase, or, if unrated, are
determined to be equivalent to the top four grades in the judgment of Delaware
Management. The fourth grade is considered medium grade and may have some
speculative characteristics. To the extent that the rating of a security held by
the Series falls below the fourth grade or Delaware Management determines that
an unrated security no longer is of comparable quality, the Series, as soon as
practicable, will dispose of such security, unless such disposal, in the
judgment of Delaware Management, would be detrimental in light of then
prevailing market conditions. Typically, the maturity of the bonds will range
between five and 30 years. The Series may not concentrate investments in any
industry, which means not investing more than 25% of its assets in any one
industry.
The Series may invest in shares or convertible bonds issued by real estate
investment trusts ("REITS"). REITS invest primarily in income producing real
estate as well as real estate related loans or interests. A REIT is not taxed on
income distributed to shareholders if it complies with several requirements
relating to its organization, ownership, assets and income, and a requirement
that it distribute to its shareholders at least 95% of its taxable income (other
than net capital gains) for each taxable year. The Series anticipates investing
only in REITS that invest the majority of their assets directly in real property
and derive their income primarily from rents, which are known as "equity REITS."
Equity REITS can also realize capital gains by selling properties that have
appreciated in value.
In pursuing its investment objective, the Series may hold securities for
any period of time. For temporary, defensive purposes, the Series may hold a
substantial portion of its assets in cash or short-term obligations, including
repurchase agreements.
The Series may be suitable for the patient investor interested in
long-term capital appreciation. The investor should be willing to accept the
risks associated with investments in equity and fixed income securities.
The value of the Series' shares can be expected to fluctuate depending
upon market conditions and, thus, an investment in the Series may not be
appropriate for a short-term investor. Investment results of the Series will be
affected by the ability of Delaware Management to anticipate changes in economic
and market conditions and, consequently, there can be no assurance that the
Series' investment objective will be realized.
<PAGE>
INTERNATIONAL EQUITY SERIES
The objective of the International Equity Series is to achieve long-term
growth without undue risk to principal. The Series seeks to achieve this
objective by investing primarily in securities that provide the potential for
capital appreciation and income. The Series is an international fund. As such,
it may invest in securities issued in any currency and may hold foreign
currency. Under normal circumstances, at least 65% of the Series' assets will be
invested in the securities of issuers organized or having a majority of their
assets in or deriving a majority of their operating income in at least three
different countries outside of the United States. Securities of issuers within a
given country may be denominated in the currency of another country or in
multinational currency units such as the European Currency Unit ("ECU"). The
Series will operate as a diversified fund for purposes of the 1940 Act.
Investment Strategy
The Series will attempt to achieve its objective by investing in a broad
range of equity securities including common stocks, preferred stocks,
convertible securities and warrants. Delaware International will employ a
dividend discount analysis across country boundaries and will also use a
purchasing power parity approach to identify currencies and markets that are
overvalued or undervalued relative to the U.S. dollar.
With a dividend discount analysis, Delaware International looks at future
anticipated dividends and discounts the value of those dividends back to what
they would be worth if they were being paid today. Delaware International uses
this technique to attempt to compare the value of different investments. With a
purchasing power parity approach, Delaware International attempts to identify
the amount of goods and services that a dollar will buy in the United States and
compare that to the amount of a foreign currency required to buy the same amount
of goods and services in another country. When the dollar buys less, the foreign
currency may be considered to be overvalued. When the dollar buys more, the
currency may be considered to be undervalued. Eventually, currencies should
trade at levels that should make it possible for the dollar to buy the same
amount of goods and services overseas as in the United States. The Series may
also invest in sponsored or unsponsored American Depository Receipts or European
Depository Receipts.
While the Series may purchase securities in any foreign country, developed
and underdeveloped, or emerging market countries, it is currently anticipated
that the countries in which the Series may invest will include, but not be
limited to, Canada, Germany, the United Kingdom, France, the Netherlands,
Belgium, Spain, Switzerland, Japan, Australia, Hong Kong, and
Singapore/Malaysia. With respect to certain countries, investments by an
investment company may only be made through investments in closed-end investment
companies that in turn are authorized to invest in the securities of such
countries. Any investment the Series may make in other investment companies is
limited in amount by the 1940 Act and would involve the indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies.
For temporary, defensive purposes, the Series may invest all or a
substantial portion of its assets in high quality debt instruments issued by
foreign governments, their agencies, instrumentalities or political
subdivisions, the U.S. Government, its agencies or instrumentalities and which
are backed by the full faith and credit of the U.S. Government, or issued by
foreign or U.S. companies. Any corporate debt obligations will be rated AA or
better by S&P, or Aa or better by Moody's or, if unrated, will be determined to
<PAGE>
be of comparable quality by Delaware International. For example, the Series may
enter the global fixed income markets when Delaware International believes that
the global equity markets are excessively volatile or overvalued so that the
Series' objective cannot be achieved in such markets. In addition, the Series
may invest in the U.S. fixed income markets for temporary, defensive purposes
when Delaware International believes that the international equity and fixed
income markets are evidencing such excessive volatility or overvaluation. The
Series may also invest in the securities listed for defensive investing pending
investment of proceeds from new sales of Series shares and to maintain
sufficient cash to meet redemption requests.
The Series may be suitable for the patient investor interested in
long-term growth through investments that provide the potential for capital
appreciation and income. The investor should be willing to accept the risks
associated with investments in foreign equity securities in which the Series may
invest, as well as the special investment techniques in which the Series may
engage. Naturally, the Series cannot assure a specific rate of return or that
principal will be protected. The value of the Series' shares can be expected to
fluctuate depending upon market conditions. However, through the cautious
selection and supervision of its portfolio, the Series will strive to achieve
its objective of long-term growth. See Special Risk Considerations.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Series will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize currency
value fluctuations. The Series may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). A forward contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Series will convert currency on a
spot basis from time to time, and investors should be aware of the costs of
currency conversion.
The Series may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Series will be able to protect itself against a
possible loss resulting from an adverse change in currency exchange rates during
the period between the date the security is purchased or sold and the date on
which payment is made or received.
When the Series' investment manager believes that the currency of a
particular country may suffer a significant decline against the U.S. dollar or
against another currency, the Series may enter into a forward foreign currency
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 the Series' securities denominated in such foreign currency.
The Series will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Series to deliver an amount of foreign currency in excess of the
value of the Series' securities or other assets denominated in that currency.
<PAGE>
At the maturity of a forward contract, the Series may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Series may realize a gain or loss from currency
transactions.
The Series also may purchase and write put and call options on foreign
currencies (traded on U.S. and foreign exchanges or over-the-counter) for
hedging purposes to protect against declines in the U.S. dollar cost of foreign
securities held by the Series and against increases in the U.S. dollar cost of
such securities to be acquired. Call options on foreign currency written by the
Series will be covered, which means that the Series will own the underlying
foreign currency. With respect to put options on foreign currency written by the
Series, the Series 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 to the amount the Series will be required to pay
upon exercise of the put. See Special Risk Considerations.
Futures Contracts and Options on Futures
Contracts
The Series may enter into contracts for the purchase or sale for future
delivery of securities or foreign currencies. The principal purpose of the
purchase or sale of futures contracts for the Series is to protect the Series
against the fluctuations in interest or exchange rates which otherwise might
adversely affect the value of the Series' portfolio securities or adversely
affect the prices of securities which the Series intends to purchase at a later
date without actually buying or selling such securities. See Other
Considerations - Futures Contracts and Options on Futures Contracts and Special
Risk Considerations.
VALUE SERIES
The objective of the Series is capital appreciation. The strategy will be
to invest primarily in common stocks and issues convertible into common stocks
which, in the opinion of Delaware Management, have market values which appear
low relative to their underlying value or future earnings and growth potential.
Securities will be purchased that Delaware Management believes to be
undervalued in relation to asset value or long-term earning power of the
companies. Delaware Management may also invest in securities of companies where
current or anticipated favorable changes within a company provide an opportunity
for capital appreciation. Delaware Management's emphasis will be on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market.
Delaware Management will consider the financial strength of the company,
the nature of its management and any developments affecting the security, the
company or the industry. Securities may be out of favor due to a variety of
factors, such as lack of an institutional following, or unfavorable developments
affecting the issuer of the securities, such as poor earning reports, dividend
reductions or cyclical economic or business conditions. Other securities
considered by Delaware Management would include those of companies where current
or anticipated favorable changes such as a new product or service, technological
breakthrough, management change, projected takeovers, changes in capitalization
or redefinition of future corporate operations provide an opportunity for
capital appreciation. Delaware Management will also consider securities where
trading patterns suggest that significant positions are being accumulated by
officers of the company, outside investors or the company itself. Delaware
<PAGE>
Management feels it may uncover situations where those who have a vested
interest in the company feel the securities are undervalued and have
appreciation potential.
Although the Series will constantly strive to attain the objective of
long-term growth, there can be no assurance that it will be attained. If
Delaware Management believes that market conditions warrant, the Series may
employ options strategies. Also, on a temporary, defensive basis, Delaware
Management may invest in fixed income obligations. The objective of the Series
may not be changed without shareholder approval.
Investment Strategy
While management believes that the Series' objective may best be attained
by investing in common stocks, the Series may also invest in other securities
including, but not limited to, convertible securities, warrants, preferred
stocks, bonds and foreign securities. Although it is expected to receive
relatively less emphasis, the Series may also invest in fixed income securities
without regard to a minimum grade level in pursuit of its objective where there
are favorable changes in a company's earnings or growth potential or where
general economic conditions and the interest rate environment provide an
opportunity for declining interest rates and consequent appreciation in these
securities. The strategies employed are dependent upon the judgment of Delaware
Management.
In investing for capital appreciation, the Series may hold securities for
any period of time. The degree of portfolio activity will affect brokerage costs
of the Series.
Should the market warrant a temporary, defensive approach, the Series may
also invest in fixed income obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, as well as money market
instruments, and corporate bonds rated A or above by Moody's or S&P.
The Series may write covered call options on individual issues as well as
write call options on stock indices. The Series may also purchase put options on
individual issues and on stock indices. Delaware Management will employ these
techniques in an attempt to protect appreciation attained, to offset capital
losses and to take advantage of the liquidity available in the option markets.
The ability to hedge effectively using options on stock indices will depend, in
part, on the correlation between the composition of the index and the Series'
portfolio as well as the price movement of individual securities. The Series
does not currently intend to write or purchase stock index options.
While there is no limit on the amount of the Series' assets which may be
invested in covered call options, the Series will not invest more than 2% of its
net assets in put options. The Series will only use Exchange-traded options. See
Other Considerations - Options, below.
The Series may enter into futures contracts and buy and sell options on
futures contracts relating to securities, securities indices or interest rates.
See Other Considerations - Futures Contracts and Options on Futures Contracts,
below.
Risk Factors
The Series may be suitable for the patient investor interested in
long-term capital appreciation. The investor should be willing to accept the
risks associated with investments in domestic and international securities (and
currency hedging transactions in connection therewith), as these investments may
be speculative and subject the Series to an additional risk. See Foreign
<PAGE>
Securities and Foreign Currency Transactions under Other Considerations.
Investing in a company temporarily out of favor may involve the risk that the
anticipated favorable change may not occur and, as a result, that security may
decline in value or not appreciate as expected. Although it will receive
relatively minor emphasis in pursuit of its objective, the Series may also
purchase, at times, lower rated or unrated corporate bonds without regard to a
grade minimum, which may be considered speculative and may increase the
portfolio's credit risk. Although the Series will not ordinarily purchase bonds
rated below B by Moody's or S&P (i.e., high-yield, high-risk fixed income
securities), it may do so if Delaware Management believes that capital
appreciation is likely. The Series will not invest more than 25% of its net
assets in bonds rated below B. Investing in such lower rated debt securities may
involve certain risks not typically associated with higher rated securities.
Such bonds are considered very speculative and may possibly be in default or
have interest payments in arrears. See High Yield Series for additional
information on the risks associated with such securities.
Net asset value may fluctuate at times in response to market conditions
and, as a result, the Series is not appropriate for a short-term investor.
This Series is designed primarily for capital appreciation. Providing
current income is not an objective of the Series. Any income produced is
expected to be minimal.
EMERGING GROWTH SERIES
Investment Strategy
The objective of the Series is long-term capital appreciation. The
strategy is to invest primarily in the common stocks and securities convertible
into common stocks of emerging and other growth-oriented companies that, in the
judgment of Delaware Management, are responsive to changes within the
marketplace and have the fundamental characteristics to support growth.
The Series will seek to identify changing and dominant trends within the
economy, the political arena and our society. The Series will purchase
securities which it believes will benefit from these trends and which have the
fundamentals to exploit them. The fundamentals include managerial skills,
product development and sales and earnings.
In investing for capital appreciation, the Series may hold securities for
any period of time. The Series may invest in repurchase agreements, but will not
normally do so except to invest excess cash balances. The Series may also invest
in foreign securities.
The Series may purchase privately placed securities the resale of which is
restricted under applicable securities laws. Such securities may offer a higher
return than comparably registered securities but involve some additional risk as
they can be resold only in privately negotiated transactions, in accordance with
an exemption from the registration requirements under applicable securities laws
or after registration.
Income is not an objective of the Series. However, should the market
warrant a temporary defensive approach, the Series may also invest in cash
equivalents, and fixed income obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, as well as corporate bonds.
Although the Series will constantly strive to attain the objective of
long-term capital growth, there can be no assurance that it will be attained.
The objective of the Series may not be changed without shareholder approval.
Part B provides more information on the Series' investment policies and
restrictions.
<PAGE>
The Series may be suitable for the patient investor interested in
long-term capital appreciation. The prices of common stock, especially those of
smaller companies, tend to fluctuate, particularly in the short-term. The
investor should be willing to accept the risks associated with investments in
growth-oriented securities, some of which may be speculative and subject the
Series to an additional risk.
Net asset value may fluctuate in response to market conditions and, as a
result, the Series is not appropriate for a short-term investor.
This Series is designed primarily for capital appreciation. Providing
current income is not an objective of the Series. Any income produced is
expected to be minimal. An investor should not consider a purchase of Series
shares as equivalent to a complete investment program.
For hedging purposes, the Series may engage in options activity and enter
into futures contracts and options on futures contracts. For a discussion on
these instruments, see Other Considerations - Options and Other Considerations -
Futures Contracts and Options on Futures Contracts.
GLOBAL BOND SERIES
The objective of the Global Bond Series is to achieve current income
consistent with the preservation of investors' principal. The Fund seeks to
achieve this objective by investing primarily in fixed income securities that
may also provide the potential for capital appreciation. The Series is a global
fund. Under normal circumstances, at least 65% of the Series' assets will be
invested in the fixed income securities of issuers organized or having a
majority of their assets in or deriving a majority of their operating income in
at least three different countries, one of which may be the United States. The
Series may invest in securities issued in any currency and may hold foreign
currency. Securities of issuers within a given country may be denominated in the
currency of another country or in multinational currency units such as the ECU.
For purposes of the 1940 Act, the Global Bond Series will operate as a
nondiversified fund.
Investment Strategy
The Series will attempt to achieve its objective by investing at least 65%
of its assets in a broad range of fixed income securities, including foreign and
U.S. Government securities and debt obligations of foreign and U.S. companies
which are generally rated A or better by S&P or Moody's, or if unrated, are
deemed to be of comparable quality by Delaware International. The Series may
also invest in zero coupon bonds and in the debt securities of supranational
entities denominated in any currency. Generally, the value of fixed income
securities moves inversely to the movement of market interest rates. The value
of the Series' portfolio securities and, thus, an investor's shares will be
affected by changes in such rates.
Zero coupon bonds are debt obligations which do not entitle the holder to
any periodic payments of interest prior to maturity or a specified date when the
securities begin paying current interest, and therefore are issued and traded at
a discount from their face amounts or par value. A supranational entity is an
entity established or financially supported by the national governments of one
or more countries to promote reconstruction or development. Examples of
supranational entities include, among others, the World Bank, the European
Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-Development Bank, the Export-Import Bank and the
Asian Development Bank. For increased safety, the Series currently anticipates
that a large percentage of its assets will be invested in U.S. and foreign
government securities and securities of supranational entities.
<PAGE>
With respect to U.S. Government securities, the Series may invest only in
securities issued or guaranteed as to the payment of principal and interest by
the U.S. Government, and those of its agencies or instrumentalities which are
backed by the full faith and credit of the United States. Direct obligations of
the U.S. Government which are available for purchase by the Series include
bills, notes, bonds and other debt securities issued by the U.S. Treasury. These
obligations differ mainly in interest rates, maturities and dates of issuance.
Agencies whose obligations are backed by the full faith and credit of the United
States include the Farmers Home Administration, Federal Financing Bank and
others.
With respect to securities issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the Series will generally invest in
such securities if they have been rated AAA or AA by S&P or Aaa or Aa by Moody's
or, if unrated, have been determined by Delaware International to be of
comparable quality.
From time to time, the Series may find opportunities to pursue its
objective outside of the fixed income markets, but in no event will such
investments exceed 5% of the Series' net assets.
The Series may also invest in sponsored or unsponsored American Depository
Receipts or European Depository Receipts. While the Series may purchase
securities of issuers in any foreign country, developed and underdeveloped, or
emerging market countries, it is currently anticipated that the countries in
which the Series may invest will include, but not be limited to, Canada,
Germany, the United Kingdom, France, the Netherlands, Belgium, Spain,
Switzerland, Ireland, Denmark, Portugal, Italy, Austria, Norway, Sweden,
Finland, Luxembourg, Japan and Australia. With respect to certain countries,
investments by an investment company may only be made through investments in
closed-end investment companies that in turn are authorized to invest in the
securities of such countries. Any investment the Series may make in other
investment companies is limited in amount by the 1940 Act and would involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies.
The Series may invest in restricted securities, including Rule 144A
Securities. See Liquidity and Rule 144A Securities. The Series may invest no
more than 10% of the value of its net assets in illiquid securities. The Series
will not concentrate its investments in any particular industry, which means
that it will not invest 25% or more of its total assets in any one industry.
It is anticipated that the average weighted maturity of the portfolio will
be in the five-to-ten year range. If, however, Delaware International
anticipates a declining interest rate environment, the average weighted maturity
may be extended past ten years. Conversely, if Delaware International
anticipates a rising rate environment, the average weighted maturity may be
shortened to less than five years.
Interest Rate Swaps
In order to attempt to protect the Series' investments from interest rate
fluctuations, the Series may engage in interest rate swaps. The Series intends
to use interest rate swaps as a hedge and not as a speculative investment.
Interest rate swaps involve the exchange by the Series with another party of
their respective rights to receive interest, e.g., an exchange of fixed rate
payments for floating rate payments. For example, if the Series holds an
interest-paying security whose interest rate is reset once a year, it may swap
the right to receive interest at this fixed rate for the right to receive
interest at a rate that is reset daily. Such a swap position would offset
changes in the value of the underlying security because of subsequent changes in
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interest rates. This would protect the Series from a decline in the value of the
underlying security due to rising rates, but would also limit its ability to
benefit from falling interest rates.
The Series may enter into interest rate swaps on either an asset-based or
liability-based basis, depending upon whether it is hedging its assets or its
liabilities, and will usually enter into interest rate swaps on a net basis,
i.e., the two payment streams are netted out, with the Series receiving or
paying, as the case may be, only the net amount of the two payments. Inasmuch as
these hedging transactions are entered into for non-speculative purposes and not
for the purpose of leveraging the Series' investments, Delaware International
and the Series believe such obligations do not constitute senior securities and,
accordingly, will not treat them as being subject to its borrowing restrictions.
The net amount of the excess, if any, of the Series' obligations over its
entitlement with respect to each interest rate swap will be accrued on a daily
basis and an amount of cash or high-quality liquid securities having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Custodian Bank. If the Series enters
into an interest rate swap on other than a net basis, the Series would maintain
a segregated account in the full amount accrued on a daily basis of the Series'
obligations with respect to the swap. See Other Considerations - Foreign
Securities and Foreign Currency Transactions and Special Risk Considerations
below.
OTHER CONSIDERATIONS
When-Issued Securities
Consistent with their respective objectives, each Series may invest in
U.S. Government securities and corporate debt obligations on a when-issued basis
("when-issued securities"). These securities involve commitments to buy a new
issue with settlement up to 60 days later. The average settlement date for
when-issued securities purchased by the Series is generally between 30 and 45
days. During the time between the commitment and settlement, the Series do not
accrue interest, but the market value of the bonds may fluctuate. This can
result in a Series' share value increasing or decreasing. The Series will not
ordinarily sell when-issued securities prior to settlement. If a Series invests
in securities of this type, it will maintain a segregated account to pay for
them and mark the account to market daily.
Mortgage-Backed Securities
The Capital Reserves and Multiple Strategy Series may also invest in
mortgage-backed securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or government sponsored corporations or those
issued by certain private, non-government 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).
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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.
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. The Series 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.
Asset-Backed Securities
The Capital Reserves, Multiple Strategy and Money Market Series may also
invest in securities which are backed by assets such as receivables on home
equity and credit card loans, and receivables regarding automobile, mobile home
and recreational vehicle loans, wholesale dealer floor plans and leases. All
such securities must be rated in the highest rating category by a reputable
credit rating agency (e.g., AAA by S&P or Aaa by Moody's). Such receivables are
securitized in either a pass-through or a pay-through structure. Pass-through
securities provide investors with an income stream consisting of both principal
and interest payments in respect of the receivables in the underlying pool.
Pay-through asset-backed securities are debt obligations issued usually by a
special purpose entity, which are collateralized by the various receivables and
in which the payments on the underlying receivables provide the funds to pay the
debt service on the debt obligations issued. The Series may invest in these and
other types of asset-backed securities that may be developed in the future. It
is the Series' current policy to limit asset-backed investments to those
represented by interests in credit card receivables, wholesale dealer floor
plans, home equity loans and automobile loans.
The rate of principal payment on asset-backed securities generally
depends upon 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. Therefore, the yield may be difficult to predict
and actual yield to maturity may be more or less than the anticipated yield to
maturity. Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. See Mortgage-Backed Securities above. Such asset-backed securities
do, however, involve certain risks not associated with mortgage-backed
securities, including the risk that security interests cannot be adequately or
in many cases, ever, established. In addition, with respect to credit card
receivables, a number of state and federal consumer credit laws give debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
outstanding balance. In the case of automobile receivables, there is a risk that
the holders may not have either a proper or first security interest in all of
the obligations backing such receivables due to the large number of vehicles
involved in a typical issuance and technical requirements under state laws.
Therefore, recoveries on repossessed collateral may not always be available to
support payments on the securities. For further discussion concerning the risks
of investing in such asset-backed securities, see Part B.
Foreign Securities and Foreign Currency
Transactions
As noted above, the International Equity Series intends to invest its
assets primarily in securities of foreign issuers and the Global Bond Series
will invest at least 65% of its assets in fixed income securities of issuers
organized or having a majority of their assets in or deriving a majority of
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their operating income in at least three different countries, one of which may
be the United States. Each of the other Series may invest up to 25% of its
assets in securities of issuers organized or having a majority of their assets
in or deriving a majority of their operating income outside the United States.
In connection with investments in foreign securities, a Series may, from time to
time, conduct foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market or
through entering into contracts to purchase or sell foreign currencies at a
future date (i.e., a "forward foreign currency" contract or "forward" contract).
A Series will engage in these foreign currency transactions in order to expedite
settlement of portfolio transactions and to minimize currency value
fluctuations. Investing in foreign securities and, in conjunction therewith,
engaging in foreign currency transactions present special considerations not
presented by investments in securities issued by United States companies. See
Foreign Currency Transactions under International Equity Series and Special Risk
Considerations for a discussion of these considerations.
Options
To achieve the Series' objectives, the Series, except for the Money Market
Series, intend to use certain hedging techniques which might not be conveniently
available to individuals.
These techniques will be used at the respective investment manager's
discretion to protect a Series' principal value.
The Series may purchase put options, write covered call options and enter
into closing transactions in connection therewith in respect of securities in
which they may invest. The International Equity and Global Bond Series may also
purchase call options and enter into related closing transactions. In purchasing
put and call options, the premium paid by the Series, plus any transaction
costs, will reduce any benefit realized by the Series upon exercise of the
option.
A put option gives a Series the right to sell one of its securities for an
agreed price up to an agreed date. The advantage is that the Series can be
protected should the market value of the security decline. However, the Series
must pay a premium for this right, whether it exercises it or not.
A covered call option obligates a Series to sell one of its securities for
an agreed price up to an agreed date. The advantage is that the Series receives
premium income, which may offset the cost of purchasing put options. However,
the Series may lose the potential market appreciation of the security if the
respective investment manager's judgment is wrong and interest rates fall.
A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed upon date. The
advantage is that the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy.
Closing transactions essentially let a Series offset a put option or call
option prior to its exercise or expiration. If it cannot effect a closing
transaction, it may have to hold a security it would otherwise sell with a
potential decline in net asset value, or deliver a security it might want to
hold.
Each Series, other than the International Equity and Global Bond Series,
will use Exchange-traded options, but reserve the right to use over-the-counter
options upon written notice to shareholders. The International Equity and Global
Bond Series may use both Exchange-traded and over-the-counter options. Certain
over-the-counter options may be illiquid. The International Equity and Global
Bond Series will only invest in such options to the extent consistent with its
10% limit on investments in illiquid securities.
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The Growth, International Equity, Value, Emerging Growth and Global Bond
Series also may write call options and purchase put options on stock indices and
enter into closing transactions in connection therewith. The International
Equity and Global Bond Series also may purchase call options on stock indices
and enter into closing transactions in connection therewith. No Series will
engage in transactions on stock indices for speculative purposes. Writing or
purchasing a call option on stock indices is similar to the writing or
purchasing of a call option on an individual stock. Purchasing a protective put
option on stock indices is similar to the purchase of protective puts on an
individual stock. Stock indices used will include, but will not be limited to,
the S&P 100 and the S&P Over-the-Counter 250. The ability to hedge effectively
using options on stock indices will depend on the degree to which price
movements in the underlying index correlate with price movements in the
portfolio securities of, as the case may be, the Growth, International Equity,
Value, Emerging Growth or Global Bond Series.
Futures Contracts and Options on Futures
Contracts
For hedging purposes, each of the International Equity, Value, Emerging
Growth and Global Bond Series may enter into futures contracts relating to
securities, securities indices or interest rates. In addition, the International
Equity and Global Bond Series may enter into futures transactions relating to
foreign currency.
A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement at a stated time
in the future for a fixed price. By its terms, a futures contract provides for a
specified settlement date on which, in the case of the majority of interest rate
and foreign currency futures contracts, the fixed-income securities or currency
underlying the contract are delivered by the seller and paid for by the
purchaser, or on which, in the case of securities index futures contracts and
certain interest rate and foreign currency futures contracts, the difference
between the price at which the contract was entered into and the contract's
closing value is settled between the purchaser and seller in cash. Futures
contracts differ from options in that they are bilateral agreements, with both
the purchaser and the seller equally obligated to complete the transaction. In
addition, futures contracts call for settlement only on the expiration date, and
cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin" as a good faith deposit. Subsequent payments
to and from the broker, referred to as "variation margin," are made on a daily
basis as the value of the index or instrument underlying the futures contract
fluctuates, making positions in the futures contract more or less valuable, a
process known as "marking to the market."
A futures contract may be purchased or sold only on an exchange, known as
a "contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a futures contract, by in effect
taking the opposite side of such contract. At any time prior to the expiration
of a futures contract, a trader may elect to close out its position by taking an
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opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of
fixed-income securities, including long-term U.S. Treasury Bonds, U.S. Treasury
Notes, GNMA modified pass-through mortgage-backed securities, U.S. Treasury
Bills, bank certificates of deposit and commercial paper. In addition, interest
rate futures contracts include contracts on indexes of municipal securities.
Foreign currency futures contracts currently are traded on the British pound,
Canadian dollar, Japanese yen, Swiss franc, German mark and on Eurodollar
deposits.
A securities index or municipal bond index futures contract provides for
the making and acceptance of a cash settlement in much the same manner as the
settlement of an option on a securities index. The types of indexes underlying
securities index futures contracts are essentially the same as those underlying
securities index options, as described above. The index underlying a municipal
bond index futures contract is a broad based index of municipal securities
designed to reflect movements in the municipal securities market as a whole. The
index assigns weighted values to the securities included in the index and its
composition is changed periodically.
Each Series may also purchase and write options on the types of futures
contracts that Series could invest in.
A call option on a futures contract provides the holder with the right to
purchase, or enter into a "long" position in, the underlying futures contract. A
put option on a futures contract provides the holder with the right to sell, or
enter into a "short" position in, the underlying futures contract. In both
cases, the option provides for a fixed exercise price up to a stated expiration
date. Upon exercise of the option by the holder, the contract market clearing
house establishes a corresponding short position for the writer of the option,
in the case of a call option, or a corresponding long position in the case of a
put option and the writer delivers to the holder the accumulated balance in the
writer's margin account which represents the amount by which the market price of
the futures contract at exercise exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the futures
contract. In the event that an option written by the Fund is exercised, the Fund
will be subject to all the risks associated with the trading of futures
contracts, such as payment of variation market deposits. In addition, the writer
of an option on a futures contract, unlike the holder, is subject to initial and
variation margin requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a futures contract, a securities index, a
security or foreign currency, becomes worthless to the holder when it expires.
Upon exercise of an option, the exchange or contract market clearing house
assigns exercise notices on a random basis to those of its members which have
written options of the same series and with the same expiration date. A
brokerage firm receiving such notices then assigns them on a random basis to
those of its customers which have written options of the same series and
<PAGE>
expiration date. A writer therefore has no control over whether an option will
be exercised against it, nor over the timing of such exercise.
To the extent that interest or exchange rates or securities prices move in
an unexpected direction, the Series may not achieve the anticipated benefits of
investing in futures contracts and options thereon, or may realize a loss. To
the extent that the Series purchases an option on a futures contract and fails
to exercise the option prior to the exercise date, it will suffer a loss of the
premium paid. Further, the possible lack of a secondary market could prevent the
Series from closing out its positions relating to futures.
Borrowings
Each Series may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Series will not borrow money in
excess of one-third of the value of their net assets. See Part B for additional
possible restrictions on borrowing. The Series have no intention of increasing
their net income through borrowing. Any borrowing will be done from a bank and,
to the extent that such borrowing exceeds 5% of the value of the Series' net
assets, asset coverage of at least 300% is required. In the event that such
asset coverage shall at any time fall below 300%, the Series shall, within three
days thereafter (not including Sunday or holidays) or such longer period as the
U.S. Securities and Exchange Commission may prescribe by rules and regulations,
reduce the amount of their borrowings to an extent that the asset coverage of
such borrowings shall be at least 300%. Except for the International Equity and
Global Bond Series, no Series will pledge more than 15% of their net assets, or
issue senior securities as defined in the 1940 Act, except for notes to banks.
The International Equity and Global Bond Series will not pledge more than 10% of
their net assets or issue senior securities as defined in the 1940 Act, except
for notes to banks. Investment securities will not be purchased while the Series
has an outstanding borrowing.
Repurchase Agreements
The Series may also use repurchase agreements which are at least 100%
collateralized by U.S. Government securities except that the International
Equity and Global Bond Series may accept as collateral any securities in which
such Series may invest. Each Series may enter into repurchase agreements with
broker/dealers or banks which are deemed creditworthy by the respective
investment manager under guidelines approved by the Board of Directors. A
repurchase agreement is a short-term investment in which the purchaser (i.e.,
the Series) acquires ownership of a security and the seller agrees to repurchase
the security at a future time and set price, thereby determining the yield
during the purchaser's holding period. The value of the securities subject to
the repurchase agreement is marked to market daily. In the event of a bankruptcy
or other default of the seller, the Series could experience delays and expenses
in liquidating the underlying securities.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Group funds jointly to invest cash balances. Each Series may invest
cash balances in joint repurchase agreements in accordance with the terms of the
Order and subject to the conditions described above.
Portfolio Loan Transactions
Each Series, except for the Money Market Series, may, from time to time,
lend securities (but not in excess of 25% of its assets) from its portfolio to
<PAGE>
brokers, dealers and financial institutions and receive collateral in cash or
short-term U.S. Government securities. While the loan is outstanding, this
collateral will be maintained at all times in an account equal to at least 100%
of the current market value of the loaned securities plus accrued interest. Such
cash collateral will be invested in short-term securities, the income from which
will increase the return of the Series.
The major risk to which a Series would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, a Series will only enter into loan arrangements
after a review of all pertinent facts by the respective investment manager,
subject to overall supervision by the Board of Directors, 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.
Liquidity and Rule 144A Securities
In order to assure that each Series has sufficient liquidity, as a matter
of fundamental policy, no Series may invest more than 10% of its net assets in
illiquid assets. For all Series, other than the International Equity, Value,
Emerging Growth and Global Bond Series, this policy shall extend to all
restricted securities, including securities eligible for resale without
registration pursuant to Rule 144A ("Rule 144A Securities") (described below),
and repurchase agreements maturing in more than seven days. With respect to the
International Equity, Value, Emerging Growth and Global Bond Series and subject
to the following paragraphs, this policy shall not limit the acquisition of
securities purchased in reliance upon Rule 144A of the Securities Act of 1933
("1933 Act"). Rule 144A permits many privately placed and legally restricted
securities to be freely traded among certain institutional buyers such as the
Series. Investing in Rule 144A Securities could have the effect of increasing
the level of illiquidity of a Series to the extent that qualified institutional
buyers become uninterested, for a time, in purchasing these securities.
While maintaining oversight, the Board of Directors has delegated to the
respective investment manager the day-to-day functions of determining whether or
not individual Rule 144A Securities are liquid for purposes of the 10%
limitation on investments in illiquid assets. The Board has instructed the
managers to consider the following factors in determining the liquidity of a
Rule 144A Security: (i) the frequency of trades and trading volume for the
security; (ii) whether at least three dealers are willing to purchase or sell
the security and the number of potential purchasers; (iii) whether at least two
dealers are making a market in the security; (iv) the nature of the security and
the nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
If the respective manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
International Equity, Value, Emerging Growth or Global Bond Series' holdings of
illiquid securities exceed the Series' 10% limit on investment in such
securities, the respective manager will determine what action shall be taken to
ensure that the Series continues to adhere to such limitation.
Special Risk Considerations
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in a Series, nor
<PAGE>
can there be any assurance that the Series' investment objective will be
attained.
Each of the International Equity and Global Bond Series has the right to
purchase securities in any foreign country, developed and underdeveloped, or
emerging growth countries. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments of
foreign nations. These risks are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation, nationalization
or confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations, foreign exchange
control (which may include suspension of the ability to transfer currency from a
given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities of issuers in those nations. In addition, in many countries, there is
less publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not subject to
uniform accounting, auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those applicable to United
States companies. Further, a Series may encounter difficulty or be unable to
pursue legal remedies and obtain judgments in foreign courts. Commission rates
on securities transactions in foreign countries, which are sometimes fixed
rather than subject to negotiation as in the United States, are likely to be
higher. Further, the settlement period of securities transactions in foreign
markets may be longer than in domestic markets. In many foreign countries, there
is less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. The foreign securities markets of many of the countries in which a
Series may invest may also be smaller, less liquid and subject to greater price
volatility than those in the United States.
Compared to the United States and other developed countries, emerging
countries may have relatively unstable governments, economies based on only a
few industries, and securities markets that trade a small number of securities.
Prices on these exchanges tend to be volatile and, in the past, securities in
these countries have offered greater potential for gain (as well as loss) than
securities of companies located in developed countries. Further, investments by
foreign investors (such as the Fund) are subject to a variety of restrictions in
many emerging countries. These restrictions may take the form of prior
governmental approval, limits on the amount or type of securities held by
foreigners, and limits on the types of companies in which foreigners may invest.
Additional restrictions may be imposed at any time by these or other countries
in which a Series invests. In addition, the repatriation of both investment
income and capital from several foreign countries is restricted and controlled
under certain regulations, including, in some cases, the need for certain
governmental consents. Although these restrictions may in the future make it
undesirable to invest in emerging countries, Delaware International does not
believe that any current repatriation restrictions would affect its decision to
invest in such countries. Countries such as those in which a Series may invest
have historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which may
influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
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foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies and
the political constraints to which a government debtor may be subject.
To the extent that interest or exchange rates or securities prices move in
an unexpected direction, a Series may not achieve the anticipated benefits of
investing in futures contracts and options thereon, or may realize a loss. To
the extent that the Series purchases an option on a futures contract and fails
to exercise the option prior to the exercise date, it will suffer a loss of the
premium paid. Further, the possible lack of a secondary market could prevent the
Series from closing out its positions relating to futures.
As in the case of other kinds of options, the writing of an option on
foreign currency will constitute only a partial hedge, up to the amount of the
premium received, and a Series could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against fluctuations in exchange rates, although, in the event of rate movements
adverse to a Series' position, the Series may forfeit the entire amount of the
premium plus related transaction costs.
With respect to forward foreign currency contracts, the precise matching
of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain.
It is impossible to forecast the market value of portfolio securities at
the expiration of the contract. Accordingly, it may be necessary for the Series
to purchase additional foreign currency on the spot market (and bear the expense
of such purchase) if the market value of the security is less than the amount of
foreign currency the Series is obligated to deliver (and if a decision is made
to sell the security and make delivery of the foreign currency). Conversely, it
may be necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security if its market value exceeds the
amount of foreign currency the Series is obligated to deliver.
The Global Bond Series may invest in zero coupon bonds. The market prices
of zero coupon securities are generally more volatile than the market prices of
securities that pay interest periodically and are likely to respond to changes
in interest rates to a greater degree than do non-zero coupon securities having
similar maturities and credit quality. Current federal income tax law requires
that a holder of a taxable zero coupon security report as income each year the
portion of the original issue discount of such security that accrues that year,
even though the holder receives no cash payments of interest during the year.
The Series has qualified as a regulated investment company under the Code.
Accordingly, during periods when the Series receives no interest payments on its
zero coupon securities, it will be required, in order to maintain its desired
tax treatment, to distribute cash approximating the income attributable to such
securities. Such distribution may require the sale of portfolio securities to
meet the distribution requirements and such sales may be subject to the risk
factor discussed above.
The use of interest rate swaps by the Global Bond Series involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If Delaware International is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
<PAGE>
investment performance of the Series will be less favorable than it would have
been if this investment technique were never used. Interest rate swaps do not
involve the delivery of securities or other underlying assets or principal.
Thus, if the other party to an interest rate swap defaults, the Series' risk of
loss consists of the net amount of interest payments that the Series is
contractually entitled to receive.
While the Global Bond Series intends to seek to qualify as a "diversified"
investment company under provisions of Subchapter M of the Code, it will not be
diversified for purposes of the 1940 Act. Thus, while at least 50% of such
Series' total assets will be represented by cash, cash items, and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Series' total assets, it will not satisfy the 1940 Act requirement in
this respect, which applies that test to 75% of the Series' assets. A
nondiversified portfolio is believed to be subject to greater risk because
adverse effects on the portfolio's security holdings may affect a larger portion
of the overall assets.
* * *
Each Series' investment objective, the Fund's designation as an open-end
investment company, each Series' (other than the Global Bond Series) designation
as a diversified fund, and each Series' policies concerning portfolio lending,
borrowing and purchases of illiquid securities may not be changed unless
authorized by the vote of a majority of the Series' outstanding voting
securities. A "majority vote of the outstanding voting securities" is the vote
by the holders of the lesser of (a) 67% or more of a Series' voting securities
present in person or represented by proxy if the holders of more than 50% of the
outstanding voting securities of such Series are present or represented by
proxy; or b) more than 50% of a Series' outstanding voting securities. Part B
lists other more specific investment restrictions of the Series which may not be
changed without a majority shareholder vote. A brief discussion of those factors
that materially affected the Series' performance during its most recently
completed fiscal year appears in the Series' Annual Report. The remaining
investment policies are not fundamental and may be changed by the Board of
Directors of the Fund without a shareholder vote.
Diversification
The Fund was established as the underlying investment for variable
contracts issued by life companies. Section 817(h) of the Internal Revenue Code
of 1986, as amended (the "Code"), imposes certain diversification standards on
the underlying assets of variable contracts held in the Portfolios of the Fund.
The Code provides that a variable contract shall not be treated as an annuity
contract or life insurance for any period (and any subsequent period) for which
the investments are not, in accordance with regulations prescribed by the United
States Treasury Department ("Treasury Department"), adequately diversified.
Disqualification of the variable contract would result in the imposition of
federal income tax to the contract owner with respect to earnings allocable to
the contract prior to distributions under the contract (e.g., withdrawals). The
Code contains a safe harbor provision which provides that variable contracts
meet the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company and no more than 55 percent of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
Treasury Department Regulations (Treas. Reg. Section 1.817-5) provide that
a fund will be deemed to be considered adequately diversified if (i) no more
<PAGE>
than 55 percent of the value of the total assets of the fund is represented by
any one investment; (ii) no more than 70 percent of such value is represented by
any two investments; (iii) no more than 80 percent of such value is represented
by any three investments; and (iv) no more than 90 percent of such value is
represented by any four investments.
The Technical and Miscellaneous Revenue Act of 1988 provides that for
purposes of determining whether or not the diversification standards imposed on
the underlying assets of variable contracts by Section 817(h) of the Code have
been met, "each United States government agency or instrumentality shall be
treated as a separate issuer."
Each Series of the Fund will be managed in such a manner as to comply with
these diversification requirements.
Ratings
Appendix A of Part B describes the ratings of S&P, Moody's, Duff and
Phelps, Inc. and Fitch Investors Service, Inc., four of the better-known
statistical rating organizations. Appendix A to this Prospectus includes
additional information concerning the ratings of securities in the High Yield
Series. The rating descriptions included in Appendix A also apply to the
high-yield, high-risk securities in which the Value Series may invest.
<PAGE>
PURCHASE AND REDEMPTION
Shares are sold only to separate accounts of life companies at net asset
value. (See Calculation of Offering Price and Net Asset Value Per Share.)
Redemptions will be effected by the separate accounts at the net asset value
next determined after receipt of the order to meet obligations under the
variable contracts. The Money Market Series is managed to maintain a constant
$10 per share net asset value although there is no assurance that this objective
can be achieved. Contract owners do not deal directly with the Fund with respect
to the acquisition or redemption of Fund shares.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Dividends for the High Yield, Capital Reserves, Money Market and Global
Bond Series are declared daily and paid monthly on the first business day after
the end of the month. Short- term capital gains distributions, if any, may be
paid with the daily dividend; otherwise, any distributions from net realized
securities profits normally will be distributed following the close of the
fiscal year. The Fund's fiscal year ends on December 31.
For the Equity/Income, Multiple Strategy and the International Equity
Series, the Fund will make payments from the Series' net investment income
quarterly. Distributions from the respective Series' net realized securities
profits, if any, normally will be made following the close of the fiscal year.
For the Growth and Value Series, the Fund will make payments from the
Series' net income and net realized securities profits, if any, once a year.
For the Emerging Growth Series, the Fund will make payments from the
Series' net investment income and net realized securities profits, if any, twice
a year.
All dividends and distributions are automatically reinvested in additional
Series shares.
<PAGE>
TAXES
The Fund has qualified as a regulated investment company under Subchapter
M of the Internal Revenue Code. As such, the Fund will not be subject to federal
income tax to the extent its earnings are distributed. The Fund intends to
distribute substantially all of the respective Series' net investment income and
net capital gains. Shareholders may be proportionately liable for taxes on
income and gains of the Series but shareholders not subject to tax on their
income will not be required to pay tax on amounts distributed to them, and the
Fund will inform shareholders of the amount and nature of such income or gains.
<PAGE>
CALCULATION OF OFFERING PRICE
AND NET ASSET VALUE PER SHARE
The offering price is the net asset value ("NAV") per share next
determined after an order is received. The 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.
A Series' NAV per share is computed by adding the value of all securities
and other assets in that Series' portfolio, deducting any liabilities of that
Series (expenses and fees are accrued daily) and dividing by the number of that
Series' shares outstanding. The valuation criteria set forth below apply equally
to securities purchased in reliance upon Rule 144A of the 1933 Act. In
determining each Series' 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. Foreign securities expressed in foreign currency values will be
converted into U.S. dollar values at the mean between the currencies' bid and
offered quotations. Debt securities (other than short-term investments) are
priced at fair value by an independent pricing service using methods approved by
the Fund's Board of Directors. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market value. All
securities in the Money Market Series are valued at amortized cost. Under the
direction of the Board of Directors, certain procedures have been adopted to
monitor the value of the Money Market Series' securities and stabilize the price
per share at $10. All other securities are valued at their fair value as
determined in good faith and in a method approved by the Fund's Board of
Directors.
The International Equity Series' portfolio will be, and the Global Bond
Series' portfolio may be, comprised primarily of foreign securities. From time
to time, those securities may be listed primarily on foreign exchanges which
trade on days when the New York Stock Exchange is closed (such as Saturday). As
a result, the NAV of that Series may be significantly affected by such trading
on days when shareholders have no access to that Series. To the extent other
Series hold foreign securities which are so listed, the net asset value of those
Series also could be affected by trading on days when shareholders have no
access to those Series.
<PAGE>
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund are managed under the direction of
its Board of Directors. Part B contains additional information regarding the
directors and officers.
Investment Managers
Delaware Management furnishes investment management services to each
Series of the Fund other than the International Equity and Global Bond Series.
Delaware International, an affiliate of Delaware Management, furnishes
investment management services to the International Equity and Global Bond
Series.
Delaware Management and its predecessors have been managing the funds in
the Delaware Group since 1938. On December 31, 1995, Delaware Management and its
affiliate, Delaware International, were supervising in the aggregate more than
$28 billion in assets in the various institutional (approximately
$17,606,321,000) and investment company (approximately $10,522,726,000)
accounts.
Delaware Management is an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). Delaware International is also controlled by
DMH through several subsidiaries. On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH, Delaware Management and Delaware International are now
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. Except for the
Global Bond Series which was not yet in existence, in connection with the
merger, new Investment Management Agreements between the Fund on behalf of each
Series and its investment manager were executed following shareholder approval.
Delaware Management's address is One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103. Delaware International's address is Veritas House, 125
Finsbury Pavement, London, England EC2A 1NQ.
Delaware Management manages each of the Series' (other than the
International Equity and Global Bond Series) portfolios and makes investment
decisions which are implemented by the Fund's Trading Department. For these
services, Delaware Management is paid an annual fee equal to 5/10 of 1% of the
average daily net assets of the Money Market Series, 3/4 of 1% of the average
daily net assets of the Growth, Value and Emerging Growth Series and 6/10 of 1%
of each of the other Series' average daily net assets, less, in the case of the
Equity/Income, High Yield, Capital Reserves, Money Market, Growth and Multiple
Strategy Series, a proportionate share of all directors' fees paid to the
unaffiliated directors of the Fund. The investment management fee, as a
percentage of average daily net assets, incurred by each Series for the year
ended December 31, 1995 was as follows:
Equity/Income Series 0.60%
High Yield Series 0.60%
Capital Reserves Series 0.59%
Money Market Series 0.49%
Growth Series 0.75%
Multiple Strategy Series 0.60%
Value Series 0.75%
Emerging Growth Series 0.75%
After considering the waiver of fees by Delaware Management, as described
under the caption Expenses, the investment management fee, as a percentage of
average daily net assets, paid by each Series was as
follows:
Equity/Income Series 0.60%
High Yield Series 0.60%
Capital Reserves Series 0.59%
Money Market Series 0.49%
Growth Series 0.70%
Multiple Strategy Series 0.60%
Value Series 0.58%
Emerging Growth Series 0.58%
<PAGE>
Delaware International manages the International Equity and Global Bond
Series' portfolios and implements investment decisions on behalf of each of the
Series. For these services, Delaware International is paid an annual fee equal
to .75% of the average daily net assets of each of the International Equity and
Global Bond Series, less, in the case of the International Equity Series, a
proportionate share of all directors' fees paid to the unaffiliated directors of
the Fund. See Expenses for a discussion of a voluntary waiver of its management
fee undertaken by Delaware International. The investment management fee incurred
by the International Equity Series for the fiscal year ended December 31, 1995
was 0.74% of average daily net assets. After considering the waiver of fees by
Delaware International, as described under Expenses, 0.65% of average daily net
assets was paid by the International Equity Series. The Global Bond Series was
first offered to investors on May 1, 1996.
John B. Fields has primary responsibility for making day-to-day investment
decisions for the Equity/Income Series. He has been the Senior Portfolio Manager
of this Series since 1992. Mr. Fields, who has 25 years experience in investment
management, earned a bachelor's degree and an MBA from Ohio State University.
Before joining the Delaware Group in 1992, he was Director of Domestic Equity
Risk Management at DuPont. Prior to that, he was Director of Equity Research at
Comerica Bank. Mr. Fields is a member of the Financial Analysts Society.
In making investment decisions for the Equity/Income Series, Mr. Fields
works with a team of 12 portfolio managers and analysts, each of whom
specializes in a different industry sector and makes recommendations
accordingly. Mr. Fields also regularly consults with Wayne A. Stork and Richard
G. Unruh, Jr. Mr. Stork, Chairman of Delaware Management and the Fund's Board of
Directors, is a graduate of Brown University and attended New York University's
Graduate School of Business Administration. Mr. Stork joined the Delaware Group
in 1962 and has served in various executive capacities at different times within
the Delaware organization. Mr. Unruh is a graduate of Brown University and
received his MBA from the University of Pennsylvania's Wharton School. He joined
the Delaware Group in 1982 after 19 years of investment management experience
with Kidder, Peabody & Co. Inc. Mr. Unruh was named an executive vice president
of the Fund in 1994. He is also a member of the Board of Directors of the
Manager and DMC and was named an executive vice president of DMC in 1994.
Paul A. Matlack and Gerald T. Nichols have primary responsibility for
making day-to-day investment decisions for the High Yield Series. Mr. Matlack
and Mr. Nichols have been members of this Series' management team since 1990,
and were named co-managers of this Series in January 1993. A Chartered Financial
Analyst, Mr. Matlack is a graduate of the University of Pennsylvania with an MBA
in Finance from George Washington University. He began his career at Mellon Bank
as a credit specialist, and later served as a corporate loan officer for Mellon
Bank and then Provident National Bank.
Mr. Nichols is a graduate of the University of Kansas, where he received a
BS in Business Administration and an MS in Finance. Prior to joining the
Delaware Group, he was a high-yield credit analyst at Waddell & Reed, Inc. and
subsequently the investment officer for a private merchant banking firm. He is a
Chartered Financial Analyst.
In making investment decisions for the High Yield Series, Mr. Matlack and
Mr. Nichols regularly consult with Paul E. Suckow. Mr. Suckow is Delaware
Management's Chief Investment Officer for Fixed Income. A Chartered Financial
<PAGE>
Analyst, he is a graduate of Bradley University with an MBA from Western
Illinois University. Mr. Suckow was a fixed income portfolio manager at the
Delaware Group from 1981 to 1985. He returned to the Delaware Group in 1993
after eight years with Oppenheimer Management Corporation.
Gary A. Reed has primary responsibility for making investment decisions
for the Capital Reserves and Money Market Series. He has been each Series'
senior portfolio manager since 1989. He holds an AB in Economics from the
University of Chicago and an MA in Economics from Columbia University. He began
his career in 1978 with the Equitable Life Assurance Company in New York City,
where he specialized in credit analysis. Prior to joining the Delaware Group in
1989, Mr. Reed was Vice President and Manager of the fixed income department at
Irving Trust Company in New York. In making investment decisions for the Capital
Reserves and Money Market Series, Mr. Reed regularly consults with Paul E.
Suckow.
Edward N. Antoian has primary responsibility for making day-to-day
investment decisions for the Growth Series and the Emerging Growth Series. He
has been each Series' senior portfolio manager since its inception. A graduate
of The State University of New York at Albany with an MBA in Finance from the
University of Pennsylvania's Wharton School, Mr. Antoian began his career with
Price Waterhouse. Prior to joining the Delaware Group in June 1984, he worked in
the Institutional Equity Department of E.F. Hutton in Philadelphia. A Chartered
Financial Analyst, Mr. Antoian is a member of the Philadelphia Finance
Association and the Philadelphia Securities Association.
In making investment decisions for each Series, Mr. Antoian regularly
consults with Wayne A. Stork, William H. Miller and other members of the
Delaware Group's equity department. Mr. Miller is an Assistant Portfolio
Manager. He holds a BA in Economics from Trinity College. Prior to joining the
Delaware Group in 1995, he worked as a technology analyst for Janney Montgomery
Scott in Philadelphia and he has also served as an institutional salesman for
Rutherford Brown & Catherwood.
George H. Burwell and Gary A. Reed have primary responsibility for making
day-to-day investment decisions for the Multiple Strategy Series. Mr. Burwell,
who has been the Multiple Strategy Series' senior portfolio manager for equities
since 1992, holds a BA from the University of Virginia. Prior to joining the
Delaware Group in 1992, Mr. Burwell was a portfolio manager for Midlantic Bank
in Edison, New Jersey, where he managed an equity mutual fund and three
commingled funds. Mr. Burwell is a Chartered Financial Analyst. Mr. Reed has
been the Multiple Strategy Series' senior portfolio manager for fixed income
since 1989.
In making investment decisions for the Multiple Strategy Series, Mr.
Burwell and Mr. Reed regularly consult with Wayne A. Stork, Richard G. Unruh,
Jr. and Paul E. Suckow.
Effective August 21, 1995, David C. Dalrymple assumed primary
responsibility for making day-to-day investment decisions for the Value Series.
Prior to that time, Mr. Dalrymple served as an assistant portfolio manager of
Delaware Group DelCap Fund, Inc. Mr. Dalrymple holds a BS in Business
Administration from Clarkson College in Potsdam, NY, and an MBA from Cornell
Johnson School of Management in Ithaca, NY. Prior to joining the Delaware Group
in 1991, he spent five years as an assistant portfolio manager for Lord Abbett
and Co. in New York. Mr. Dalrymple is a Chartered Financial Analyst and a member
of the Financial Analysts of Philadelphia.
<PAGE>
In making investment decisions for the Value Series, Mr. Dalrymple
consults with Wayne A. Stork and Richard G. Unruh, Jr.
Clive A. Gillmore has primary responsibility for making day-to-day
investment decisions for the International Equity Series. He has been the senior
portfolio manager for this Series since its inception. A graduate of the
University of Warwick and having begun his career at Legal and General
Investment Management, Mr. Gillmore joined the Delaware Group in 1990 after
eight years of investment experience. His most recent position prior to joining
the Delaware Group was as a Pacific Basin equity analyst and senior portfolio
manager for Hill Samuel Investment Advisers Ltd. Mr. Gillmore completed the
London Business School Investment program.
In making investment decisions for this Series, Mr. Gillmore regularly
consults with an international equity team of seven members, three of whom
research the Pacific Basin and four of whom research the European Markets. Mr.
Gillmore also regularly consults with David G. Tilles. Mr. Tilles, who is Chief
Investment Officer for Delaware International, is a graduate of the University
of Warwick with a BS in management sciences. Before joining the Delaware Group
in 1990, he was Chief Investment Officer of Hill Samuel Investment Advisers Ltd.
He is a member of the Institute of Investment Management & Research and the
Operational Research Society.
Ian G. Sims has primary responsibility for making day-to-day investment
decisions for the Global Bond Series. He has been the senior portfolio manager
for this Series since its inception. Mr. Sims is a graduate of the University of
Newcastle-Upon-Tyne. He joined Delaware International in 1990 as a senior
international fixed income and currency manager. Mr. Sims began his investment
career with the Standard Life Assurance Co., and subsequently moved to the Royal
Bank of Canada Investment Management International Company, where he was an
international fixed income manager. Prior to joining Delaware International, he
was a senior fixed income and currency portfolio manager with Hill Samuel
Investment Advisers Ltd.
In making investment decisions for the Global Bond Series, Mr. Sims
regularly consults with Hywel Morgan and Christopher A. Moth. Mr. Morgan was
educated at the University of Wales and was subsequently an Economics Lecturer
at Dundee University. Prior to joining Delaware International, he was Associate
Director of the international fixed income department and head of the credit
review committee at Hill Samuel Investment Management responsible for over $500
million in multi-currency fixed interest accounts. His prior experience included
working as an economic adviser for Credit Suisse and the Economic Intelligence
Unit. Mr. Morgan started his business career as a Corporate Economist &
Strategist at Ford of Europe and Esso Petroleum. Mr. Moth is a graduate of The
City University London. Mr. Moth joined Delaware in 1992. He previously worked
at the Guardian Royal Exchange in an actuarial capacity where he was responsible
for technical analysis, quantitative models and projections. Mr. Moth has been
awarded the certificate in Finance & Investment from the Institute of Actuaries
in London.
Portfolio Trading Practices
The Series normally will not invest for
short-term trading purposes. However, the Series may sell securities without
regard to the length of time they have been held. The degree of portfolio
activity will affect brokerage costs of the Series. Given the respective Series'
investment objectives, the annual portfolio turnover rates are not expected to
exceed 100% for the Equity/Income, High Yield, Growth, International Equity and
<PAGE>
Global Bond Series, 200% for the Capital Reserves and Multiple Strategy Series,
and may exceed 100% for the Value and Emerging Growth Series.
The portfolio turnover rates for each Series for the past two years were
as follows:
Year Ended Year Ended
Series December 31, 1994 December 31, 1995
Equity/
Income
Series 91% 85%
High
Yield
Series 47% 74%
Capital
Reserves
Series 219% 145%
Multiple
Strategy
Series 140% 106%
Growth
Series 43% 73%
International
Equity
Series 13% 19%
Value
Series 26% 71%
Emerging
Growth
Series 59% 76%
Best efforts are used to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the respective
investment manager or their respective advisory clients. These services may be
used by the respective investment manager in servicing any of their respective
accounts. Subject to best price and execution, the respective investment manager
may consider a broker/dealer's sales of variable contracts in placing portfolio
orders, and may place orders with broker/dealers that have agreed to defray
certain Series expenses such as custodian fees.
PERFORMANCE INFORMATION
Equity/Income, High Yield, Capital Reserves, Growth, Multiple Strategy,
International Equity, Value, Emerging Growth and Global Bond Series
From time to time, the Fund may quote the above listed Series' total
return performance in advertising and other types of literature. Total return
will be based on a hypothetical $1,000 investment, reflecting the reinvestment
of all distributions at net asset value. Each presentation will include the
average annual total return for one-, five- and ten-year (or life of Series, if
applicable) periods. The Fund may also advertise aggregate and average total
return information concerning the Series over additional periods of time.
From time to time, the Fund may also quote the High Yield, Capital
Reserves and Global Bond Series' yield performance in advertising and other
types of literature. The current yield for these Series will be calculated by
dividing the annualized net investment income earned by the Series during a
recent 30-day period by the maximum offering price per share on the last day of
the period. The yield formula provides for semi-annual compounding which assumes
that net investment income is earned and reinvested at a constant rate and
annualized at the end of a six-month period.
Because securities' prices fluctuate, investment results of the Series
will fluctuate and past performance should not be considered as a representation
of future results.
<PAGE>
Money Market Series
From time to time, the Fund may publish the Series' "yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "yield" of the Series refers to the income
generated by an investment in the Series over a specified seven-day period. This
income is then "annualized," which means the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated in a similar manner but, when annualized, the income earned by an
investment in the Series is assumed to be reinvested. The "effective yield" will
be slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The Fund may also publish aggregate and average annual
total return information concerning the Series which will reflect the compounded
rate of return of an investment in the Series over a specified period of time
and will assume the investment of all distributions at net asset value. Yield
fluctuates and is not guaranteed. Past performance is not an indication of
future results.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the Fund's national
distributor under Distribution Agreements dated April 3, 1995 for all Series
other than Global Bond Series. The Global Bond Series' Distribution Agreement is
dated as of May 1, 1996. The Distributor bears all of the costs of promotion and
distribution.
Delaware Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing and transfer agent for the Equity/Income, High
Yield, Capital Reserves, Multiple Strategy, Growth, International Equity, Value,
Emerging Growth and Global Bond Series under the Amended and Restated
Shareholders Services Agreement dated May 1, 1996, and for the Money Market
Series under the Shareholders Services Agreement dated June 29, 1988.
The Distributor and the Transfer Agent are indirect, wholly-owned
subsidiaries of DMH.
EXPENSES
Each Series is responsible for all of its own expenses other than those
borne by the respective investment manager under the Investment Management
Agreements and those borne by the Distributor under the Distribution Agreements.
With respect to the High Yield, Capital Reserves and Money Market Series,
Delaware Management elected voluntarily to waive its fee and reimburse those
Series to limit certain expenses of those Series to 8/10 of 1% of average daily
net assets for six months following their initial public offering. This waiver
has been extended through June 30, 1996. For the year ended December 31, 1995,
the High Yield, Capital Reserves and Money Market Series' ratios of expenses to
average daily net assets were 0.69%, 0.71% and 0.62%, respectively.
With respect to the Equity/Income, Multiple Strategy and Growth Series,
Delaware Management had elected voluntarily to waive its fee and reimburse those
Series to the extent necessary to limit certain expenses of each Series to 8/10
of 1% of each Series' average daily net assets for the period July 1, 1992
through June 30, 1993. This waiver has been extended through June 30, 1996. For
the year ended December 31, 1995, the Equity/Income, Multiple Strategy and
Growth Series' ratios of expenses to average daily net assets were 0.69%, 0.69%
and 0.80%, respectively. The expense ratio for the Growth Series reflects the
waiver of fees described above.
<PAGE>
With respect to the International Equity and Global Bond Series, Delaware
International has elected voluntarily to waive its fee and to reimburse the
Series to the extent necessary to limit certain expenses to 8/10 of 1% of
average daily net assets for the period from commencement of the public offering
through June 30, 1993 for the International Equity Series and through June 30,
1996 for the Global Bond Series. This waiver has been extended through June 30,
1996 with respect to the International Equity Series. For the year ended
December 31, 1995, the International Equity Series' ratio of expenses to average
daily net assets was 0.80%, reflecting the waiver.
In connection with the Value and Emerging Growth Series, Delaware
Management had elected voluntarily to waive its fee and to reimburse the Series
to the extent necessary to limit certain expenses to 8/10 of 1% of average daily
net assets for the period from commencement of the public offering for the
Series through June 30, 1994. This waiver has been extended through June 30,
1996. For the year ended December 31, 1995, the Value Series' and the Emerging
Growth Series' ratio of expenses to average daily net assets was 0.80%.
DESCRIPTION OF FUND SHARES
Shares of the Fund are sold only to separate accounts of life companies.
Currently, the shares of the Fund are sold only to Variable Annuity Account C
and Flexible Premium Variable Life Account K of Lincoln National Life Insurance
Company, Variable Accounts A and B of American International Life Assurance
Company of New York, Variable Accounts I and II of AIG Life Insurance Company,
Separate Accounts VA-K, VEL II and Inheiritage of First Allmerica Financial Life
Insurance Company and Separate Accounts VA-K, VEL, VEL II and Inheiritage of
Allmerica Financial Life Insurance and Annuity Company. In the future, shares of
the Fund may be sold to separate accounts of other affiliated or unaffiliated
life companies to fund variable contracts. The Fund's Board of Directors will
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto. An irreconcilable conflict that is not resolved might result
in the withdrawal of a substantial amount of assets, causing a negative impact
on net asset value.
As a "series" type of mutual fund, the Fund issues separate classes or
series of stock, currently the ten Series described in this Prospectus.
Additional series may be established in the future. An interest in the Fund is
limited to the assets of the particular Series in which shares are held, and
shareholders of each Series are entitled to a pro-rata share of all dividends
and distributions arising from an investment in such Series.
The Fund was organized as a Maryland corporation on February 19, 1987. The
authorized capital stock of the Fund consists of five hundred million shares of
common stock, $.01 par value. Each of the ten Series is currently allocated
fifty million shares. The Fund may establish additional series and may allocate
its shares either to such new classes or to any of the ten existing Series.
Each Series' shares have equal voting rights and are equal in all other
respects. Each Series will vote separately on any matter which affects only that
Series. Shareholders get one vote for each share held; fractional shares are
voted. The Fund will hold annual meetings as necessary for shareholder matters
to be voted under the 1940 Act or otherwise. Shares of each Series will have a
priority over shares of any other Series of the Fund in the assets and income of
that Series.
Because of current federal securities law requirements, the Fund expects
that its life company shareholders will offer their contract owners the
opportunity to instruct them as to how Series shares allocable to their variable
contracts will be voted with respect to certain matters, such as approval of
investment advisory agreements. An insurance company will vote all Series shares
held in a separate account in the same proportion as it receives instructions
from contract owners in that separate account. Under certain circumstances,
which are described more fully in the accompanying prospectuses for the separate
accounts which invest in the Fund, the voting instructions received from
contract owners may be disregarded.
<PAGE>
APPENDIX A--RATINGS FOR HIGH
YIELD SERIES
The High Yield Series' assets are invested primarily in bonds rated BBB or
lower by S&P or Baa or lower by Moody's and in unrated corporate bonds. These
credit ratings evaluate only the safety of principal and interest and do not
consider the market value risk associated with high-yield securities. The table
set forth below shows the percentage of the Series' securities included in each
of the specified rating categories and shows the percentage of the Series'
assets held in United States government securities. Certain securities may not
be rated because the rating agencies were either not asked to provide ratings
(e.g., many issuers of privately placed bonds do not seek ratings) or because
the rating agencies declined to provide a rating for some reason, such as
insufficient data. The table below shows the percentage of the Series'
securities which are not rated. The information contained in the table was
prepared based on a dollar weighted average of the Series' portfolio composition
based on month end data for the Series' year ended December 31, 1995. The
paragraphs following the table contain excerpts from Moody's and S&P's ratings
descriptions.
Rating Moody's Average Weighted
and/or Percentage of
S&P Portfolio
- ----------------- -----------------
United States
Treasury Obligations 0.00%
Aaa/AAA 0.00%
Aa/AA 0.00%
A/A 0.00%
Baa/BBB 0.00%
Ba/BB 38.05%
B/B 49.52%
Caa/CCC 0.00%
Not Rated 12.43%
General Rating Information
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to be
the best quality. They carry the smallest degree of investment risk; Aa--judged
to be of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; Baa--considered as medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; Ba--judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
<PAGE>
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
Commercial Paper
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
<PAGE>
--------------------------------
DELAWARE GROUP
--------------------------------
PREMIUM FUND, INC.
--------------------------------
INVESTMENT MANAGERS PART B
Delaware Management Company, Inc.
One Commerce Square STATEMENT OF
Philadelphia, PA 19103 ADDITIONAL INFORMATION
Delaware International Advisers Ltd.
Veritas House --------------------------------
125 Finsbury Pavement
London, England EC2A 1NQ MAY 1, 1996
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
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
CUSTODIANS
The Chase Manhattan Bank, N.A.
4 Chase Metrotech Center
Brooklyn, NY 11245
Chemical Bank
450 West 33rd Street
New York, NY 10001
Morgan Guaranty Trust Company of New York DELAWARE
60 Wall Street GROUP
New York, NY 10260 --------
<PAGE>
- ------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
- ------------------------------------------------------------------------------
DELAWARE GROUP
- ------------------------------------------------------------------------------
PREMIUM FUND, INC.
- ------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Cover Page
- ------------------------------------------------------------------------------
Investment Objectives and Policies
- ------------------------------------------------------------------------------
Accounting and Tax Issues
- ------------------------------------------------------------------------------
Performance Information
- ------------------------------------------------------------------------------
Trading Practices and Brokerage
- ------------------------------------------------------------------------------
Offering Price
- ------------------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions
- ------------------------------------------------------------------------------
Taxes
- ------------------------------------------------------------------------------
Investment Management Agreements
- ------------------------------------------------------------------------------
Officers and Directors
- ------------------------------------------------------------------------------
General Information
- ------------------------------------------------------------------------------
Appendix A--Description of Ratings
- ------------------------------------------------------------------------------
Appendix B
- ------------------------------------------------------------------------------
Financial Statements
- ------------------------------------------------------------------------------
<PAGE>
Delaware Group Premium Fund, Inc. ("Premium Fund" or the "Fund") is a
diversified, open-end management investment company which is intended to meet a
wide range of investment objectives with its ten separate Portfolios ("Series").
Each Series is in effect a separate fund issuing its own shares.
The shares of the Fund are sold only to separate accounts of life
insurance companies ("life companies"). The separate accounts are used in
conjunction with variable annuity contracts and variable life insurance policies
("variable contracts"). The separate accounts invest in shares of the various
Series in accordance with allocation instructions received from contract owners.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses of
the Fund dated May 1, 1996, as they may be amended from time to time. It should
be read in conjunction with the prospectuses for the variable contracts and the
Fund. Part B is not itself a prospectus but is, in its entirety, incorporated by
reference into the Fund's Prospectuses. The Fund's Prospectuses may be obtained
by writing or calling your investment dealer or by contacting the Fund's
national distributor, Delaware Distributors, L.P. (the "Distributor"), 1818
Market Street, Philadelphia, PA 19103.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Series are below. There can be no
assurance that the objectives of any Series will be realized.
Equity/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.
This Series has the same objective and investment disciplines as
the Decatur Total Return Fund of Delaware Group Decatur Fund, Inc.,
a separate Delaware Group fund, in that it invests generally, but
not exclusively, in common stocks and income-producing securities
convertible into common stocks, consistent with the Series'
objective.
High Yield Series seeks as high a current income as possible by
investing in rated and unrated corporate bonds (including
high-yield bonds commonly known as junk bonds), U.S. Government
securities and commercial paper. This Series has the same objective
and investment disciplines as Delaware Group Delchester High-Yield
Bond Fund, Inc., a separate Delaware Group fund. An investment in
the Series may involve greater risks than an investment in a
portfolio comprised primarily of investment grade bonds.
Capital Reserves Series seeks a high stable level of current income
while minimizing fluctuations in principal by investing in a
diversified portfolio of short- and intermediate-term securities.
Money Market Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in
short-term money market instruments. This Series has the same
objective and investment disciplines as Delaware Group Cash
Reserve, Inc., a separate Delaware Group fund.
Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the
potential for significant growth. This Series has the same
objective and investment disciplines as Delaware Group DelCap Fund,
Inc., a separate Delaware Group fund, in that it invests in common
stocks and other securities including, but not limited to,
convertible securities, warrants, preferred stocks, bonds and
foreign securities, consistent with the Series' objective.
Multiple Strategy 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. This Series has the same objective and investment
disciplines as the Delaware Fund of Delaware Group Delaware Fund,
Inc., a separate Delaware Group fund, in that, as a "balanced"
fund, the Series, consistent with its objective, invests at least
25% of its assets in fixed income securities and the remainder
primarily in equity securities.
<PAGE>
International Equity Series seeks long-term growth without undue
risk to principal by investing primarily in equity securities of
foreign issuers providing the potential for capital appreciation
and income. This Series has the same objective and investment
disciplines as the International Equity Series of Delaware Group
Global & International Funds, Inc., a separate Delaware Group fund,
in that it invests in a broad range of equity securities of foreign
issuers including common stocks, preferred stocks, convertible
securities and warrants, consistent with the Series' objective.
Value Series seeks capital appreciation by investing in small- to
mid-cap common stocks whose market value appears 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. This Series has the same objective and investment
disciplines as Delaware Group Value Fund, Inc., a separate Delaware
Group fund.
Emerging Growth 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. This Series has the same
objective and investment disciplines as Delaware Group Trend Fund,
Inc., a separate Delaware Group fund.
Global Bond Series seeks current income consistent with
preservation of principal by investing primarily in fixed income
securities that may also provide the potential for capital
appreciation. This Series is a global fund, as such, at least 65%
of the Series' assets will be invested in fixed income securities
of issuers organized or having a majority of their assets in or
deriving a majority of their operating income in at least three
different countries, one of which may be the United States. This
Series has the same objective and investment disciplines as the
Global Bond Series of Delaware Group Global & International Funds,
Inc., a separate Delaware Group fund.
INVESTMENT RESTRICTIONS
The Fund has the following restrictions for each Series which may not be
amended without approval of a majority of the outstanding voting securities of
the affected Series, which is the lesser of more than 50% of the outstanding
voting securities or 67% of the voting securities of the affected Series 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 Series will not:
1. Invest more than 5% of the value of its assets in securities of any
one issuer (other than obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities). This restriction shall apply to only 75% of
the assets of the International Equity, Value and Emerging Growth Series and to
only 50% of the assets of the Global Bond Series.
<PAGE>
2. Purchase more than 10% of the voting securities of any company, or
invest in any company for the purpose of exercising control or management.
3. Purchase or retain securities of a company which has an officer or
director who is an officer or director of the Fund, or an officer or director of
its investment manager if such persons, each owning beneficially more than 1/2
of 1% of the shares of the company, own in the aggregate more than 5% thereof.
4. Purchase any security issued by any other investment company (except
in connection with a merger, consolidation or offer of exchange) if after such
purchase it would: (a) own more than 3% of the voting stock of such company, (b)
own securities of such company having a value in excess of 5% of a Series'
assets or (c) own securities of investment companies having an aggregate value
in excess of 10% of a Series' assets. Any such purchase shall be at the
customary brokerage commission. The limitations set forth in this restriction do
not apply to purchases by the International Equity Series of securities issued
by closed-end investment companies, all of which must be at the customary
brokerage commission.
5. Make any investment in real estate unless necessary for office space
or the protection of investments already made. (This restriction does not
preclude a Series' purchase of securities secured by real estate or interests
therein, or securities issued by companies which invest in real estate or
interests therein, including real estate investment trusts.)
6. Purchase securities on margin, make short sales of securities or
maintain a net short position (except that a Series may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities). This restriction shall not prohibit the Series from satisfying
margin requirements with respect to futures transactions.
7. Invest in interests in oil, gas or other mineral exploration or
development programs, commodities or commodities contracts. This restriction
shall not prohibit the International Equity, Value and Emerging Growth Series
from entering into futures contracts or options thereon, to the extent that not
more than 5% of its assets are required as futures contract margin deposits and
premiums on options and only to the extent that obligations under such contracts
and transactions represent not more than 20% of the Series' assets.
8. Borrow money in excess of one-third of the value of its net assets and
then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Series have no intention of increasing their net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of a Series' assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Series shall, within three days thereafter (not including
Sunday and holidays) or such longer period as the Securities and Exchange
Commission may prescribe by rules and regulations, reduce the amount of its
borrowings to an extent that the asset coverage of such borrowings shall be at
least 300%. A Series will not pledge more than 15% of its net assets. A Series
shall not issue senior securities as defined in the Investment Company Act of
1940 (the "1940 Act"), except for notes to banks.
9. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements) in accordance with each Series' investment
objective and policies are considered loans and except that each Series may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
10. Invest more than 5% of the value of its total assets in securities of
companies less than three years old. Such three-year period shall include the
operation of any predecessor company or companies.
<PAGE>
11. Invest more than 25% of its total assets in any particular industry,
except that a Series may invest more than 25% of the value of its total assets
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, certificates of deposit and bankers' acceptances of banks
with over one billion dollars in assets or bank holding companies whose
securities are rated A-2 or better by Standard & Poor's Ratings Group ("S&P") or
P-2 or better by Moody's Investors Service, Inc. ("Moody's").
12. Act as an underwriter of securities of other issuers, except that a
Series may acquire restricted or not readily-marketable securities under
circumstances where, if such securities are sold, a Series might be deemed to be
an underwriter for the purposes of the Securities Act of 1933.
Investment restrictions 2, 3, 7 and 10 above are nonfundamental
policies of the Global Bond Series. In addition, although not considered a
fundamental policy, the Global Bond Series will not invest more than 10% of its
net assets in repurchase agreements maturing in more than seven days and other
illiquid assets. Securities of foreign issuers which are not listed on a
recognized domestic or foreign exchange or for which a bona fide market does not
exist at the time of purchase or subsequent valuation are included in the
category of illiquid assets.
In addition, the following investment restrictions may be changed by
the Board of Directors:
(a) Each Series will not invest in warrants valued at lower of cost or
market exceeding 5% of a Series' net assets. Included within that amount, but
not to exceed 2% of a Series' net assets, may be warrants not listed on the New
York Stock Exchange or American Stock Exchange. This restriction shall not apply
to the International Equity Series.
(b) The Money Market Series will not invest more than 25% of its assets
in foreign banks which are subject to the same regulation as United States banks
or to foreign branches of United States banks where such a bank is liable for
the obligations of the branch.
While the Series are permitted under certain circumstances to borrow
money, they do not normally do so. No investment securities will be purchased
while a Series has an outstanding borrowing. The Fund has undertaken, for so
long as required by California Regulatory Authority and so long as insurance
policy premiums or proceeds of contracts sold in California are used to purchase
Fund shares, each Series will not borrow money in excess of 25% of the value of
its net assets.
ADDITIONAL INFORMATION ON THE
MONEY MARKET AND CAPITAL
RESERVES SERIES
Money Market Instruments
The Capital Reserves Series may, from time to time, invest all or part
of its available assets in money market instruments maturing in one year or
less. The Money Market Series will invest all of its available assets in
instruments which have a remaining maturity of 13 months or less at the time of
acquisition and which will otherwise meet the maturity, quality and
diversification conditions with which taxable money market funds must comply.
The types of instruments which these Series may purchase are described below:
1. U.S. Government Securities--Securities issued or guaranteed by the
U.S. Government, including Treasury Bills, Notes and bonds.
2. 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.
3. 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
<PAGE>
combined with its branches has total assets of at least one billion dollars, and
certificates and issues of domestic savings and loan associations of one billion
dollars in assets whose deposits are insured by the Federal Deposit Insurance
Corporation. 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 Series to a greater risk of loss. The Series will only buy short-term
instruments in nations where these risks are minimal. The Series will consider
these factors 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 Series. Either Series may invest more than 25% of its
assets in foreign banks except that this limitation shall not apply to United
States branches of foreign banks which are subject to the same regulations as
United States banks or to foreign branches of United States banks where such a
bank is liable for the obligations of the branch. This policy may be changed by
the Board of Directors without shareholder approval.
The Money Market Series is subject to certain maturity, quality and
diversification conditions applicable to taxable money market funds. Thus, if a
bank obligation or, as relevant, its issuer is considered to be rated at the
time of the proposed purchase, it or, as relevant, its issuer must be so rated
in one of the two highest rating categories by at least two
nationally-recognized statistical rating organizations or, if such security or,
as relevant, its issuer is not so rated, the purchase of the security must be
approved or ratified by the Board of Directors in accordance with the maturity,
quality and diversification conditions with which taxable money market funds
must comply.
4. Commercial Paper--Short-term promissory notes issued by corporations
which at the time of purchase are rated A-2 or better by S&P or P-2 or better by
Moody's or which have received comparable ratings from a nationally-recognized
statistical rating organization approved by the Board of Directors or, if not
rated, issued or guaranteed by a corporation with outstanding debt rated AA, Aa
or better by S&P or Moody's. The Money Market Series invests in commercial paper
in accordance with the restrictions set forth in the Prospectuses.
5. Short-term Corporate Debt--In addition to the other debt securities
described in the Prospectuses, corporate notes, bonds and debentures which at
the time of purchase are rated AA or better by S&P or Aa or better by Moody's or
which have received comparable ratings from a nationally-recognized statistical
rating organization approved by the Board of Directors, provided such securities
have one year or less remaining to maturity. Such securities generally have
greater liquidity and are subject to considerably less market fluctuation than
longer issues. The Money Market Series invests in corporate notes, bonds and
debentures in accordance with the restrictions set forth in the Prospectuses.
The ratings of S&P, Moody's and other rating services represent their
opinions as to the quality of the money market instruments which they undertake
to rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. These ratings are the initial criteria for
selection of portfolio investments, but the Series will further evaluate these
securities. See Appendix A--Description of Ratings.
<PAGE>
ADDITIONAL INFORMATION ON THE CAPITAL RESERVES, MONEY MARKET AND MULTIPLE
STRATEGY SERIES
Asset-Backed Securities
The Capital Reserves, Money Market and Multiple Strategy Series may
invest a portion of their 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. 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 Series 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 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.
ADDITIONAL INFORMATION ON THE CAPITAL RESERVES SERIES
Average Weighted Maturity
The Capital Reserves Series ordinarily maintains its average dollar
weighted portfolio maturity within the five to seven year range, but not in
excess of ten years. However, many of the securities in which the Series invests
will have remaining maturities in excess of seven years. The Series may purchase
individual securities with a remaining maturity of up to 15 years.
Some of the securities in the Series' portfolio may have periodic
interest rate adjustments based upon an index such as the 91-day Treasury Bill
rate. This periodic interest rate adjustment tends to lessen the volatility of
the security's price. With respect to securities with an interest rate
<PAGE>
adjustment period of one year or less, the Series will, when determining average
weighted maturity, treat such a security's maturity as the amount of time
remaining until the next interest rate adjustment.
Instruments such as GNMA, FNMA and FHLMC securities and similar
securities backed by amortizing loans generally have shorter effective
maturities than their stated maturities. This is due to changes in amortization
caused by demographic and economic forces such as interest rate movements. These
effective maturities are calculated based upon historical payment patterns. For
purposes of determining the Series' average weighted maturity, the maturities of
such securities will be calculated based upon the issuing agency's payment
factors using industry-accepted valuation models.
ADDITIONAL INFORMATION ON THE MONEY MARKET SERIES
The Series intends to achieve its objective by investing at least 80%
of its assets in a diversified portfolio of money market instruments. See Money
Market Instruments below and Appendix A--Description of Ratings.
The Series maintains its net asset value at $10 per share by valuing
its securities on an amortized cost basis. See Offering Price. The Series
maintains a dollar weighted average portfolio maturity of not more than 90 days
and does not purchase any issue having a remaining maturity of more than 13
months. In addition, the Series limits its investments, including repurchase
agreements, to those instruments which the Board of Directors determines present
minimal credit risks and which are of high quality. The Series may sell
portfolio securities prior to maturity in order to realize gains or losses or to
shorten the average maturity if it deems such actions appropriate to maintain a
stable net asset value. While the Series will make every effort to maintain a
fixed net asset value of $10 per share, there can be no assurance that this
objective will be achieved.
While the Series intends to hold its investments until maturity when
they will be redeemable at their full principal value plus accrued interest, it
may attempt, from time to time, to increase its yield by trading to take
advantage of market variations. Also, revised evaluations of the issuer or
redemptions may cause sales of portfolio investments prior to maturity or at
times when such sales might otherwise not be desirable. The Series' right to
borrow to facilitate redemptions may reduce but does not guarantee a reduction
in the need for such sales. The Series will not purchase new securities while
any borrowings are outstanding. See Dividends and Realized Securities Profits
Distributions and Taxes for effect of any capital gains distributions.
A shareholder's rate of return will vary with the general interest rate
levels applicable to the money market instruments in which the Series invests.
In the event of an increase in current interest rates, a national credit crisis
or if one or more of the issuers became insolvent prior to the maturity of the
instruments, principal values could be adversely affected. Investments in
obligations of foreign banks and of overseas branches of U.S. banks may be
subject to less stringent regulations and different risks than those of U.S.
domestic banks. The rate of return and the net asset value will be affected by
such other factors as sales of portfolio securities prior to maturity and the
Series' operating expenses.
ADDITIONAL INFORMATION ON THE INTERNATIONAL EQUITY, VALUE, EMERGING GROWTH AND
GLOBAL BOND SERIES
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures Contracts--As noted in the Prospectus, each of the International Equity,
Value, Emerging Growth and Global Bond Series may enter into futures contracts
relating to securities, securities indices or interest rates. In addition, the
<PAGE>
International Equity and Global Bond Series may enter into foreign currency
futures contracts. (Unless otherwise specified, interest rate futures contracts,
securities and securities index futures contracts and foreign currency futures
contracts are collectively referred to as "futures contracts.") Such investment
strategies will be used as a hedge and not for speculation.
Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Series' current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Series may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of the
Series' securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
part, by gains on the futures position. When a Series is not fully invested in
the securities market and anticipates a significant market advance, it may
purchase stock or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Series intends to purchase. As such purchases are made, the
corresponding positions in stock or bond index futures contracts will be closed
out.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on a
Series' current or intended investments in fixed income securities. For example,
if a Series owned long-term bonds and interest rates were expected to increase,
that Series might sell interest rate futures contracts. Such a sale would have
much the same effect as selling some of the long-term bonds in that Series'
portfolio. However, since the futures market is more liquid than the cash
market, the use of interest rate futures contracts as a hedging technique allows
a Series to hedge its interest rate risk without having to sell its portfolio
securities. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of that Series' interest rate futures
contracts would be expected to increase at approximately the same rate, thereby
keeping the net asset value of that Series from declining as much as it
otherwise would have. On the other hand, if interest rates were expected to
decline, interest rate futures contracts could be purchased to hedge in
anticipation of subsequent purchases of long-term bonds at higher prices.
Because the fluctuations in the value of the interest rate futures contracts
should be similar to those of long-term bonds, a Series could protect itself
against the effects of the anticipated rise in the value of long-term bonds
without actually buying them until the necessary cash became available or the
market had stabilized. At that time, the interest rate futures contracts could
be liquidated and that Series' cash reserve could then be used to buy long-term
bonds on the cash market.
As noted in the Prospectus, the International Equity and Global Bond
Series may each purchase and sell foreign currency futures contracts for hedging
purposes to attempt to protect its current or intended investments from
fluctuations in currency exchange rates. Such fluctuations could reduce the
dollar value of portfolio securities denominated in foreign currencies, or
increase the cost of foreign-denominated securities to be acquired, even if the
value of such securities in the currencies in which they are denominated remains
constant. Each of the International Equity and Global Bond Series may sell
futures contracts on a foreign currency, for example, when a Series holds
securities denominated in such currency and it anticipates a decline in the
value of such currency relative to the dollar. In the event such decline occurs,
the resulting adverse effect on the value of foreign-denominated securities may
be offset, in whole or in part, by gains on the futures contracts. However, if
the value of the foreign currency increases relative to the dollar, the Series'
loss on the foreign currency futures contract may or may not be offset by an
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increase in the value of the securities because a decline in the price of the
security stated in terms of the foreign currency may be greater than the
increase in value as a result of the change in exchange rates.
Conversely, each of the International Equity and Global Bond Series
could protect against a rise in the dollar cost of foreign-denominated
securities to be acquired by purchasing futures contracts on the relevant
currency, which could offset, in whole or in part, the increased cost of such
securities resulting from a rise in the dollar value of the underlying
currencies. When a Series purchases futures contracts under such circumstances,
however, and the price of securities to be acquired instead declines as a result
of appreciation of the dollar, the Series will sustain losses on its futures
position which could reduce or eliminate the benefits of the reduced cost of
portfolio securities to be acquired.
The Series may also engage in currency "cross hedging" when, in the
opinion of the International Equity and Global Bond Series' investment manager,
Delaware International Advisers Ltd. ("Delaware International"), the historical
relationship among foreign currencies suggests that a Series may achieve
protection against fluctuations in currency exchange rates similar to that
described above at a reduced cost through the use of a futures contract relating
to a currency other than the U.S. dollar or the currency in which the foreign
security is denominated. Such "cross hedging" is subject to the same risks as
those described above with respect to an unanticipated increase or decline in
the value of the subject currency relative to the dollar.
Options on Futures Contracts--As noted in the Prospectus, each of the
International Equity, Value, Emerging Growth and Global Bond Series may purchase
and write options on the types of futures contracts that Series could invest in.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities in the Series'
portfolio. If the futures price at expiration of the option is below the
exercise price, a Series will retain the full amount of the option premium,
which provides a partial hedge against any decline that may have occurred in the
Series' portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the securities or other
instruments required to be delivered under the terms of the futures contract. If
the futures price at expiration of the put option is higher than the exercise
price, a Series will retain the full amount of the option premium, which
provides a partial hedge against any increase in the price of securities which
the Series intends to purchase. If a put or call option a Series has written is
exercised, the Series 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 options
on futures positions, a Series' losses from exercised options on futures may to
some extent be reduced or increased by changes in the value of portfolio
securities.
The Series may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected marketwide decline or changes in interest or exchange
rates, a Series could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such decrease occurs, it may be offset, in
whole or in part, by a profit on the option. If the market decline does not
occur, the Series will suffer a loss equal to the price of the put. Where it is
projected that the value of securities to be acquired by a Series will increase
prior to acquisition, due to a market advance or changes in interest or exchange
rates, a Series could purchase call options on futures contracts, rather than
purchasing the underlying futures contracts. If the market advances, the
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increased cost of securities to be purchased may be offset by a profit on the
call. However, if the market declines, the Series will suffer a loss equal to
the price of the call, but the securities which the Series intends to purchase
may be less expensive.
Options on Foreign Currencies
The International Equity and Global Bond Series 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 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,
the Series may purchase put options on the foreign currency. If the value of the
currency does decline, the Series 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, the Series 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 the Series 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, the Series 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.
The Series may write options on foreign currencies for the same types
of hedging purposes. For example, where the Series anticipate a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates, they 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 the
anticipated increase in the dollar cost of securities to be acquired, the Series
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Series to hedge such
increased costs up to the value 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 the
Series 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, the Series 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.
Each Series intends to write covered call options on foreign
currencies. A call option written on a foreign currency by a Series is "covered"
if the Series 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 Series' custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Series has a call on the same foreign currency and in the same principle amount
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as the call written where the exercise price of the call held (a) is equal to
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 the Series
in cash, U.S. Government securities or other high-grade liquid debt securities
in a segregated account with its custodian bank.
With respect to writing put options, at the time the put is written, a
Series 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 Series will be required to pay upon
exercise of the put. The account will be maintained until the put is exercised,
has expired, or the Series has purchased a closing put of the same series as the
one previously written.
REPURCHASE AGREEMENTS
Each of the Fund's ten Series may, from time to time, enter into
repurchase transactions. Repurchase agreements are instruments under which
securities are purchased from a bank or securities dealer with an agreement by
the seller to repurchase the securities. Under a repurchase agreement, the
purchaser acquires ownership of the security but the seller agrees, at the time
of sale, to repurchase it at a mutually agreed-upon time and price. The Series
will take custody of the collateral under repurchase agreements. Repurchase
agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred. The resale price is in excess of
the purchase price and reflects an agreed-upon market rate unrelated to the
coupon rate or maturity of the purchase security. Such transactions afford an
opportunity for the Series to invest temporarily available cash. The Series'
risk is limited to the seller's ability to buy the security back at the
agreed-upon sum at the agreed-upon time, since the repurchase agreement is
secured by the underlying obligation. Should such an issuer default, the
investment managers believe that, barring extraordinary circumstances, the
Series will be entitled to sell the underlying securities or otherwise receive
adequate protection for its interest in such securities, although there could be
a delay in recovery. The Series consider the creditworthiness of the bank or
dealer from whom it purchases repurchase agreements. The Series will monitor
such transactions to assure that the value of the underlying securities subject
to repurchase agreements is at least equal to the repurchase price. The
underlying securities will be limited to those described above.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the Investment Company Act of
1940 to allow the Delaware Group funds jointly to invest cash balances. Each
Series of the Fund 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.
PORTFOLIO LOAN TRANSACTIONS
Each of the Fund's ten Series, except for the Money Market Series, may
loan up to 25% of its assets to qualified broker/dealers or institutional
investors for their use relating to short sales or other security transactions.
It is the understanding of the Series' respective investment manager
that the staff of the Securities and Exchange Commission permits portfolio
lending by registered investment companies if certain conditions are met. These
conditions are as follows: 1) each transaction must have 100% collateral in the
form of cash, short-term U.S. Government securities, or irrevocable letters of
credit payable by banks acceptable to the Fund 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
Series; 3) the Series must be able to terminate the loan after notice, at any
time; 4) the Series must receive reasonable interest on any loan, and any
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dividends, interest or other distributions on the lent securities, and any
increase in the market value of such securities; 5) the Series may pay
reasonable custodian fees in connection with the loan; 6) the voting rights on
the lent securities may pass to the borrower; however, if the directors of the
Fund 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 Series would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, a Series will only enter into loan arrangements
after a review of all pertinent facts by the Series' respective investment
manager, under the supervision of the Board of Directors, 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 Series' respective
investment manager.
FOREIGN SECURITIES
To the extent the Fund's ten Series are authorized and intend to invest
in foreign securities, investors should recognize that investing in securities
of 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 the Series may temporarily hold uninvested
reserves in bank deposits in foreign currencies, the Series 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 of the Series permit them to
enter into forward foreign currency exchange contracts and various related
currency transactions in order to hedge the Series' 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 Series. Payment of
such interest equalization tax, if imposed, would reduce such Series' 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 the Series 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 non-equity 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
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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 (the "Code"), as amended, 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 Series may make or enter into will
be subject to the special currency rules described above.
FOREIGN CURRENCY TRANSACTIONS
In connection with a Series' investment in foreign securities, a Series
may purchase or sell currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations.
Forward foreign currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A Series will account for
forward contracts by marking to market each day at daily exchange rates.
When a Series 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 that Series' assets
denominated in such foreign currency, the Series' custodian bank or subcustodian
will place cash or liquid high grade debt securities in a separate account of
the Series in an amount not less than the value of such Series' 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 the Series' commitments with respect to
such contracts.
OPTIONS
Each of the Fund's ten Series, except for the Money Market Series, may
write call options and purchase put options on a covered basis only. The
International Equity and Global Bond Series may also purchase call options. The
Series also may enter into closing transactions with respect to such options
transactions. No Series will engage in option transactions for speculative
purposes.
To the extent authorized to engage in option transactions, the Series
may invest in options that are Exchange listed and the International Equity and
Global Bond Series may also invest in options that are traded over-the-counter.
The other Series reserve the right to invest in over-the-counter options upon
written notice to their shareholders. The Series will enter into an option
position only if there appears to be a liquid market for such options. However,
there can be no assurance that a liquid secondary market will be maintained.
Thus, it may not be possible to close option positions and this may have an
adverse impact on a Series' ability to effectively hedge its securities.
A. Covered Call Writing--A Series may write covered call options from
time to time on such portion of its portfolio, without limit, as the respective
investment manager determines is appropriate in seeking to obtain the Series'
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investment objective. A call option gives the purchaser of such option the right
to buy, and the writer, in this case the Series, has the obligation to sell the
underlying security at the exercise price during the option period. The
advantage to a Series of writing covered calls is that the Series receives a
premium which is additional income. However, if the security rises in value, the
Series may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to such options, the Series may enter into closing
purchase transactions. A closing purchase transaction is one in which the
Series, 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 the
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Series 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, the Series 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, the Series 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 Series will write call options only on a covered basis, which means
that the Series will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Series 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 the Series will normally have expiration dates between one
and nine months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
B. Purchasing Put Options--A Series may invest up to 2% of its total
assets in the purchase of put options. The Series will, at all times during
which it holds a put option, own the security covered by such option.
A put option purchased by the Series gives it the right to sell one of
its securities for an agreed price up to an agreed date. The Series intend to
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purchase put options in order to protect against a decline in 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
Series to protect unrealized gain in an appreciated security in its portfolio
without actually selling the security. If the security does not drop in value,
the Series will lose the value of the premium paid. A Series may sell a put
option which it has previously purchased prior to the sale of the securities
underlying such option. Such sales will result in a net gain or loss depending
on whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio
securities. Additionally, the Series may enter into closing sale transactions. A
closing sale transaction is one in which a Series, 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.
C. Purchasing Call Options--The International Equity and Global Bond
Series may purchase call options to the extent that premiums paid by the Series
do not aggregate more than 2% of the Series' total assets. When the Series
purchases a call option, in return for a premium paid by the Series to the
writer of the option, the Series obtains the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium upon
writing the option, has the obligation, upon exercise of the option, to deliver
the underlying security against payment of the exercise price. The advantage of
purchasing call options is that the Series may alter portfolio characteristics
and modify portfolio maturities without incurring the cost associated with
portfolio transactions.
The Series 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. The
Series will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Series 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 the Series will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Series 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 the Series may expire without any value
to the Series.
D. Options on Stock Indices--The Growth, International Equity, Value,
Emerging Growth and Global Bond Series also may write call options and purchase
put options on certain stock indices and enter into closing transactions in
connection therewith. 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
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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 the Series 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, the Growth, International Equity, Value,
Emerging Growth and Global Bond Series may offset positions in stock index
options prior to expiration by entering into a closing transaction on an
Exchange or may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indices are currently
traded on the following Exchanges among others: The Chicago Board Options
Exchange, New York Stock Exchange and American Stock Exchange.
The Series' ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the Series' portfolio securities. Since the Series' portfolio will
not duplicate the components of an index, the correlation will not be exact.
Consequently, the Series bear 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.
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 the Series' ability to effectively
hedge its securities. The Series will enter into an option position only if
there appears to be a liquid secondary market for such options.
The Growth, International Equity, Value, Emerging Growth and Global
Bond Series 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.
<PAGE>
ACCOUNTING AND TAX ISSUES
When a Series writes a call, or purchases a put option, an amount equal
to the premium received or paid by it is included in the Series' 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 Series has written
expires on its stipulated expiration date, a Series recognizes a capital gain.
If a Series enters into a closing purchase transaction with respect to an option
which a Series has written, a Series 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. If a call option which a
Series has written is exercised, a Series realizes a capital gain or loss 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 Series for the purchase of a put option is
recorded in the Series' 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 Series has purchased expires on
the stipulated expiration date, a Series 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 Series exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid.
Options on Certain Stock Indices--Accounting for options on certain
stock indices will be in accordance with generally accepted accounting
principles. The amount of any realized gain or loss on closing out such a
position will result in a realized gain or loss for tax purposes. Such options
held by the Growth, International Equity, Value, Emerging Growth or Global Bond
Series 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 Series has qualified, and intends to
continue to qualify, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended. A Series must meet several
requirements to achieve or maintain its status as a regulated investment
company. Among these requirements are that at least 90% of each Series'
investment company taxable income be derived from dividends, interest, payment
with respect to securities loans and gains from the sale or disposition of
securities; that at the close of each quarter of its taxable year at least 50%
of the value of each Series' assets consist of cash and cash items, government
securities, securities of other regulated investment companies and, subject to
certain diversification requirements, other securities; and that less than 30%
of each Series' gross income be derived from sales of securities held for less
than three months.
<PAGE>
The requirement that not more than 30% of each Series' gross income be
derived from gains from the sale or other disposition of securities held for
less than three months may restrict a Series in its ability to write covered
call options on securities which it has held less than three months, to write
options which expire in less than three months, to sell securities which have
been held less than three months and to effect closing purchase transactions
with respect to options which have been written less than three months prior to
such transactions. Consequently, in order to avoid realizing a gain within the
three-month period, a Series may be required to defer the closing out of a
contract beyond the time when it might otherwise be advantageous to do so. A
Series may also be restricted in the sale of purchased put options and the
purchase of put options for the purpose of hedging underlying securities because
of the application of the short sale holding period rules with respect to such
underlying securities.
The straddle rules of Section 1092 may apply. Generally, the straddle
rules provide that a loss on a position of a straddle may be recognized only to
the extent it exceeds the unrecognized gain at year-end in other positions of
the straddle. Losses which are deferred to the extent of unrecognized gains will
be carried over to the succeeding taxable year subject to the same general
limitations.
<PAGE>
PERFORMANCE INFORMATION
Contract owners and prospective investors will be interested in
learning from time to time the current yield of the High Yield, Capital Reserves
and Global Bond Series and, in addition, the effective compounded yield of the
Money Market Series. Advertisements of performance of the underlying Series, if
any, will be accompanied by a statement of performance of the separate account.
As explained under Dividends and Realized Securities Profits Distributions,
dividends for the High Yield, Capital Reserves, Global Bond and Money Market
Series are declared daily from net investment income. Yield will fluctuate as
income earned fluctuates.
From time to time, the Fund may state each Series' total return in
advertisements and other types of literature. Any statements of total return
performance data will be accompanied by information on the Series' average
annual total rate of return over the most recent one-, five- and ten-year
periods. Each Series may also advertise aggregate and average total return
information over additional periods of time.
Each Series' average annual total rate of return 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;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase at the
end of the period.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes all distributions are
reinvested at net asset value.
The performance of each Series, other than the Global Bond Series, as
shown below, is the average annual total return quotations through December 31,
1995. As of the date of this Part B, the Global Bond Series had not yet begun
investment operations. Securities prices fluctuated during the periods covered
and past results should not be considered as representative of future
performance.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return*
Equity/ High Capital Money Multiple
Income Yield Reserves Market Strategy Growth
<S> <C> <C> <C> <C> <C> <C> <C>
1 year 1 year
ended ended
12/31/95 36.12% 15.50% 14.08% 5.48% 26.58% 12/31/95 29.53%
3 years 3 years
ended ended
12/31/95 16.18% 9.29% 6.18% 3.87% 10.99% 12/31/95 11.71%
Period
5 years 7/12/91**
ended through
12/31/95 15.86% 15.29% 6.91% 4.09% 14.53% 12/31/95 10.58%
Period
7/28/88**
through
12/31/95 10.35% 10.12% 7.37% 5.35% 12.06%
</TABLE>
<TABLE>
<CAPTION>
International Emerging
Equity Value Growth
<S> <C> <C> <C> <C>
1 year 1 year
ended ended
12/31/95 13.98% 12/31/95 23.85% 39.21%
Period
3 years 12/27/93**
ended through
12/31/95 10.68% 12/31/95 12.80% 18.79%
Period
10/29/92**
through
12/31/95 10.17%
</TABLE>
* The respective investment manager elected to waive voluntarily the portion
of its annual compensation under its Investment Management Agreement with
each Series to limit operating expenses of the Series to .80%. In the
absence of such voluntary waiver, performance would have been affected
negatively.
** Date of initial public offering.
<PAGE>
The High Yield, Capital Reserves and Global Bond Series may also quote
its current yield, calculated as described below, in advertisements and investor
communications.
The yield computation for the High Yield, Capital Reserves and Global
Bond Series is determined by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of the
period and annualizing the resulting figure, according to the following formula:
a - b
-----
YIELD = 2[( cd + 1)6- 1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends;
d = the maximum offering price per share on the last day of the
period.
The above formula will be used in calculating quotations of yield, based
on specific 30-day periods identified in advertising by the Series. The yields
of the High Yield and Capital Reserves Series as of December 31, 1995 using this
formula were 9.30% and 6.09%, respectively.
Yield quotations are based on the offering price determined by the
Series' net asset value on the last day of the period and will fluctuate
depending on the period covered.
The Money Market Series may also quote its current yield in
advertisements and investor communications.
Yield calculation for the Money Market Series begins with the value of a
hypothetical account of one share at the beginning of a seven-day period; this
is compared with the value of that same account at the end of the same period
(including shares purchased for the account with dividends earned during the
period). The net change in the account value is generally the net income earned
per share during the period, which consists of accrued interest income plus or
minus amortized purchase discount or premium, less all accrued expenses
(excluding expenses reimbursed by the investment manager) but does not include
realized gains or losses or unrealized appreciation or depreciation.
<PAGE>
The current yield of the Money Market Series represents the net change in
this hypothetical account annualized over 365 days. In addition, a shareholder
may achieve a compounding effect through reinvestment of dividends which is
reflected in the effective yield shown below.
The following is an example, for purposes of illustration only, of the
current and effective yield calculations for the Money Market Series for the
seven-day period ended December 31, 1995.
Value of a hypothetical account with one
share at the beginning of the period......... $10.00000000
Value of the same account at the
end of the period............................ 10.00979598
===========
Net change in account value........................... .00979598*
Base period return = net change in account
value / beginning account value.............. .000979598
Current yield [base period return x (365 / 7)]........ 5.11%**
=====
Effective yield (1 + base period) 365/7 - 1........... 5.24%***
=====
Weighted average life to maturity of the portfolio on December 31, 1995 was 40
days.
* This represents the net income per share for the seven calendar days ended
December 31, 1995.
** This represents the average of annualized net investment income per share
for the seven calendar days ended December 31, 1995.
*** This represents the current yield for the seven calendar days ended
December 31, 1995 compounded daily.
The yield quoted at any time represents the amount being earned on a
current basis and is a function of the types of instruments in the Money Market
Series' portfolio, their quality and length of maturity and the Series'
operating expenses. The length of maturity for the portfolio is the average
dollar weighted maturity of the portfolio. This means that the portfolio has an
average maturity of a stated number of days for its issues. The calculation is
weighted by the relative value of the investment.
<PAGE>
The yield will fluctuate daily as the income earned on the investments of
the Money Market Series fluctuates. Accordingly, there is no assurance that the
yield quoted on any given occasion will remain in effect for any period of time.
It should also be emphasized that the Fund is an open-end investment company and
that there is no guarantee that the net asset value or any stated rate of return
will remain constant. Investment performance is not insured. Investors comparing
results of the Money Market Series with investment results and yields from other
sources such as banks or savings and loan associations should understand these
distinctions. Historical and comparative yield information may, from time to
time, be presented by the Money Market Series. Although the Money Market Series
determines the yield on the basis of a seven-calendar-day period, it may, from
time to time, use a different time span.
Other funds of the money market type may calculate their yield on a
different basis and the yield quoted by the Series could vary upward or downward
if another method of calculation or base period were used.
Investors should note that income earned and dividends paid by the High
Yield, Capital Reserves and Global Bond Series will also vary depending upon
fluctuations in interest rates and performance of each Series' portfolio. The
net asset value of each Series may change. Unlike the Money Market Series, the
High Yield, Capital Reserves and Global Bond Series invest in longer-term
securities that fluctuate in value and do so in a manner inversely correlated
with changing interest rates. The Series' net asset values will tend to rise
when interest rates fall. Conversely, the Series' net asset values will tend to
fall as interest rates rise. Normally, fluctuations in interest rates have a
greater effect on the prices of longer-term bonds. The value of the securities
held in the Series will vary from day to day and investors should consider the
volatility of the Series' net asset values as well as their yields before making
a decision to invest.
Comparative Information
From time to time, performance of each Series in the Fund may be compared
to various industry indices.
The Fund may quote actual total return performance, dividend results and
other performance information in advertising and other types of literature of
those Series that invest primarily in equity securities and may compare that
information to, or may separately illustrate similar information reported by the
Standard and Poor's 500 Stock Index and the Dow Jones Industrial Average and
other unmanaged indices. The Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average are industry accepted unmanaged indices of
generally-conservative securities used for measuring general market performance.
The total return performance reported will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charges or other fees. In seeking a particular
investment objective, a Series' portfolio may include common stocks considered
by the respective investment manager to be more aggressive than those tracked by
these indices.
Each Series' total return performance will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will also reflect the maximum sales charge
paid, if any, for the illustrated investment amount, but not any income taxes
payable by shareholders on the reinvested distributions included in the
calculation. Because security prices fluctuate, past performance should not be
considered as a representation of the results which may be realized from an
investment in the Series in the future.
<PAGE>
Each Series may also state total return performance in the form of an
average annual return. The average annual return figure will be computed by
taking the sum of the particular Series' annual return, then dividing that
figure by the number of years in the overall period indicated. The computation
will reflect the impact of the maximum sales charge paid, if any, on the
illustrated investment amount against the first year's return.
From time to time, the Fund may quote actual total return and/or yield
performance for the Series in advertising and other types of literature compared
to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees offered by leading banks and thrifts as monitored by Bank Rate
Monitor, and those of generally-accepted corporate bond and government security
price indices of various durations prepared by Lehman Brothers and Salomon
Brothers, Inc. These indices are not managed for any investment goal.
Comparative information on the Consumer Price Index and representative
mutual fund indices maintained by CDA Technologies, Inc. may also be used. The
Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return from an
investment. CDA Technologies, Inc. is a performance evaluation service that
maintains a statistical database of performance, as reported by a diverse
universe of independently-managed mutual funds.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in preparing
exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Series activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations,
may also be used in the promotion of sales in the Fund. Any indices used are not
managed for any investment goal.
CDA Technologies, Inc., Lipper Analytical Services, Inc. and Morningstar,
Inc. are performance evaluation services that maintain statistical
performance databases, as reported by a diverse universe of
independently- managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income
on the stock market as well as other investment asset classes, and
inflation. With their permission, this information will be used primarily
for comparative purposes and to illustrate general financial planning
principles.
Interactive Data Corporation is a statistical access service that
maintains a database of various international industry indicators, such
as historical and current price/earning information, individual equity
and fixed income price and return information.
Compustat Industrial Databases, a service of Standard & Poor's, may also
be used in preparing performance and historical stock and bond market
exhibits. This firm maintains fundamental databases that provide
financial, statistical and market information covering more than 7,000
industrial and nonindustrial companies.
<PAGE>
Russell Indexes is an investment analysis service that provides both
current and historical stock performance information, focusing on the
business fundamentals of those firms issuing the security.
Salomon Brothers and Lehman Brothers are statistical research firms that
maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as
well as unmanaged indices compiled and maintained by these firms, will be
used in preparing comparative illustrations.
Morgan Stanley Capital International is a statistical and research firm
that maintains a statistical database of international securities. This
firm also compiles and maintains a number of unmanaged indices of
international securities. These indices are designed to measure the
performance of the stock markets of the USA, Europe, Canada, Mexico,
Australia and the Far East, and that of international industry groups.
FT-Actuaries World Indices are jointly compiled by The Financial Times,
Ltd.; Goldman, Sachs & Co.; and Wood Mackenzie & Co., Ltd. in conjunction
with the Institute of Actuaries and the Faculty of Actuaries. Indices
maintained by this group primarily focus on compiling statistical
information on international financial markets and industry sectors,
stock and bond issues and certain fundamental information about the
companies issuing the securities. Statistical information on
international currencies is also maintained.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current industry rate and yield
information on all industry available fixed income securities, as reported
weekly by The Bond Buyer, may be used in preparing comparative illustrations.
The following table is an example, for purposes of illustration only, of
cumulative total return performance for the each Series, other than the Global
Bond Series, through December 31, 1995. For these purposes, the calculations
assume the reinvestment of any realized securities profits distributions and
income dividends paid during the indicated periods.
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return*
Equity/ High Capital Money Multiple
Income Yield Reserves Market Strategy Growth
<S> <C> <C> <C> <C> <C> <C> <C>
3 months 3 months
ended ended
12/31/95 6.17% 2.93% 3.28% 1.33% 6.24% 12/31/95 4.42%
6 months 6 months
ended ended
12/31/95 14.80% 6.07% 4.99% 2.68% 12.87% 12/31/95 14.53%
9 months 9 months
ended ended
12/31/95 22.84% 10.65% 9.57% 4.10% 18.89% 12/31/95 20.75%
1 year 1 year
ended ended
12/31/95 36.12% 15.50% 14.08% 5.48% 26.58% 12/31/95 29.53%
3 years 3 years
ended ended
12/31/95 56.83% 30.54% 19.73% 12.07% 36.74% 12/31/95 39.39%
Period
5 years 7/12/91**
ended through
12/31/95 108.77% 103.67% 39.70% 22.17% 97.05% 12/31/95 56.81%
Period
7/28/88**
through
12/31/95 107.84% 104.65% 69.58% 47.33% 133.01%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International Emerging
Equity Value Growth
<S> <C> <C> <C> <C>
3 months 3 months
ended ended
12/31/95 2.82% 12/31/95 5.59% 3.47%
6 months 6 months
ended ended
12/31/95 8.80% 12/31/95 13.99% 17.91%
9 months 9 months
ended ended
12/31/95 10.35% 12/31/95 19.79% 31.15%
1 year 1 year
ended ended
12/31/95 13.98% 12/31/95 23.85% 39.21%
Period
3 years 12/27/93**
ended through
12/31/95 35.58% 12/31/95 27.44% 41.44%
Period
10/29/92**
through
12/31/95 35.99%
</TABLE>
* The respective investment manager elected to waive voluntarily the portion
of its annual compensation under its Investment Management Agreement with
each Series to limit operating expenses of the Series to .80%. In the
absence of such voluntary waiver, performance would have been affected
negatively.
** Date of initial public offering.
<PAGE>
Because every investor's goals and risk threshold are different, certain
advertising and other related literature may 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, information
may be provided discussing the respective investment manager's overriding
investment philosophy and how that philosophy affects the Series', and other
Delaware Group funds', investment disciplines employed in meeting their
objectives.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Prices of securities such as stocks and bonds tend to move up and down over
various market cycles and are generally intended for longer-term investing.
Money market funds, which typically maintain stable prices, are generally
intended for your short-term investment needs and can often be used as a basis
for building a long-term investment plan.
Though logic says to invest when prices are low, 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 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.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share 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 a Series.
<PAGE>
THE POWER OF COMPOUNDING
As part of your Variable Annuity contract, any earnings from your
investment selection are automatically reinvested to purchase additional shares
of a Series. This gives your investment yet another opportunity to grow. It's
called the Power of Compounding and the following charts illustrate just how
powerful that can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly for 10 years:
6% 8% 10% 12%
Rate of Rate of Rate of Rate of
Return Return Return Return
1 Year $10,617 $10,830 $11,047 $11,268
2 Years $11,272 $11,729 $12,204 $12,697
3 Years $11,967 $12,702 $13,482 $14,308
4 Years $12,705 $13,757 $14,894 $16,122
5 Years $13,488 $14,898 $16,453 $18,167
6 Years $14,320 $16,135 $18,176 $20,471
7 Years $15,203 $17,474 $20,079 $23,067
8 Years $16,141 $18,924 $22,182 $25,993
9 Years $17,137 $20,495 $24,504 $29,290
10 Years $18,194 $22,196 $27,070 $33,004
Results of various assumed fixed rates of return on a $10,000
investment compounded quarterly for 10 years:
6% 8% 10% 12%
Rate of Rate of Rate of Rate of
Return Return Return Return
1 Year $10,614 $10,824 $11,038 $11,255
2 Years $11,265 $11,717 $12,184 $12,668
3 Years $11,956 $12,682 $13,449 $14,258
4 Years $12,690 $13,728 $14,845 $16,047
5 Years $13,468 $14,859 $16,386 $18,061
6 Years $14,295 $16,084 $18,087 $20,328
7 Years $15,172 $17,410 $19,965 $22,879
8 Years $16,103 $18,845 $22,038 $25,751
9 Years $17,091 $20,399 $24,326 $28,983
10 Years $18,140 $22,080 $26,851 $32,620
These figures are calculated assuming a fixed constant investment return
and assume no fluctuation in the value of principal. These figures, which do not
reflect payment of applicable taxes, are not intended to be a projection of
investment results and do not reflect the actual performance results of any of
the Series.
<PAGE>
TRADING PRACTICES AND BROKERAGE
The Fund or, in the case of the International Equity and Global Bond
Series, Delaware International, selects banks, brokers or dealers to execute
transactions on behalf of the Series 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 price and execution. Best price and
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. The Fund pays
reasonably competitive brokerage commission rates based upon the professional
knowledge of its trading department or, in the case of the International Equity
and Global Bond Series, Delaware International, as to rates paid and charged for
similar transactions throughout the securities industry. In some instances, the
Fund pays a minimal share transaction cost when the transaction presents no
difficulty. Some trades are made on a net basis where the Fund either buys the
securities directly from the dealer or sells 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 in the equivalent of a
commission.
During the years ended December 31, 1993, 1994 and 1995, the aggregate
dollar amounts of brokerage commissions paid by the Equity/Income Series were
$133,337, $217,957 and $255,600, respectively, Multiple Strategy Series were
$75,275, $81,947 and $85,124, respectively, Growth Series were $30,521, $34,086
and $53,072, respectively, and International Equity Series were $29,430,
$167,836 and $86,131, respectively. During the years ended December 31, 1994 and
1995, the aggregate dollar amounts of brokerage commissions paid by the Value
Series were $3,179 and $25,600, respectively, and Emerging Growth Series were
$4,127 and $18,776, respectively.
The respective investment manager may allocate out of all commission
business generated by all of the funds and accounts under management by the
respective investment manager, 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 respective investment manager in connection with
its investment decision-making process 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 year ended December 31, 1995, portfolio transactions of the
Equity/Income, Multiple Strategy, Growth, International Equity, Value and
Emerging Growth Series in the amounts of $44,360,225, $13,929,576, $15,555,506,
$6,705,049, $2,666,533 and $3,257,292, respectively, resulting in brokerage
commissions of $63,705, $25,776, $38,849, $17,005, $8,490 and $12,260,
respectively, were directed to brokers for brokerage and research services
provided.
As provided in the Securities Exchange Act of 1934 and the Investment
Management 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
<PAGE>
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes 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 respective investment manager which constitute in some part brokerage and
research services used by the respective investment manager in connection with
its investment decision-making process and constitute in some part services used
by the respective investment manager in connection with administrative or other
functions not related to its investment decision-making process. In such cases,
the respective investment 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 respective investment 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 Fund and to other funds in the Delaware
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The respective investment 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 price and execution. Transactions involving commingled
orders are allocated in a manner deemed equitable to each account or fund. When
a combined order is executed in a series of transactions at different prices,
each account participating in the order may be allocated an average price
obtained from the executing broker. It is believed that the ability of the
accounts to participate in volume transactions will generally be beneficial to
the accounts and funds. Although it is recognized that, in some cases, the joint
execution of orders could adversely affect the price or volume of the security
that a particular account or fund may obtain, it is the opinion of the
respective investment manager and the Fund's Board of Directors that the
advantages of combined orders outweigh the possible disadvantages of separate
transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, the
Fund may place orders with broker/dealers which have agreed to defray certain
Series expenses such as custodian fees, and may, at the request of the
Distributor, give consideration to sales of the variable contracts as a factor
in the selection of brokers and dealers to execute Series portfolio
transactions.
Portfolio Turnover
The rate of portfolio turnover will not be a limiting factor when
portfolio changes are deemed appropriate for each Series. Given the respective
Series' investment objectives, the Fund anticipates that the annual rates of
portfolio turnover will not generally exceed 100% for the Equity/Income, High
Yield, Growth, International Equity and Global Bond Series, 200% for the Capital
Reserves and Multiple Strategy Series and may exceed 100% for the Value and
Emerging Growth Series. It is possible that in any particular year market
conditions or other factors might result in portfolio activity at a greater rate
than anticipated. The portfolio turnover rate of each Series 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 Series during the particular fiscal year, exclusive of
securities whose maturities at the time of acquisition are one year or less.
<PAGE>
The degree of portfolio activity may affect brokerage costs incurred by
each Series. A turnover rate of 100% would occur, for example, if all the
investments in a Series' portfolio at the beginning of the year were replaced by
the end of the year. In investing to achieve their respective objective, a
Series may hold securities for any period of time. Portfolio turnover will also
be increased if a Series writes a large number of call options which are
subsequently exercised. The turnover rate also may be affected by cash
requirements from redemptions and repurchases of Series' shares.
The portfolio turnover rates for each Series for the past two years were
as follows:
Year Ended Year Ended
Series December 31, 1994 December 31, 1995
Equity/
Income
Series 91% 85%
High
Yield
Series 47% 74%
Capital
Reserves
Series 219% 145%
Multiple
Strategy
Series 140% 106%
Growth
Series 43% 73%
International
Equity
Series 13% 19%
Value
Series 26% 71%
Emerging
Growth
Series 59% 76%
<PAGE>
OFFERING PRICE
The offering price of shares is the net asset value per share next to be
determined after an order is received. The purchase of shares becomes effective
at the close of business on the day on which the investment is received from the
life company and after any dividend is declared. Dividends, if any, begin to
accrue on the next business day. There is no sales charge.
The purchase will be effected at the net asset value next computed after
the receipt of Federal Funds provided they are received by the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when such exchange is open. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year except for New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. When the New York Stock Exchange is closed, the Fund
will generally be closed, pricing calculations will not be made and purchase and
redemption orders will not be processed. In the event of changes in Securities
and Exchange Commission requirements or the Fund's change in time of closing,
the Fund reserves the right to price at a different time, to price more often
than once daily or to make the offering price effective at a different time.
An example showing how to calculate the net asset value per share is
included in the Series' financial statements which are incorporated by reference
into this Part B.
The net asset value per share is computed by adding the value of all
securities and other assets in a Series' portfolio, deducting any liabilities of
that Series and dividing by the number of that Series' shares outstanding.
Expenses and fees are accrued daily. The Prospectus describes how securities are
valued.
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 Series of securities owned by it is not reasonably
practical, or it is not reasonably practical for a Series fairly to value its
assets, or in the event that the Securities and Exchange Commission has provided
for such suspension for the protection of shareholders, the Fund may postpone
payment or suspend the right of redemption or repurchase. In such case, the
shareholder may withdraw a 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.
Money Market Series
The Board of Directors has adopted certain procedures to monitor and
stabilize the price per share of the Money Market Series. Calculations are made
each day to compare part of the Series' value with the market value of
instruments of similar character. At regular intervals all issues in the
portfolio are valued at market value. Securities maturing in more than 60 days
are valued more frequently by obtaining market quotations from market makers.
The portfolio will also be valued by market makers at such other times as is
felt appropriate. In the event that a deviation of more than 1/2 of 1% exists
between the Series' $10 per share offering and redemption prices and the net
asset value calculated by reference to market quotations, or if there is any
other deviation which the Board of Directors believes would result in a material
dilution to shareholders or purchasers, the Board of Directors will promptly
consider what action, if any, should be initiated, such as changing the price to
more or less than $10 per share.
<PAGE>
DIVIDENDS AND REALIZED SECURITIES
PROFITS DISTRIBUTIONS
Dividends for the High Yield, Capital Reserves and Global Bond Series are
declared daily and paid monthly on the first business day after the end of the
month.
For the Equity/Income, Multiple Strategy and the International Equity
Series, the Fund will make payments from the Series' net investment income
quarterly.
The Growth and Value Series will make payments from its net income and
net realized securities profits, if any, once a year.
For the Emerging Growth Series, the Fund will make payments from the
Series' net investment income and net realized securities profits, if any, twice
a year.
Short-term capital gains distributions, if any, may be paid with the
daily dividend; otherwise, any distributions from net realized securities
profits normally will be distributed following the close of the fiscal year.
All dividends and distributions are automatically reinvested.
Money Market Series
The Fund declares a dividend of this Series' net investment income on a
daily basis, to shareholders of record at the time of the previous calculation
of the Series' net asset value, each day that the Fund is open for business.
Payment of dividends will be made monthly on the first business day after the
end of the month. The amount of net investment income will be determined at the
time the offering price and net asset value are determined (see Offering Price),
and shall include investment income accrued, less the estimated expenses of the
Series incurred since the last determination of net asset value. Gross
investment income consists principally of interest accrued and, where
applicable, net pro-rata amortization of premiums and discounts since the last
determination. The dividend declared at the time the offering price and net
asset value are determined, as noted above, will be deducted immediately before
the net asset value calculation is made. See Offering Price. Net investment
income earned on days when the Fund is not open will be declared as a dividend
on the next business day. An investor begins earning dividends when payments for
shares purchased are converted into Federal Funds and are available for
investment.
To the extent necessary to maintain a $10 per share net asset value, the
Board of Directors will consider temporarily reducing or suspending payment of
daily dividends, or making a distribution of realized securities profits or
other distributions at the time the net asset value per share has changed.
<PAGE>
TAXES
Each Series has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As such, the Fund will not be subject to federal income tax to
the extent its earnings are distributed.
Each Series of the Fund is treated as a single tax entity, and any
capital gains and losses for each Series are calculated separately. It is each
Series' policy to pay out substantially all net investment income and net
realized gains to relieve the Fund of federal income tax liability on that
portion of its income paid to shareholders under the Internal Revenue Code.
Each Series has no fixed policy with regard to distributions of realized
securities profits when such realized securities profits may be offset by
capital losses carried forward. Presently, however, each Series intends to
offset realized securities profits to the extent of the capital losses carried
forward.
<PAGE>
INVESTMENT MANAGEMENT
AGREEMENTS
Delaware Management Company, Inc. ("Delaware Management"), located at One
Commerce Square, 2005 Market Street, Philadelphia, PA 19103, furnishes
investment management services to the Equity/Income, High Yield, Capital
Reserves, Money Market, Growth, Multiple Strategy, Value and Emerging Growth
Series. Delaware International Advisers Ltd. ("Delaware International"), located
at Veritas House, 125 Finsbury Pavement, London, England EC2A 1NQ, furnishes
investment management services to the International Equity and Global Bond
Series. Such services are provided subject to the supervision and direction of
the Fund's Board of Directors. Delaware International is affiliated with
Delaware Management.
Delaware Management and its predecessors have been managing the funds in
the Delaware Group since 1938. The aggregate assets of these funds on December
31, 1995 were approximately $10,522,726,000. Investment advisory services are
also provided to institutional accounts with assets on December 31, 1995 of
approximately $17,606,321,000.
The Investment Management Agreements for each Series, except the Global
Bond Series, are dated April 3, 1995 and were approved by shareholders on March
29, 1995 and will remain in effect for an initial period of two years. The
Investment Management Agreement for the Global Bond Series is dated May 1, 1996
and was approved by the initial shareholder on May 1, 1996 and will remain in
effect for an initial period of two years. The Agreements may be renewed only if
such renewal and continuance are specifically approved at least annually by the
Board of Directors 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 directors of the Fund 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. The Agreements are terminable
without penalty on 60 days' notice by the directors of the Fund or by the
respective investment manager. The Agreements will terminate automatically in
the event of their assignments.
The annual compensation paid by the Money Market Series for investment
management services is equal to 5/10 of 1% of its average daily net assets, by
the Growth, International Equity, Value, Emerging Growth and Global Bond Series
is equal to 3/4 of 1% of its average daily net assets and, by each other Series
is equal to 6/10 of 1% of average daily net assets, less, with the exception of
the Value, Emerging Growth and Global Bond Series, each Series' proportionate
share of all directors' fees paid to the unaffiliated directors of the Fund.
On December 31, 1995, the total net assets of the Fund were $445,206,109,
broken down as follows:
Equity/Income Series $109,003,456
High Yield Series $56,604,954
Capital Reserves Series $27,934,739
Money Market Series $16,338,182
Growth Series $58,122,589
Multiple Strategy Series $63,215,176
International Equity Series $81,548,039
Value Series $11,929,310
Emerging Growth Series $20,509,664
The Global Bond Series did not publicly offer its shares prior to May 1,
1996.
The respective investment manager makes all investment decisions for the
Series to which it provides investment management services. In addition,
Delaware Management pays the salaries of all directors, officers and employees
who are affiliated with both it and the Fund.
For the year ended December 31, 1993, the investment management fee
incurred by the Equity/Income Series amounted to $302,835 of which $298,117 was
paid after consideration of the waiver described below. For the years ended
December 31, 1994 and 1995, investment management fees paid by the Equity/Income
Series amounted to $422,361 and $528,481, respectively. For the year ended
December 31, 1993, such fee incurred by the Multiple Strategy Series amounted to
$156,031 of which $127,098 was paid after consideration of the waiver described
<PAGE>
below. For the years ended December 31, 1994 and 1995, investment management
fees paid by the Multiple Strategy Series amounted to $262,703 and $329,278,
respectively. For the years ended December 31, 1993, 1994 and 1995, investment
management fees incurred by the Growth Series amounted to $173,640, $274,800 and
$357,930, respectively, of which $125,578, $244,127 and $336,345, respectively,
were paid after considering the waiver described below. For the year ended
December 31, 1993, the investment management fee incurred by the High Yield
Series amounted to $123,285 of which $113,956 was paid after consideration of
the waiver. For the years ended December 31, 1994 and 1995, investment
management fees paid by the High Yield Series amounted to $241,993 and $311,242,
respectively. For the year ended December 31, 1993, the investment management
fee incurred by the Money Market Series amounted to $43,278 of which $36,993 was
paid after consideration of the waiver. For the years ended December 31, 1994
and 1995, investment management fees paid by the Money Market Series amounted to
$81,666 and $93,257, respectively. For the year ended December 31, 1993, the
investment management fee incurred by the Capital Reserves Series amounted to
$99,054 of which $89,445 was paid after consideration of the waiver. For the
years ended December 31, 1994 and 1995, investment management fees paid by the
Capital Reserves Series amounted to $150,708 and $157,204, respectively. For the
year ended December 31, 1993, the investment management fee incurred by the
International Equity Series amounted to $32,209 and no amount was paid by the
Series due to the waiver described below. For the years ended December 31, 1994
and 1995, investment management fees incurred by the International Equity Series
amounted to $294,997 and $525,376, respectively, and $209,618 and $457,751,
respectively, were paid due to the waiver of fees described below. For the years
ended December 31, 1994 and 1995, investment management fees incurred by the
Value Series amounted to $25,775 and $65,528, respectively, and $4,738 and
$51,016, respectively, were paid due to the waiver of fees described below. For
the years ended December 31, 1994 and 1995, investment management fees incurred
by the Emerging Growth Series amounted to $25,229 and $92,985, respectively, and
$2,545 and $72,359, respectively, were paid due to the waiver of fees described
below.
Except for those expenses borne by the respective investment manager
under the Investment Management Agreements and the Distributor under the
Distribution Agreements, each Series is responsible for all of its own expenses.
Among others, these include the Series' proportionate share of rent and certain
other administrative expenses; the investment management fees; transfer and
dividend disbursing agent fees and costs; custodian expenses; federal securities
registration fees; proxy costs; and the costs of preparing prospectuses and
reports sent to shareholders. for the year ended December 31, 1995, the ratios
of expenses to average daily net assets for the Series were as follows:
Equity/Income Series 0.69%
High Yield Series 0.69%
Capital Reserves Series 0.71%
Money Market Series 0.62%
Growth Series 0.80%
Multiple Strategy Series 0.69%
International Equity Series 0.80%
Value Series 0.80%
Emerging Growth Series 0.80%
The expense ratio of the Growth, International Equity, Value and Emerging
Growth Series reflect the waiver of fees described below.
In connection with the High Yield, Capital Reserves and Money Market
Series, Delaware Management elected voluntarily to waive its fee and reimburse
these Series for the first six months following their public offering to the
extent that any such Series' annual operating expenses, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceed .80% of
average daily net assets. This waiver has been extended through June 30, 1996.
In connection with the Equity/Income, Multiple Strategy and Growth Series,
<PAGE>
Delaware Management elected voluntarily to waive its fee and reimburse those
Series to the extent that any such Series' annual operating expenses, exclusive
of taxes, interest, brokerage commissions and extraordinary expenses, exceed
.80% of average daily net assets for the period from July 1, 1992 through June
30, 1993. This waiver has been extended through June 30, 1996. Similarly,
Delaware International has voluntarily elected to waive its fee and reimburse
the International Equity and Global Bond Series to the extent the Series' annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses exceed .80% for the period from the commencement of the
Series' operations through June 30, 1993 with respect to the International
Equity Series and through June 30, 1996 with respect to the Global Bond Series.
This waiver has been extended through June 30, 1996 with respect to the
International Equity Series. In connection with the Value and Emerging Growth
Series, Delaware Management has elected voluntarily to waive its fee and
reimburse these Series for the period from the commencement of the Series'
operations through June 30, 1994 to the extent that any such Series' annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed .80% of average daily net assets. This waiver has
been extended through June 30, 1996.
Distribution and Service
Delaware Distributors, L.P. (which formerly conducted business as Delaware
Distributors, Inc.), located at 1818 Market Street, Philadelphia, PA 19103, is
the national distributor of each Series under Distribution Agreements dated
April 3, 1995 for each Series except the Global Bond Series, whose Distribution
Agreement is dated May 1, 1996. It is an affiliate of Delaware Management and
Delaware International and bears all of the costs of promotion and distribution.
Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the
national distributor of the Series' shares. On that date Delaware Distributors,
L.P., a newly formed limited partnership, succeeded to the business of DDI. All
officers and employees of DDI became officers and employees of Delaware
Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
Delaware Service Company, Inc., another affiliate of Delaware Management
and Delaware International, is the Fund's shareholder servicing, dividend
disbursing and transfer agent for the Equity/Income, High Yield, Capital
Reserves, Multiple Strategy, Growth, International Equity, Value, Emerging
Growth and Global Bond Series pursuant to the Amended and Restated Shareholders
Services Agreement dated May 1, 1996 and for the Money Market Series pursuant to
the Shareholders Services Agreement dated June 29, 1988. Delaware Service
Company, Inc. is also an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc.
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of
its Board of Directors.
Certain officers and directors of the Fund hold identical positions in
each of the other funds in the Delaware Group.
DMH Corp., Delaware Management Company, Inc., 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 Investment Counselors, Inc. and
Delaware Investment & Retirement 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. In connection with the
merger, new Investment Management Agreements between the Fund on behalf of all
of the Series, except Global Bond Series, and, as relevant, Delaware Management
and Delaware International, were executed following shareholder approval. DMH,
Delaware Management and Delaware International are now 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.
Directors and principal officers of the Fund are noted below along with
their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and director is One Commerce
Square, Philadelphia, PA 19103.
*Wayne A. Stork (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee of
the Fund, 15 other funds in the Delaware Group (which excludes
Delaware Pooled Trust, Inc.), Delaware Management Holdings, Inc.,
DMH Corp., Delaware International Holdings Ltd. and Founders
Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware Investment
Counselors, Inc. and Delaware Investment & Retirement Services, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware International
Advisers Ltd.
Director of Delaware Distributors, Inc. and Delaware Service Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
- ----------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
<PAGE>
Winthrop S. Jessup (50)
Executive Vice President of the Fund and 15 other funds in the Delaware
Group (which excludes Delaware Pooled Trust, Inc.) and Delaware
Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and Founders
Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
Richard G. Unruh, Jr. (56)
Executive Vice President of the Fund and each of the other 16 funds in the
Delaware Group.
Executive Vice President and Director of Delaware Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (68)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
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.
Anthony D. Knerr (57)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he
was also a lecturer in English at the University. In addition,
Mr. Knerr was Chairman of The Publishing Group, Inc., New York, from
1988 to 1990. Mr. Knerr founded The Publishing Group, Inc. in 1988.
Ann R. Leven (55)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
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.
<PAGE>
W. Thacher Longstreth (75)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Charles E. Peck (70)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
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.
David K. Downes (56)
Senior Vice President/Chief Administrative Officer/Chief Financial Officer
of the Fund, each of the other 16 funds in the Delaware Group and
Delaware Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment & Retirement
Services, Inc.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director of
DMH Corp.
Senior Vice President/Chief Administrative Officer and Director of
Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware
Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial Officer
and Director of Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International Holdings
Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Investment Counselors, Inc.
Senior Vice President/Chief Financial Officer and Director of Founders
Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer of
Equitable Capital Management Corporation, New York, from December
1985 through August 1992, Executive Vice President from December
1985 through March 1992, and Vice Chairman from March 1992 through
August 1992.
<PAGE>
George M. Chamberlain, Jr. (49)
Senior Vice President and Secretary of the Fund, each of the other 16
funds in the Delaware Group, Delaware Management Holdings, Inc.,
Delaware Distributors, L.P. and Delaware Investment Counselors, Inc.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Investment & Retirement Services,
Inc. and Founders Holdings, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
Paul E. Suckow (48)
Executive Vice President/Chief Investment Officer, Fixed Income of the
Fund, each of the other 16 the Delaware Group and Delaware
Management Company, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Holdings, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Founders CBO Corporation.
Before returning to the Delaware Group in 1993, Mr. Suckow was Executive
Vice President and Director of Fixed Income for Oppenheimer
Management Corporation, New York, NY from 1985 to 1992. Prior to
that, Mr. Suckow was a fixed income portfolio manager for the
Delaware Group.
Edward N. Antoian (40)
Vice President/Senior Portfolio Manager of the Fund, of seven other
equity funds in the Delaware Group and of Delaware Management
Company, Inc.
During the past five years, Mr. Antoian has served in such capacities
within the Delaware organization.
David C. Dalrymple (38)
Vice President/Senior Portfolio Manager of the Fund and seven other
equity funds in the Delaware Group.
Before joining the Delaware Group in 1991, Mr. Dalrymple was an Assistant
Portfolio Manager for Lord Abbett and Company, New York, N.Y. from
1986 to 1991.
John B. Fields (50)
Vice President/Senior Portfolio Manager of the Fund, of seven other
equity funds in the Delaware Group and of Delaware Management
Company, Inc.
Before joining the Delaware Group in 1992, Mr. Fields served as a director
of domestic equity risk management for DuPont, Wilmington, DE.
George H. Burwell (34)
Vice President/Senior Portfolio Manager of the Fund, of seven other
equity funds in the Delaware Group and of Delaware Management
Company, Inc.
Before joining the Delaware Group in 1992, Mr. Burwell was a portfolio
manager for Midlantic Bank, New Jersey. In addition, he was a
security analyst for Balis & Zorn, New York and for First Fidelity
Bank, New Jersey.
<PAGE>
Gary A. Reed (41)
Vice President/Senior Portfolio Manager of the Fund, of the tax-exempt and
other income funds in the Delaware Group, Delaware Management
Company, Inc. and Delaware Investment Counselors, Inc.
During the past five years, Mr. Reed has served in such capacities within
the Delaware organization.
Gerald T. Nichols (38)
Vice President/Senior Portfolio Manager of the Fund, of nine other income
funds in the Delaware Group, the closed-end funds in the Delaware
Group and Delaware Management Company, Inc.
Vice President of Founders Holdings, Inc.
Treasurer and Director of Founders CBO Corporation.
During the past five years, Mr. Nichols has served in various capacities
at different times within the Delaware organization.
Paul A. Matlack (36)
Vice President/Senior Portfolio Manager of the Fund, of nine other income
funds in the Delaware Group, the closed-end funds in the Delaware
Group and Delaware Management Company, Inc.
Vice President of Founders Holdings, Inc.
Secretary and Director of Founders CBO Corporation.
During the past five years, Mr. Matlack has served in various capacities
at different times within the Delaware organization.
Joseph H. Hastings (46)
Vice President/Corporate Controller of the Fund, each of the other 16
funds in the Delaware Group, Delaware Management Holdings, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Investment Counselors, Inc., Founders Holdings, Inc. and
Delaware International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P., New
York, NY from 1989 to 1992. Prior to that, Mr. Hastings served as
Controller and Treasurer for Fine Homes International, L.P.,
Stamford, CT from 1987 to 1989.
Michael P. Bishof (33)
Vice President/Treasurer of the Fund, each of the other 16 funds in the
Delaware Group, Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware Service
Company, Inc. and Founders Holdings, Inc.
Assistant Treasurer of Founders CBO Corporation.
Vice President/Manager of Investment Accounting of Delaware International
Holdings Ltd.
Before joining the Delaware Group 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.
<PAGE>
The following is a compensation table listing for each director entitled
to receive compensation, the aggregate compensation received from the Fund and
the total compensation received from all Delaware Group funds for the year ended
December 31, 1995 and an estimate of annual benefits to be received upon
retirement under the Delaware Group Retirement Plan for Directors/Trustees as of
December 31, 1995.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 17
Compensation as Part of Upon Delaware
Name from Fund Fund Expenses Retirement* Group Funds
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,336 None $18,100 $61,324
Ann R. Leven $2,475 None $18,100 $66,324
Walter P. Babich $2,345 None $18,100 $64,188
Anthony D. Knerr $2,447 None $18,100 $65,324
Charles E. Peck $2,178 None $18,100 $58,188
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for Directors/Trustees,
each disinterested director who, at the time of his or her retirement from
the Board, has attained the age of 70 years and served on the Board for at
least five continuous years, is entitled to receive payments from each fund
in the Delaware Group for a period equal to the lesser of the number of years
that such person served as a 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 directors of each fund at the time of
such person's retirement. If an eligible director retired as of December 31,
1995, he or she would be entitled to annual payments totaling $18,100, in the
aggregate, from all of the funds in the Delaware Group, based on the number
of funds in the Delaware Group as of that date.
<PAGE>
GENERAL INFORMATION
Delaware Management is the investment manager of each Series of the
Fund other than the International Equity and Global Bond Series. Delaware
International is the investment manager of the International Equity and Global
Bond Series. Delaware Management or its affiliate, Delaware International,
manages the other funds in the Delaware Group. Delaware Management, through a
separate division, also manages private investment accounts. While investment
decisions for each Series 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 Series.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to Delaware Management, Delaware International or their affiliates, are
permitted to engage in personal securities transactions subject to the
exceptions set forth in Rule 17j-1 and the following general restrictions and
procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
Delaware Distributors, L.P. acts as national distributor for the Fund
and for the other mutual funds in the Delaware Group.
In addition, Delaware Service Company, Inc., an affiliate of Delaware
Management, acts as shareholder servicing, dividend disbursing and transfer
agent for the Fund and for the other mutual funds in the Delaware Group.
Compensation is fixed each year and approved by the Board of Directors,
including a majority of the disinterested directors.
Delaware Management and its affiliates own the name "Delaware Group."
Under certain circumstances, including the termination of the Fund's advisory
relationship with Delaware Management or its distribution relationship with
Delaware Distributors, L.P., Delaware Management and its affiliates could cause
the Fund to delete the words "Delaware Group" from the Fund's name.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for the Fund by
Messrs. Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania.
The initial public offering date for the Equity/Income, High Yield,
Capital Reserves, Money Market and Multiple Strategy Series was July 28, 1988.
The initial public offering date for the Growth Series was July 2, 1991. The
International Equity Series commenced operations on October 29, 1992. The Value
and Emerging Growth Series commenced operations on December 27, 1993. The
initial public offering date for the Global Bond Series was May 1, 1996.
Capitalization
The Fund has a present authorized capitalization of five hundred
million shares of capital stock with a $.01 par value per share. The Board of
Directors has allocated fifty million shares to each Series. While all shares
have equal voting rights on matters affecting the entire Fund, each Series would
vote separately on any matter which affects only that Series, such as investment
objective and policy or action to dissolve the Series, and as otherwise
prescribed by the 1940 Act. Shares of each Series have a priority in that
<PAGE>
Series' assets, and in gains on and income from the portfolio of that Series.
Shares have no preemptive rights, are fully transferable and, when issued, are
fully paid and nonassessable. All shares participate equally in dividends, and
upon liquidation would share equally.
Noncumulative Voting
Series shares have noncumulative voting rights which means that the
holders of more than 50% of the shares of the Fund voting for the election of
directors can elect all the directors if they choose to do so, and, in such
event, the holders of the remaining shares will not be able to elect any
directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission ("SEC"). Shareholders may obtain a copy of the Registration Statement
by contacting the SEC in Washington, DC.
<PAGE>
APPENDIX A--DESCRIPTION OF RATINGS
Commercial Paper
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from Duff and Phelps, Inc.'s description of its two highest
ratings: Category 1--Top Grade: Duff 1-Plus--Highest certainty of timely
payment. Short-term liquidity, including internal operating factors and/or ready
access to alternative sources of funds, is clearly outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations. Duff 1--Very high
certainty of timely payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are minor. Duff 1-Minus--High
certainty of timely payment. Liquidity factors are strong and supported by good
fundamental protection factors. Risk factors are very small. Category 2--Good
Grade: Duff 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds' needs may enlarge total
financing requirements, access to capital markets is good.
Risk factors are small.
Excerpts from Fitch Investors Service, Inc.'s description of its two
highest ratings: F-1--Highest grade commercial paper assigned this rating is
regarded as having the strongest degree of assurance for timely payment.
F-2--Very good grade issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than the strongest issues.
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings; C--the
lowest rated class of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
<PAGE>
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
<PAGE>
APPENDIX B
The Company Life Cycle
Traditional business theory contends that a typical company progresses
through basically four stages of development, keyed closely to a firm's sales.
1. Emerging Growth--a period of experimentation in which the company
builds awareness of a new product or firm.
2. Accelerated Development--a period of rapid growth with potentially
high profitability and acceptance of the product.
3. Maturing Phase--a period of diminished real growth due to dependence
on replacement or sustained product demand.
4. Cyclical Stage--a period in which a company faces a potential
saturation of demand for its product. At this point, a firm either diversifies
or becomes obsolete.
The Growth Series concentrates on seeking and actively managing the
potentials held by firms entering phase 2 of this development cycle. The
following illustration of a firm's hypothetical development is intended to
graphically depict the full development cycle.
Hypothetical Corporate Life Cycle
Hypothetical Corporate Life Cycle Chart shows in a line illustration,
the stages that a typical company would go through, beginning with the emerging
state where sales growth continues at a steep pace to the mature phase where
growth levels off to the cyclical stage where sales show more definitive highs
and lows.
The above chart illustrates the path traditionally followed by
companies that successfully survive the growth sequence.
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditor for each Series of
the Fund and, in its capacity as such, audits the financial statements of each
Series contained in the Fund's Annual Report. The Series' Statements of Net
Assets, Statements of Operations, Statements of Changes in Net Assets and Notes
to Financial Statements, as well as the report of Ernst & Young LLP, independent
auditor, for the year ended December 31, 1995 are included in the Fund's Annual
Report to shareholders. The financial statements and the report of Ernst & Young
LLP listed above are incorporated by reference from the Annual Report into this
Part B.
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
PART C
------
Other Information
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Accountant's Report
*The financial statements and Accountant's Report listed
above are incorporated by reference into Part B from the
Registrant's Annual Report for the fiscal year ended
December 31, 1995.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended and supplemented
through January 22, 1996, incorporated into this filing by
reference to Post-Effective Amendment No. 16 filed January
22, 1996.
(b) Articles Supplementary to Articles of Incorporation
(April 1996) attached as Exhibit.
(2) By-Laws. By-Laws, as amended through April 27, 1995,
incorporated into this filing by reference to Post-Effective
Amendment No. 15 filed April 27, 1995.
(3) Voting Trust Agreement. Inapplicable.
i
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
(4) Copies of All Instruments Defining the Rights of Holders.
(a) Articles of Incorporation, Articles of Amendment and
Articles Supplementary.
(i) Article Fifth, Article Seventh, Article Eighth and
Article Tenth of Articles of Incorporation (February
17, 1987), Article Second of Articles Supplementary
(January 29, 1988), Article One of Articles of
Amendment (July 27, 1989), Article Second of Articles
Supplementary (April 25, 1991), Article Second of
Articles Supplementary (July 28, 1992) and Article
Second of Articles Supplementary (October 11, 1993)
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed January 22,
1996.
(ii) Articles of Amendment (1996) attached as Exhibit
24(b)(1)(b).
(b) By-Laws. Article II, Article III, as amended, and Article
XIII, which was subsequently designated as Article XIV,
incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed April 27, 1995.
(5) Investment Management Agreements.
(a) Investment Management Agreement between Delaware Management
Company, Inc. and the Registrant on behalf of the Emerging
Growth Series (April 3, 1995) incorporated into this filing
by reference to Post-Effective Amendment No. 15 filed April
27, 1995.
(b) Investment Management Agreement between Delaware Management
Company, Inc. and the Registrant on behalf of the Growth
Series (April 3, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 15 filed April
27, 1995.
(c) Investment Management Agreement between Delaware
International Advisers, Ltd. and the Registrant on behalf
of the International Equity Series (April 3, 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed April 27, 1995.
(d) Investment Management Agreement between Delaware Management
Company, Inc. and the Registrant on behalf of the Money
Market Series (April 3, 1995) incorporated into this filing
by reference to Post-Effective Amendment No. 15 filed April
27, 1995.
ii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
(e) Investment Management Agreement between Delaware Management
Company, Inc. and the Registrant on behalf of the
Equity/Income, High Yield, Capital Reserves and Multiple
Strategy Series (April 3, 1995) incorporated into this
filing by reference to Post-Effective Amendment No. 15
filed April 27, 1995.
(f) Investment Management Agreement between Delaware Management
Company, Inc. and the Registrant on behalf of the Value
Series (April 3, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 15 filed April
27, 1995.
(g) Investment Management Agreement between Delaware
International Advisers Ltd. and the Registrant on behalf of
the Global Bond Series (May 1, 1996) attached as Exhibit.
(6) Distribution Agreements.
(a) Executed Distribution Agreement between Delaware
Distributors, L.P. and the Registrant on behalf of the
Equity/Income, High Yield, Capital Reserves and Multiple
Strategy Series (April 3, 1995) incorporated into this
filing by reference to Post-Effective Amendment No. 16
filed January 22, 1996.
(b) Executed Distribution Agreement between Delaware
Distributors, L.P. and the Registrant on behalf of the
Money Market Series (April 3, 1995) incorporated into this
filing by reference to Post-Effective Amendment No. 16
filed January 22, 1996.
(c) Executed Distribution Agreement between Delaware
Distributors, L.P. and the Registrant on behalf of the
Growth Series (April 3, 1995) incorporated into this filing
by reference to Post-Effective Amendment No. 16 filed
January 22, 1996.
(d) Executed Distribution Agreement between Delaware
Distributors, L.P. and the Registrant on behalf of the
International Equity Series (April 3, 1995) incorporated
into this filing by reference to Post-Effective Amendment
No. 16 filed January 22, 1996.
(e) Executed Distribution Agreement between Delaware
Distributors, L.P. and the Registrant on behalf of the
Value Series (April 3, 1995) incorporated into this filing
by reference to Post-Effective Amendment No. 16 filed
January 22, 1996.
iii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
(f) Executed Distribution Agreement between Delaware
Distributors, L.P. and the Registrant on behalf of the
Emerging Growth Series (April 3, 1995) incorporated into
this filing by reference to Post-Effective Amendment No. 16
filed January 22, 1996.
(g) Distribution Agreement between Delaware Distributors, L.P.
and the Registrant on behalf of the Global Bond Series (May
1, 1996) attached as Exhibit.
(7) Bonus, Profit Sharing, Pension Contracts. Amended and Restated
Profit Sharing Plan (November 17, 1994) and Amendment to Profit
Sharing Plan (December 21, 1995) incorporated into this filing
by reference to Post-Effective Amendment No. 15 filed April 27,
1995 and Post-Effective Amendment No. 16 filed January 22,
1996.
(8) Custodian Agreements.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 3 filed April 26, 1989,
Post-Effective Amendment No. 8 filed December 30, 1991,
Post-Effective Amendment No. 11 filed April 28, 1993 and
Post-Effective Amendment No. 14 filed July 29, 1994.
(b) Custodian Agreement between The Chase Manhattan Bank, N.A.
and the Registrant on behalf of the Global Bond Series (May
1, 1996) attached as Exhibit.
(9) Other Material Contracts.
(a) Shareholders Services Agreement between Delaware Service
Company, Inc. and the Registrant on behalf of the Money
Market Series incorporated into this filing by reference to
Post-Effective Amendment No. 2 filed July 13, 1988.
(b) Amended and Restated Shareholders Services Agreement
between Delaware Service Company, Inc. and the Registrant
on behalf of the High Yield Series, Capital Reserves
Series, Equity/Income Series, Multiple Strategy Series,
Growth Series, International Equity Series, Value Series,
Emerging Growth Series and Global Bond Series (May 1, 1996)
attached as Exhibit.
iv
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
(10) Opinion of Counsel. Filed with letter relating to Rule 24f-2 on
February 27, 1996.
(11) Consent of Auditors. Attached as Exhibit.
(12) Inapplicable.
(13) Subscription Agreement. Incorporated into this filing by
reference to Pre-Effective Amendment No. 1 filed October 13,
1987.
(14-15) Inapplicable.
(16) Schedules of Computation for each Performance Quotation.
Incorporated into this filing by reference to Post-Effective
Amendment No. 15 filed April 27, 1995.
Schedules of Computation for each
Performance Quotation for periods not
previously electronically filed attached as
Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
(18) Inapplicable.
(19) Other: Directors' Power of Attorney. Incorporated into this
filing by reference to Post-Effective Amendment No. 15 filed
April 27, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- ---------------
Delaware Group Premium Fund, Inc.'s
High Yield Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 29, 1996
v
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
Number of
Title of Class Record Holders
-------------- ---------------
Delaware Group Premium Fund, Inc.'s
Capital Reserves Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 29, 1996
Delaware Group Premium Fund, Inc.'s
Equity/Income Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 29, 1996
Delaware Group Premium Fund, Inc.'s
Multiple Strategy Series
Common Stock Par Value 8 Accounts as of
$.01 Per Share February 29, 1996
Delaware Group Premium Fund, Inc.'s
Money Market Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 29, 1996
Delaware Group Premium Fund, Inc.'s
Growth Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 29, 1996
Delaware Group Premium Fund, Inc.'s
International Equity Series
Common Stock Par Value 10 Accounts as of
$.01 Per Share February 29, 1996
Delaware Group Premium Fund, Inc.'s
Value Series
Common Stock Par Value 3 Accounts as of
$.01 Per Share February 29, 1996
Delaware Group Premium Fund, Inc.'s
Emerging Growth Series
Common Stock Par Value 3 Accounts as of
$.01 Per Share February 29, 1996
vi
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
Number of
Title of Class Record Holders*
-------------- ---------------
Delaware Group Premium Fund, Inc.'s
Global Bond Series
Common Stock Par Value 0 Accounts as of
$.01 Per Share February 29, 1996
* Shares of the Global Bond Series were not offered prior to the effective date
of this Registration Statement.
Item 27. Indemnification. Incorporated into this filing by reference to
initial Registration Statement filed May 14, 1987 and Article VII of
the Amendment to By-Laws (February 16, 1989) incorporated into this
filing by reference to Post-Effective Amendment No. 15 filed April 27,
1995.
Item 28. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company, Inc. ("DMC") serves as investment
manager to the Equity/Income, High Yield, Capital Reserves, Money Market,
Growth, Multiple Strategy, Emerging Growth and Value Series. In addition, DMC
also serves as investment manager or sub-adviser to certain other funds in the
Delaware Group (Delaware Group Delaware Fund, Inc., Delaware Group Trend Fund,
Inc., Delaware Group Value Fund, Inc., Delaware Group DelCap Fund, Inc.,
Delaware Group Decatur Fund, Inc., Delaware Group Delchester High-Yield Bond
Fund, Inc., Delaware Group Government Fund, Inc., Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware Group
Tax-Free Fund, Inc., DMC Tax-Free Income Trust- Pennsylvania, Delaware Group
Tax-Free Money Fund, Inc., Delaware Group Global & International Funds, Inc.,
Delaware Pooled Trust, Inc., Delaware Group Dividend and Income Fund, Inc., and
Delaware Group Global Dividend and Income Fund, Inc.) and provides investment
advisory services to institutional accounts, primarily retirement plans and
endowment funds. In addition, certain directors of DMC also serve as
directors/trustees of the other Delaware Group funds, and certain officers are
also officers of these other funds. A company indirectly owned by DMC's parent
company acts as principal underwriter to the mutual funds in the Delaware Group
(see Item 29 below) and another such company acts as the shareholder servicing,
dividend disbursing and transfer agent for all of the mutual funds in the
Delaware Group.
The following persons serving as directors or officers of DMC have
held the following positions with the Registrant during the past two years:
vii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with DMC and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
<S> <C>
Wayne A. Stork Chairman of the Board, President, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.; President, Chief
Executive Officer, Chairman of the Board and Director of the Registrant and,
with the exception of Delaware Pooled Trust, Inc., each of the other funds in
the Delaware Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware International Holdings Ltd. and Founders Holdings, Inc.; Chairman of
the Board and Director of Delaware Pooled Trust, Inc., Delaware Investment
Counselors, Inc. and Delaware Investment & Retirement Services, Inc.;
Chairman, Chief Executive Officer and Director of Delaware International
Advisers Ltd.; and Director of Delaware Distributors, Inc. and Delaware Service
Company, Inc.
Winthrop S. Jessup Executive Vice President and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware International Holdings Ltd. and Founders Holdings, Inc.;
Executive Vice President of the Registrant and, with the exception of Delaware
Pooled Trust, Inc., each of the other funds in the Delaware Group and Delaware
Management Holdings, Inc.; President and Chief Executive Officer of Delaware
Pooled Trust, Inc.; Vice Chairman of Delaware Distributors, L.P.; Vice
Chairman and Director of Delaware Distributors, Inc.; Director of Delaware
Service Company, Inc., Delaware Management Trust Company, Delaware
International Advisers Ltd. and Delaware Investment & Retirement Services,
Inc.; and President and Director of Delaware Investment Counselors, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company, Inc.;
Executive Vice President of the Registrant and each of the other funds in the
Delaware Group; Senior Vice President of Delaware Management Holdings, Inc.; and
Director of Delaware International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of Finance
Committee, Mid Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
viii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with DMC and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
<S> <C>
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant and each of the other funds in the
Delaware Group; Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.; Senior Vice President and Director of Founders
Holdings, Inc.; and Director of Founders CBO Corporation
David K. Downes Senior Vice President, Chief Administrative Officer and Chief Financial Officer of
Delaware Management Company, Inc., the Registrant and each of the other funds in
the Delaware Group; Chairman and Director of Delaware Management Trust Company;
Senior Vice President, Chief Administrative Officer, Chief Financial Officer and
Treasurer of Delaware Management Holdings, Inc.; Senior Vice President, Chief
Financial Officer, Treasurer and Director of DMH Corp.; Senior Vice President and
Chief Administrative Officer of Delaware Distributors, L.P.; Senior Vice President,
Chief Administrative Officer and Director of Delaware Distributors, Inc.; Senior
Vice President, Chief Administrative Officer, Chief Financial Officer and Director
of Delaware Service Company, Inc.; Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Senior Vice President, Chief Financial Officer and
Treasurer of Delaware Investment Counselors, Inc.; Senior Vice President, Chief
Financial Officer and Director of Founders Holdings, Inc.; Chief Executive Officer
and Director of Delaware Investment & Retirement Services, Inc.; and Director of
Delaware International Advisers Ltd.
Chief Executive Officer, Chief Financial Officer and Treasurer of Forewarn,
Inc. since 1992, 8 Clayton Place, Newtown Square, PA
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with DMC and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
<S> <C>
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware Management
Company, Inc., DMH Corp., Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc. and Delaware Investment & Retirement
Services, Inc.; Senior Vice President and Secretary of the Registrant, each of
the other funds in the Delaware Group, Delaware Distributors, L.P., Delaware
Investment Counselors, Inc. and Delaware Management Holdings, Inc.;
Executive Vice President, Secretary and Director of Delaware Management
Trust Company; Secretary and Director of Delaware International Holdings
Ltd.; and Director of Delaware International Advisers Ltd.
Director of ICI Mutual Insurance Co. since 1992, P.O. Box 730, Burlington, VT
Richard J. Flannery Managing Director/Corporate Tax & Affairs of Delaware Management
Company, Inc., Delaware Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Delaware Investment Counselors, Inc.,
Founders CBO Corporation and Delaware Investment & Retirement Services,
Inc.; Vice President of the Registrant and each of the other funds in the
Delaware Group; Managing Director/Corporate Tax & Affairs and Director of
Founders Holdings, Inc.; Managing Director and Director of Delaware
International Holdings Ltd.; and Director of Delaware International Advisers
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
Michael P. Bishof(1) Vice President and Treasurer of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.
and Founders Holdings, Inc.; Assistant Treasurer of Founders CBO Corporation;
and Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with DMC and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
<S> <C>
Eric E. Miller Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Founders Holdings, Inc., Delaware Investment Counselors, Inc.
and Delaware Investment & Retirement Services, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., DMH Corp., Delaware Management
Trust Company, Delaware Investment Counselors, Inc., Delaware Investment &
Retirement Services, Inc. and Founders Holdings, Inc.; and Assistant Secretary
of Founders CBO Corporation and Delaware International Holdings Ltd.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Ln.,
Philadelphia, PA
John M. Zerr(2) Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, DMH
Corp., Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Management Trust Company, Delaware
Investment Counselors, Inc. and Delaware Investment & Retirement Services,
Inc.
Secretary and Counsel of Renovisions, Inc. since 1990, 4284 South Dixi Road,
Resaca, GA
Joseph H. Hastings Vice President/Corporate Controller of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Investment
Counselors, Inc., Founders Holdings, Inc. and Delaware International Holdings
Ltd.; Executive Vice President, Chief Financial Officer and Treasurer of
Delaware Management Trust Company; Chief Financial Officer and Treasurer
of Delaware Investment & Retirement Services, Inc.; and Assistant Treasurer of
Founders CBO Corporation
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with DMC and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
<S> <C>
Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp. and Delaware Management Trust Company; and Vice
President/Internal Audit of Delaware Investment & Retirement Services, Inc.
Steven T. Lampe(3) Vice President/Taxation of Delaware Management Company, Inc., the Registrant, each
of the other funds in the Delaware Group, Delaware Management Holdings, Inc., DMH
Corp., Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company, Founders Holdings, Inc., Founders
CBO Corporation and Delaware Investment Counselors, Inc.
Lisa O. Brinkley(4) Vice President/Compliance of Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group, DMH Corp., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Investment Counselors, Inc. and Delaware
Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware Distributors, L.P. and Delaware
Distributors, Inc.
Douglas L. Anderson Vice President/Operations of Delaware Management Company, Inc., Delaware Service
Company, Inc. and Delaware Investment & Retirement Services, Inc.; and Vice
President/Operations and Director of Delaware Management Trust Company
Michael T. Taggart Vice President/Facilities Management and Administrative Services of Delaware
Management Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the fixed income funds and the closed-end
funds in the Delaware Group; Vice President of Founders Holdings, Inc.; and
Treasurer and Director of Founders CBO Corporation
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with DMC and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
<S> <C>
J. Michael Pokorny Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant, each of the tax-exempt funds and the fixed income funds in
the Delaware Group
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware
Group and Delaware Investment Counselors, Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the fixed income funds and the closed-end
funds in the Delaware Group; Vice President of Founders Holdings, Inc.; and
Secretary and Director of Founders CBO Corporation
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware
Group
Roger A. Early(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware
Group
Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
General Partner of Zeke Investment Partners since 1991, 569 Canterbury Lane,
Berwyn, PA
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the equity funds in the Delaware Group and Delaware Investment
Counselors, Inc.
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant and each of the equity funds in the Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with DMC and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
<S> <C>
Faye P. Staples(6) Vice President/Human Resources of Delaware Management Company, Inc.,
Delaware Distributors, L.P. and Delaware Distributors, Inc.; and Vice
President/Director of Human Resources of Delaware Service Company, Inc.
Daniel H. Carlson(7) Vice President/Marketing Manager of Delaware Management Company, Inc.
</TABLE>
1 VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust
and VICE PRESIDENT, CS First Boston Investment Management prior to
June 1995.
2 ATTORNEY, Ballard, Spahr, Andrews & Ingersoll prior to July 1995.
3 TAX MANAGER, Price Waterhouse prior to October 1995.
4 VICE PRESIDENT AND COMPLIANCE OFFICER, Banc One Securities Corporation prior
to June 1994 and ASSISTANT VICE PRESIDENT AND COMPLIANCE OFFICER, Aetna
Life and Casualty prior to March 1993.
5 SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER, Federated Investors prior to
July 1994.
6 VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 1995.
7 PRINCIPAL AND CONSULTANT, Buck Consultants prior to October 1995.
(b) Delaware International Advisers Ltd. ("Delaware International")
serves as investment manager to the International Equity and Global Bond Series
of the Registrant. In addition, Delaware International also serves as investment
manager or sub-adviser to certain other funds in the Delaware Group (Delaware
Pooled Trust, Inc., Delaware Group Global & International Funds, Inc. and
Delaware Group Global Dividend and Income Fund, Inc.) and other institutional
accounts. Information regarding the officers and directors of Delaware
International and the positions they have held with the Registrant during the
past two fiscal years is provided below.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------------
<S> <C>
*Wayne A. Stork Chairman of the Board, Chief Executive Officer and Director of Delaware
International Advisers Ltd.; President, Chief Executive Officer, Chairman of the
Board and Director of the Registrant and, with the exception of Delaware Pooled
Trust, Inc., each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware International Holdings Ltd.
and Founders Holdings, Inc.; Chairman of the Board and Director of Delaware
Pooled Trust, Inc., Delaware Investment Counselors, Inc. and Delaware
Investment & Retirement Services, Inc.; Chairman of the Board, President, Chief
Executive Officer, Chief Investment Officer and Director of Delaware
Management Company, Inc.; and Director of Delaware Distributors, Inc. and
Delaware Service Company, Inc.
**G. Roger H. Kitson Vice Chairman and Director of Delaware International Advisers Ltd.
</TABLE>
* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
xiv
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ----------------------------------------------------------------
<S> <C>
**David G. Tilles Managing Director, Chief Investment Officer and Director of Delaware
International Advisers Ltd.
**John Emberson Secretary/Compliance Officer/Finance Director and Director of Delaware
International Advisers Ltd.
*David K. Downes Director of Delaware International Advisers Ltd.; Senior Vice President, Chief
Administrative Officer, Chief Financial Officer and Treasurer of Delaware
Management Holdings, Inc.; Senior Vice President/Chief Administrative
Officer/Chief Financial Officer of Delaware Management Company, Inc., the
Registrant and each of the other funds in the Delaware Group; Chairman and
Director of Delaware Management Trust Company; Senior Vice President, Chief
Financial Officer, Treasurer and Director of DMH Corp.; Senior Vice President
and Chief Administrative Officer of Delaware Distributors, L.P.; Senior Vice
President, Chief Administrative Officer and Director of Delaware Distributors,
Inc.; Senior Vice President, Chief Administrative Officer, Chief Financial
Officer and Director of Delaware Service Company, Inc.; Chief Financial
Officer and Director of Delaware International Holdings Ltd.; Senior Vice
President, Chief Financial Officer and Treasurer of Delaware Investment
Counselors, Inc.; Chief Executive Officer and Director of Delaware Investment
& Retirement Services, Inc.; and Senior Vice President, Chief Financial Officer
and Director of Founders Holdings, Inc.
Chief Executive Officer, Chief Financial Officer and Treasurer of Forewarn,
Inc. since 1992, 8 Clayton Place, Newtown Square, PA
*George M. Chamberlain, Jr. Director of Delaware International Advisers Ltd.; Senior Vice President and
Secretary of the Registrant, each of the other funds in the Delaware Group,
Delaware Distributors, L.P., Delaware Management Holdings, Inc. and
Delaware Investment Counselors, Inc.; Senior Vice President, Secretary and
Director of Delaware Management Company, Inc., DMH Corp., Delaware
Distributors, Inc., Delaware Service Company, Inc., Founders Holdings, Inc.
and Delaware Investment & Retirement Services, Inc.; Executive Vice
President, Secretary and Director of Delaware Management Trust Company; and
Secretary and Director of Delaware International Holdings Ltd.
Director of ICI Mutual Insurance Co. since 1992, P.O. Box 730, Burlington, VT
</TABLE>
* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
xv
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ----------------------------------------------------------------
<S> <C>
*Winthrop S. Jessup Director of Delaware International Advisers Ltd., Delaware Service Company,
Inc., Delaware Management Trust Company and Delaware Investment &
Retirement Services, Inc.; Executive Vice President of the Registrant and, with
the exception of Delaware Pooled Trust, Inc., each of the other funds in the
Delaware Group and Delaware Management Holdings, Inc.; President and Chief
Executive Officer of Delaware Pooled Trust, Inc.; Executive Vice President and
Director of DMH Corp., Delaware Management Company, Inc., Delaware
International Holdings Ltd. and Founders Holdings, Inc.; Vice Chairman of
Delaware Distributors, L.P.; Vice Chairman and Director of Delaware
Distributors, Inc.; and President and Director of Delaware Investment
Counselors, Inc.
*Richard G. Unruh, Jr. Director of Delaware International Advisers Ltd.; Executive Vice President and
Director of Delaware Management Company, Inc.; Executive Vice President of
the Registrant and each of the other funds in the Delaware Group; and Senior
Vice President of Delaware Management Holdings, Inc.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of Finance
Committee, Mid Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia, PA
*Richard J. Flannery Director of Delaware International Advisers Ltd.; Managing Director/Corporate
Tax & Affairs of Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware Investment Counselors, Inc., Founders CBO Corporation and
Delaware Investment & Retirement Services, Inc.; Vice President of the
Registrant and each of the other funds in the Delaware Group; Managing
Director/Corporate & Tax Affairs and Director of Founders Holdings, Inc.; and
Managing Director and Director of Delaware International Holdings 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
</TABLE>
* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
xvi
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ----------------------------------------------------------------
<S> <C>
*John C. E. Campbell Director of Delaware International Advisers Ltd.
*George E. Deming Director of Delaware International Advisers Ltd.
**Timothy W. Sanderson Senior Portfolio Manager/Deputy Compliance Officer/Director Equity Research
and Director of Delaware International Advisers Ltd.
**Clive A. Gillmore Senior Portfolio Manager/Director U.S. Mutual Fund Liaison and Director of
Delaware International Advisers Ltd.
**Hamish O. Parker Senior Portfolio Manager/Director U.S. Marketing Liaison and Director of
Delaware International Advisers Ltd.
**Ian G. Sims Senior Portfolio Manager/Deputy Managing Director and Director of Delaware
International Advisers Ltd.
**Elizabeth A. Desmond Senior Portfolio Manager of Delaware International Advisers Ltd.
**Gavin A. Hall Senior Portfolio Manager of Delaware International Advisers Ltd.
</TABLE>
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Group. Delaware Distributors, L.P.
also serves as underwriter for Lincoln Advisor Funds, Inc.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
</TABLE>
* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
xvii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Management Investment Manager to
Company, Inc. Limited Partner Equity/Income, High-Yield,
Capital Reserves, Money Market,
Growth, Multiples Strategy,
Emerging Growth and Value Series
Delaware Investment
Counselors, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
J. Lee Cook Senior Vice President/ None
National Sales Manager
Stephen H. Slack Senior Vice President/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
Minette van Noppen Senior Vice President/ None
Retirement Services
Thomas E. Sawyer Senior Vice President/ None
Wholesaler
J. Chris Meyer Senior Vice President None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xviii
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Dana B. Hall Senior Vice President/ None
Key Accounts
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
John M. Zerr Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/ None
Retirement Services
Jerome J. Alrutz Vice President/ None
Retirement Services
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xix
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Stephen J. DeAngelis Vice President/Product None
Development
Susan T. Friestedt Vice President/Customer None
Service
Dinah J. Huntoon Vice President/Product None
Management
Jodie L. Johnson Vice President/National None
Accounts
Ellen M. Krott Vice President/Communications None
Holly W. Reimel Vice President/ None
Telemarketing
Thomas S. Butler Vice President/ None
DDI Administration
Frank Albanese Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xx
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/Human Resources None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. 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 31. Management Services. None.
xxi
<PAGE>
Form N-1A
File No. 33-14363
Delaware Group Premium Fund, Inc.
Item 32. Undertakings.
(a) Not Applicable.
(b) The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the initial
public offering of shares of the Global Bond Series.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon the
question of removal of any director when requested in
writing to do so by the record holders of not less than
10% of the outstanding shares.
xxii
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 28th day of March, 1996.
DELAWARE GROUP PREMIUM FUND, INC.
By:/s/ Wayne A. Stork
---------------------------------------
Wayne A. Stork
President, Chairman of the Board,
Chief Executive Officer and Director
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>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
President, Chairman of the Board,
/s/ Wayne A. Stork Chief Executive Officer and Director March 28, 1996
- -----------------------------
Wayne A. Stork
Senior Vice President/Chief Administrative
Officer/Chief Financial Officer (Principal
Financial Officer/Principal Accounting
/s/ David K. Downes Officer) March 28, 1996
- -----------------------------
David K. Downes
/s/Walter P. Babich * Director March 28, 1996
- -----------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director March 28, 1996
- -----------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director March 28, 1996
- -----------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director March 28, 1996
- -----------------------------
W. Thacher Longstreth
/s/Charles E. Peck * Director March 28, 1996
- -----------------------------
Charles E. Peck
*By/s/ Wayne A. Stork
--------------------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</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
Exhibit No. Exhibit
- ----------- -------
EX-99.B1B Articles Supplementary to Articles of Incorporation (April 1996)
EX-99.B5G Investment Management Agreement on behalf of Global Bond Series
(May 1, 1996)
EX-99.B6G Distribution Agreement on behalf of Global Bond Series
(May 1, 1996)
EX-99.B8B Custodian Agreement on behalf of Global Bond Series (May 1, 1996)
EX-99.B9B Amended and Restated Shareholders Services Agreement on behalf of
the High Yield, Capital Reserves, Equity/Income, Multiple Strategy,
Growth, International Equity, Value, Emerging Growth and Global
Bond Series (May 1, 1996)
EX-99.B11 Consent of Auditors
EX-99.B16 Schedules of Computation for each Performance Quotation for periods
not previously electronically filed
EX-99.B17 Financial Data Schedules
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Premium Fund, Inc., a Maryland corporation
having its principal office in Baltimore, Maryland (the "Corporation"), hereby
certifies, in accordance with Section 2-208 of the Maryland General Corporation
Law, to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting
held on April 18, 1996, adopted resolutions classifying and allocating
unallocated and unissued common stock of the Corporation as follows: Fifty
Million (50,000,000) shares of common stock with a par value of One Cent ($.01)
per share to a new series of shares designated as the Global Bond Series.
SECOND: The shares of the Global Bond Series shall have the
rights and privileges, and shall be subject to the limitations and priorities,
set forth in the Articles of Incorporation of the Corporation.
THIRD: The shares of the Global Bond Series have
been classified by the Board of Directors pursuant to authority
contained in the Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Premium Fund, Inc.
has caused these Articles Supplementary to be signed in its
name and on its behalf this day of April, 1996.
DELAWARE GROUP PREMIUM FUND, INC.
By:_____________________________
George M. Chamberlain, Jr.
Senior Vice President and
Secretary
Attest:
____________________________
John M. Zerr
Vice President and
Assistant Secretary
<PAGE>
THE UNDERSIGNED, Senior Vice President and Secretary of
DELAWARE GROUP PREMIUM FUND, INC., who executed on behalf of said Corporation
the foregoing Articles Supplementary of which this instrument is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, said
Articles Supplementary to be the corporate act of said Corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
____________________________
George M. Chamberlain, Jr.
-2-
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
GLOBAL BOND SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP PREMIUM FUND,
INC., a Maryland corporation (the "Fund") for the GLOBAL BOND SERIES (the
"Series") and DELAWARE INTERNATIONAL ADVISERS LTD., a U.K. company (the
"Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an
investment company registered under the Investment Company Act of 1940 and
engages in the business of investing and reinvesting its assets in securities;
and
WHEREAS, the Investment Manager is a registered Investment
Adviser under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, Fund desires to retain the Investment Adviser to
provide investment management services to the Series and the Investment Manager
desires to provide such 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 Fund hereby employs the Investment Manager to manage
the investment and reinvestment of the Series' assets and to administer its
affairs, subject to the direction of the Board and officers of the Fund 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 Fund in any way, or in
any way be deemed an agent of the Fund. The Investment Manager shall regularly
make decisions as to what securities to purchase and sell on behalf of the
Series, shall effect the purchase and sale of investments in furtherance of the
Series' objectives and policies and shall furnish the Board of Directors of the
Fund with such information and reports regarding the Series' investments as the
Investment Manager deems appropriate or as the Directors of the Fund may
reasonably request.
2. 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;
transfer of stock, including issuance, redemption 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.
2
<PAGE>
3. (a) Subject to the primary objective of obtaining the best
available prices and execution, the Investment Manager will place orders for the
purchase and sale of portfolio securities with such broker/dealers who provide
statistical, factual and financial information and services to the Fund, to the
Investment Manager or to any other fund for which the Investment Manager
provides investment advisory services and/or with broker/dealers who sell shares
of the Fund or who sell shares of any other fund for which the Investment
Manager provides investment advisory services. Broker/dealers who sell shares of
the funds of which Delaware International Advisers Ltd. is Investment Manager,
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 the National Association of
Securities Dealers, 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 and officers of the Fund, the Investment Manager may ask the Fund
and the Fund may agree 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 it and the
Investment Manager have 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 Fund and to other funds and other advisory accounts for which the
Investment Manager exercises investment discretion.
4. As compensation for the services to be rendered to the Fund
by the Investment Manager under the provisions of this Agreement, the Fund shall
pay to the Investment Manager monthly from the Series' assets a fee (at an
annual rate) equal to .75% of the average daily net assets of the Series during
the month.
If this Agreement is terminated prior to the end of any
calendar month, the management 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 Investment Manager to
the Fund 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.
6. 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
Fund or to any other investment company, corporation, association, firm or
individual.
3
<PAGE>
7. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of duties of the
Investment Manager to the Fund, the Investment Manager shall not be subject to
liabilities to the Fund or to any shareholder of the Fund 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. This Agreement shall be executed and become effective as of
the date written below. 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 or by vote of
a majority of the outstanding voting securities of the Series and only if the
terms and the renewal hereof have been approved by the vote of a majority of the
Directors of the Fund, 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. No amendment to this Agreement shall be effective unless the terms
thereof have been approved by the vote of a majority of the outstanding voting
securities of the Series and by the vote of a majority of Directors of the Fund
who are not parties to the Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund at
any time, without the payment of a penalty, on sixty days' written notice to the
Investment Manager of the Fund's intention to do so, pursuant to action by the
Board of Directors of the Fund or pursuant to vote of a majority of the
outstanding voting securities of the Series. The Investment Manager may
terminate this Agreement at any time, without the payment of a penalty on sixty
days' written notice to the Fund 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 Fund 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.
9. This Agreement shall extend to and bind the heirs,
executors, administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a
majority of the outstanding voting securities"; "interested persons"; and
"assignment" shall have the meanings defined in the Investment Company Act of
1940.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by having it signed by their duly authorized officers as of the 1st
day of May, 1996.
DELAWARE GROUP PREMIUM FUND, INC.
for the GLOBAL BOND SERIES
Attest:___________________________ By: ________________________________
DELAWARE INTERNATIONAL ADVISERS LTD.
Attest:___________________________ By: _________________________________
3
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
GLOBAL BOND SERIES
DISTRIBUTION AGREEMENT
Distribution Agreement made as of this 1st day of May, 1996 by and
between DELAWARE GROUP PREMIUM FUND, INC., a Maryland corporation (the "Fund"),
on behalf of its GLOBAL BOND SERIES (the "Series") and DELAWARE DISTRIBUTORS,
L.P. (the "Distributor"), a Delaware limited partnership.
W I T N E S S E T H:
WHEREAS, the Fund 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 Fund desires to appoint the Distributor as distributor for
the shares of the Series and the Distributor wishes to accept such appointment
on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the
distribution of the Series' shares and, in connection
therewith and as agent for the Fund and not as principal, to
advertise, promote, offer and sell the Series' shares to the
public.
2. The Distributor agrees to serve as distributor of the
Series' shares and, as agent for the Fund 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 Fund's Registration
Statement under the Securities Act of 1933 including the
Prospectus contained therein and the Statement of
Additional Information contained therein, as may be
mutually determined by the Fund and the Distributor from
time to time. The Distributor will bear all costs of
financing any activity which is primarily intended to
result in the sale of the Series' 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 the
Series' shares.
3. (a) The Fund agrees to make available for sale by the
Fund through the Distributor all or such part of
the authorized but unissued Series' shares as the
Distributor shall require from time to time, all
subject to the further provisions of this contract,
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<PAGE>
and except with the Distributor's written consent or
as provided in Paragraph 3(b) hereof, the Fund will
not sell Series shares other than through the efforts
of the Distributor.
(b) The Fund reserves the right from time to time (l)
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 for shares of any corporation or trust;
(3) to pay stock dividends to its shareholder, or
to pay dividends in cash or stock at the option of
its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable
from time to time in cash, or to split up or
combine its outstanding shares of Common Stock; (4)
to offer shares for cash to its stockholders 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 where the Distributor is not
registered as a broker dealer.
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered
investment company, and any and all shares which it
will sell through the Distributor are, or will be,
properly registered with the Securities and
Exchange Commission.
(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.
5. (a) The Fund will supply to the Distributor a conformed
copy of the Registration Statement, all amendments
thereto, all exhibits, and each Prospectus and
Statement of Additional Information.
(b) The Fund will register or qualify the Series'
shares for sale in such states as is deemed
desirable.
(c) The Fund, 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
shares may be qualified;
(2) from time to time, will furnish the
Distributor as soon as reasonably
practicable the following information: (a)
true copies of its periodic reports to
stockholders, and unaudited quarterly
balance sheets and income statements for the
period from the beginning of the then
current fiscal year to such balance sheet
dates; and (b) a profit and loss statement
and a balance sheet at the end of each
fiscal half year accompanied by a copy of
the certificate or report thereon of an
independent public accountant (who may be
the regular accountant for the Fund),
provided that in lieu of furnishing at the
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<PAGE>
end of any fiscal half year a statement of
profit and loss and a balance sheet
certified by an independent public
accountant as above required, the Fund may
furnish a true copy of its detailed
semi-annual report to its stockholders;
(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 Prospectus 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 shares
authorized, any increases being subject to
approval of the Fund's shareholders as may
be required;
(6) before filing any further amendment to the
Registration Statement or to the Prospectus,
will furnish 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 the 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
stockholders (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
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<PAGE>
(8) will, for the purpose of computing the
offering price of its Series' shares, advise
the Distributor within one hour after the
close of regular trading on 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 common stock outstanding,
determined in accordance with any applicable
provisions of law and the provisions of the
Articles of Incorporation, as amended, of
the Company as of the close of business on
such business day. In the event that prices
are to be calculated more than once daily,
the Fund 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 Fund, prior to
its use, the form of all sales literature proposed to be
generally disseminated by or for the Distributor on
behalf of the Fund all advertisements proposed to be used
by the Distributor, and 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. The Distributor
also agrees that the Distributor will submit such sales
literature and advertisements to the NARD, 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 or to permit
others to use such sales literature or advertisements
without the written consent of the Fund if any regulatory
agency expresses objection thereto or if the Fund 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 Fund's
prospectus, as amended from time to time, determined in
accordance with applicable provisions of law, the
provisions of its Articles of Incorporation and the Rules
of Fair Practice of the National Association of
Securities Dealers, 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 Fund, and shall not purchase or sell such
shares as principal. Orders for Series' shares and
payment for such orders shall be directed to the Fund's
agent, Delaware Service Company, for acceptance on behalf
of the Fund. 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.
-5-
<PAGE>
9. With respect to the apportionment of costs between the
Fund and the Distributor of activities with which both
are concerned, the following will apply:
(a) The Fund and the Distributor will cooperate in
preparing the Registration Statements, the
Prospectus, and all amendments, supplements and
replacements thereto. The Fund will pay all costs
incurred in the preparation of the Fund's
registration statement, including typesetting, the
costs incurred in printing and mailing prospectuses
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.
(c) The Distributor will pay advertising and
promotional expenses, including the costs of
literature sent to prospective investors.
(d) The Fund will pay the costs and fees incurred in
registering the Series' shares with the various
states and with the Securities and Exchange
Commission.
(e) The Distributor will pay the costs of any
additional copies of the Fund reports and other
Fund literature supplied to the Distributor by the
Fund 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 Fund 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 Fund
shall not be liable for indemnification of the
Distributor or any controlling person thereof for any
liability to the Fund 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 hereunder or by reason of
their reckless disregard of their obligations and duties
under this Agreement.
12. Copies of financial reports, registration statements and
prospectuses, as well as demands, notices, requests,
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<PAGE>
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, 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 Fund 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 Fund without
the written consent of the Distributor signed by its duly
authorized officers and delivered to the Fund. Except as
specifically provided in the indemnification provisions
contained in Paragraph 11 hereof, this contract 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 provisions of this
Agreement are 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. The Distributor shall look only to the assets of
the Fund to meet the obligations of, or claims against, the
Fund under this Agreement and not to the holder of any share
of the Fund.
14. (a) This contract shall remain in force for a period of
two years from the date of execution of this
Agreement and from year to year thereafter, but
only so long as such continuance is specifically
approved at least annually by the Board of
Directors 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 Directors
of the Fund, 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 contract on
written notice to the Fund at any time in case the
effectiveness of the Registration Statement shall
be suspended, or in case Stop Order proceedings are
initiated by the U. S. Securities and Exchange
-7-
<PAGE>
Commission in respect of the Registration Statement
and such proceedings are not withdrawn or terminated
within thirty days. The Distributor may also
terminate this contract at any time by giving the
Fund written notice of its intention to terminate the
contract at the expiration of three months from the
date of delivery of such written notice of intention
to the Fund.
(c) The Fund may terminate this contract 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 stockholders 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 Fund
may also terminate this contract 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.
15. The validity, interpretation and construction of this
contract, and of each part hereof, will be governed by
the laws of the Commonwealth of Pennsylvania.
16. In the event any provision of this contract is determined to
be void or unenforceable, such determination shall, not affect
the remainder of the contract, which shall continue to be in
force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
Attest: General Partner
__________________________ By:________________________________
Name: Name:
Title: Title:
DELAWARE GROUP PREMIUM FUND, INC.
Attest: FOR THE GLOBAL BOND SERIES
__________________________ By:________________________________
Name: Name:
Title: Title:
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<PAGE>
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective ___________________, 199_, and is between
THE CHASE MANHATTAN BANK, N.A. (the "Bank") and (the "Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank or its Subcustodian
for the account of the Customer, which cash shall not be subject to withdrawal
by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. The Bank may deliver securities
of the same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section 3
(or their securities depositories), such arrangement must be authorized by a
written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
<PAGE>
The Bank may act under this Agreement through the subcustodians listed
in Schedule A of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank to
hold Assets in the Accounts in accounts which the Bank has established with one
or more of its branches or Subcustodians. The Bank and Subcustodians are
authorized to hold any of the Securities in their account with any securities
depository in which they participate.
The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by the Bank of any
amendment to Schedule A. Upon request by the Customer, the Bank will identify
the name, address and principal place of business of any Subcustodian of the
Customer's Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of the
Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its discretion,
may advance the Customer such excess amount which shall be deemed a loan payable
on demand, bearing interest at the rate customarily charged by the Bank on
similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit Account,
with interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
<PAGE>
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits and debits
of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer sends the Bank a written exception or objection to
any Bank statement within sixty (60) days of receipt, the Customer shall be
deemed to have approved such statement. In such event, or where the Customer has
otherwise approved any such statement, the Bank shall, to the extent permitted
by law, be released, relieved and discharged with respect to all matters set
forth in such statement or reasonably implied therefrom as though it had been
settled by the decree of a court of competent jurisdiction in an action where
the Customer and all persons having or claiming an interest in the Customer or
the Customer's Accounts were parties.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. The Bank shall have no liability for any loss occasioned by delay in
the actual receipt of notice by the Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take any action under this Agreement.
<PAGE>
8. Corporate Actions; Proxies; Tax Reclaims.
(a) Corporate Actions. Whenever the Bank receives information
concerning the Securities which requires discretionary action by the beneficial
owner of the Securities (other than a proxy), such as subscription rights, bonus
issues, stock repurchase plans and rights offerings, or legal notices or other
material intended to be transmitted to securities holders ("Corporate Actions"),
the Bank will give the Customer notice of such Corporate Actions to the extent
that the Bank's central corporate actions department has actual knowledge of a
Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions are
not received in time for the Bank to take timely action, or actual notice of
such Corporate Action was received too late to seek Instructions, the Bank is
authorized to sell such rights entitlement or fractional interest and to credit
the Deposit Account with the proceeds or take any other action it deems, in good
faith, to be appropriate in which case it shall be held harmless for any such
action.
(b) Proxy Voting. The Bank will provide proxy voting services only
pursuant to a separate agreement. Proxy voting services may be provided by the
Bank or, in whole or in part, by one or more third parties appointed by the Bank
(which may be affiliates of the Bank).
(c) Tax Reclaims.
(i) Subject to the provisions hereof, the Bank will apply for a
reduction of withholding tax and any refund of any tax paid or tax credits which
apply in each applicable market in respect of income payments on Securities for
the benefit of the Customer which the Bank believes may be available to such
Customer.
(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup withholding
tax will be deducted from U.S. source income. The Customer shall provide to the
Bank such documentation and information as it may require in connection with
taxation, and warrants that, when given, this information shall be true and
correct in every respect, not misleading in any way, and contain all material
information. The Customer undertakes to notify the Bank immediately if any such
information requires updating or amendment.
(iii) The Bank shall not be liable to the Customer or any third party
for any tax, fines or penalties payable by the Bank or the Customer, and shall
be indemnified accordingly, whether these result from the inaccurate completion
of documents by the Customer or any third party, or as a result of the provision
to the Bank or any third party of inaccurate or misleading information or the
withholding of material information by the Customer or any other third party, or
as a result of any delay of any revenue authority or any other matter beyond the
control of the Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the deposit account any taxes or levies
required by any revenue or governmental authority for whatever reason in respect
of the Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at its
absolute discretion, supplement or amend the markets in which the tax reclaim
services are offered. Other than as expressly provided in this sub-clause, the
Bank shall have no responsibility with regard to the Customer's tax position or
status in any jurisdiction.
<PAGE>
(vi) The Customer confirms that the Bank is authorised to disclose any
information requested by any revenue authority or any governmental body in
relation to the Customer or the Securities and/or Cash held for the Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities depository,
as the case may be. The Bank may without notice to the Customer cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer or
its designated agent that any such employee or agent is no longer an Authorized
Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. The Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in Instructions
which are consistent with the provisions of this Agreement as follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable to
the Customer for any loss which shall occur as the result of the failure of a
<PAGE>
Subcustodian to exercise reasonable care with respect to the safekeeping of such
Assets to the same extent that the Bank would be liable to the Customer if the
Bank were holding such Assets in New York. In the event of any loss to the
Customer by reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the market value of the
property which is the subject of the loss at the date of discovery of such loss
and without reference to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints unless
such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith, without negligence. In performing its obligations
under this Agreement, the Bank may rely on the genuineness of any document which
it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income from
or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for
any loss which results from: 1) the general risk of investing, or 2) investing
or holding Assets in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any default
in the payment of principal or income of any security other than as provided in
Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this Agreement;
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations against
Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
<PAGE>
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to enter
into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange through
its subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement shall apply to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's independent
public accountant reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):
____ Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
____ Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
____ Neither of the above.
This Agreement consists exclusively of this document together with
<PAGE>
Schedule A, Exhibits I - _______ and the following Rider(s) [Check applicable
rider(s)]:
___ ERISA
___ MUTUAL FUND
___ SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise, or the exercise of any
other power or right. No waiver by a party of any provision of this Agreement,
or waiver of any breach or default, is effective unless in writing and signed by
the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:____________________________
Customer: _____________________________________
_____________________________________
_____________________________________
or telex: ___________________________
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the Bank
shall deliver the Assets in the Accounts; and further provided that, if Bank is
the terminating party (other than on account of a material breach hereof by
Customer) Customer may extend the termination period by up to an additional 60
days by sending prompt written notice ("Extension Notice") to Bank of its intent
to do so (including the number of additional days). The Extension Notice shall
be accompanied by a statement from an Authorized Person that Customer shall
continue to abide by Chase's written operating procedures for Russia, as the
<PAGE>
same may be in effect from time to time, during any such extension. If notice of
termination is given by the Bank, the Customer shall, within sixty (60) days (or
such other amount of days as is contemplated by the Extension Notice) following
receipt of the notice, deliver to the Bank Instructions specifying the names of
the persons to whom the Bank shall deliver the Assets. In either case the Bank
will deliver the Assets to the persons so specified, after deducting any amounts
which the Bank determines in good faith to be owed to it under Section 13. If
within sixty (60) days following receipt of a notice of termination by the Bank,
the Bank does not receive Instructions from the Customer specifying the names of
the persons to whom the Bank shall deliver the Assets, the Bank, at its
election, may deliver the Assets to a bank or trust company doing business in
the State of New York to be held and disposed of pursuant to the provisions of
this Agreement, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to the Bank.
CUSTOMER
By:____________________________________________
Title:
Date:
THE CHASE MANHATTAN BANK, N.A.
By:____________________________________________
Title:
Date:
<PAGE>
STATE OF )
: ss.
COUNTY OF )
On this day of , 19 , before me personally came
, to me known, who being by me duly sworn, did depose and
say that he/she resides in at , that he/she is of
, the entity described in and which executed the foregoing
instrument; that he/she knows the seal of said entity, that the seal affixed to
said instrument is such seal, that it was so affixed by order of said entity,
and that he/she signed his/her name thereto by like order.
__________________________________
Sworn to before me this ___________
day of ______________, 19____.
___________________________________
Notary
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of ,
19 , before me personally came ,
to me known, who being by me duly sworn, did depose and say that he/she
resides in at ;
that he/she is a Vice President of THE CHASE MANHATTAN BANK, (National
Association), the corporation described in and which executed the foregoing
instrument; that he/she knows the seal of said corporation, that the seal
affixed to said instrument is such corporate seal, that it was so affixed by
order of the Board of Directors of said corporation, and that he/she signed
his/her name thereto by like order.
__________________________________
Sworn to before me this ___________
day of ______________, 19____.
___________________________________
Notary
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
_____________________________________________
effective __________________
Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation, interpretation promulgated by or under
the authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country other
than the United States that is regulated as such by that country's government or
an agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof) (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank; or (iv) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
The Customer represents that its Board of Directors has approved each
of the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through of Schedule A, and further represents that its
Board hasdetermined that the use of each Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Fund(s) and
its (their) shareholders. The Bank will supply the Customer with any amendment
to Schedule A for approval. The Customer has supplied or will supply the Bank
with certified copies of its Board of Directors resolution(s) with respect to
the foregoing prior to placing Assets with any Subcustodian so approved.
Section 11. Instructions.
<PAGE>
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant
to Section 5 and 6 of this Agreement may be made only for the purposes listed
below. Instructions must specify the purpose for which any transaction is to be
made and Customer shall be solely responsible to assure that Instructions are in
accord with any limitations or restrictions applicable to the Customer by law or
as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise
become payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank, its Subcustodian or the Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement of the
purpose for which the delivery or payment is to be made, the amount of the
payment or specific Securities to be delivered, the name of the person or
persons to whom delivery or payment is to be made, and a certification that the
purpose is a proper purpose under the instruments governing the Customer; and
<PAGE>
(o) Upon the termination of this Agreement as set forth in Section
14(i).
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions will apply rather than the provisions of Section
8 of the Agreement:
The Bank will send to the Customer or the Authorized Person for a
Custody Account, such proxies (signed in blank, if issued in the name of the
Bank's nominee or the nominee of a central depository) and communications with
respect to Securities in the Custody Account as call for voting or relate to
legal proceedings within a reasonable time after sufficient copies are received
by the Bank for forwarding to its customers. In addition, the Bank will follow
coupon payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise the Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of which the
Bank has received notice from the issuer of the Securities, or as to which
notice is published in publications routinely utilized by the Bank for this
purpose.
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
AMENDED AND RESTATED SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 1st day of May, 1996 by and between
DELAWARE GROUP PREMIUM FUND, INC. (the "Fund"), a Maryland Corporation, for the
EQUITY/INCOME SERIES, the HIGH YIELD SERIES, the CAPITAL RESERVES SERIES, the
MULTIPLE STRATEGY SERIES, the GROWTH SERIES, the GLOBAL BOND SERIES, the
EMERGING GROWTH SERIES, the INTERNATIONAL EQUITY SERIES and the VALUE SERIES
(collectively "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. and Delaware International Advisers Ltd.
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; transfer 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;
and
WHEREAS, the Fund and DSC desire to amend and restate their Amended and
Restated Shareholder Services Agreement dated as of December 13, 1993, to
include the Fund's new Series, the Global Bond Series.
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;
2
<PAGE>
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, or altering or abolishing
each such class or series;
(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The Form of share certificates of the Series in the form
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectus 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
Directors 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 Directors 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 certificate 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.
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.
3
<PAGE>
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 Series, 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.
(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.
4
<PAGE>
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Series, DSC shall disburse and
cause to be disbursed to Series' stockholders 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, 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:
(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
investor and Series stockholders, 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.
5
<PAGE>
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 of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group 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
and accepted for the type "of" 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 of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), 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 Directors 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 its 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
Directors 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.
6
<PAGE>
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 Directors 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
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 Directors 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.
ATTEST:______________________ By:__________________________________________
Title: Eric E. Miller David K. Downes
Vice President and Senior Vice President,
Assistant Secretary Chief Administrative Officer,
Chief Financial Officer
DELAWARE GROUP PREMIUM FUND INC.
FOR THE: EQUITY/INCOME SERIES, HIGH
YIELD SERIES, CAPITAL
RESERVES SERIES, MULTIPLE
STRATEGY SERIES, GROWTH
SERIES, GLOBAL BOND SERIES,
INTERNATIONAL EQUITY
SERIES, EMERGING GROWTH
SERIES and VALUE SERIES
ATTEST:______________________ By:__________________________________________
Title: John M. Zerr Wayne A. Stork
Vice President and Chairman, President and Chief Executive
Assistant Secretary Officer
7
<PAGE>
SCHEDULE A
COMPENSATION
Delaware Service Company's ("DSC") compensation will be $50,000 annually. DSC
will bill, and the Delaware Group Premium Fund, Inc. ("Fund") will pay, such
compensation monthly ($4,166.67 per month) allocated among the Series of the
Fund based on the relative percentage of assets of each Series at the time of
billing and adjusted appropriately to reflect the length of time a particular
Series is in operation during any billing period.
8
<PAGE>
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the use of our report dated February 9, 1996 in
the Post-Effective Amendment No. 17 to the Registration Statement (Form N1-A)
(No. 33-14363) of Delaware Group Premium Fund, Inc.
/s/ Ernst & Young LLP
--------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
March 26, 1996
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Premium Fund, Inc.
We have audited the accompanying statements of net assets of the Equity/Income
Series, the High Yield Series, the Capital Reserves Series, the Multiple
Strategy Series, the Money Market Series, the Growth Series, the International
Equity Series, the Emerging Growth Series, and the Value Series (collectively
referred to as "Delaware Group Premium Fund, Inc." or the "Fund") as of December
31, 1995, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, the financial highlights for each of the five years in the period then
ended for the Equity/Income Series, High Yield Series, Capital Reserves Series,
Multiple Strategies Series, and Money Market Series and the financial highlights
for each period from the date of the initial public offering through December
31, 1995 for the Growth Series, International Equity Series, Emerging Growth
Series, and Value Series. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
series of Delaware Group Premium Fund, Inc. at December 31, 1995, the results of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended for the Equity/Income Series,
High Yield Series, Capital Reserves Series, Multiple Strategies Series, and
Money Market Series and the financial highlights for each period from the date
of the initial public offering through December 31, 1995 for the Growth Series,
International Equity Series, Emerging Growth Series, and the Value Series, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
--------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
February 9, 1996
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Premium Fund, Inc. -- International Equity Series
We have audited the accompanying statement of net assets of Delaware Group
Premium Fund, Inc. -- International Equity Series (the "Series") as of December
31, 1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the period
ended December 31, 1995 and the period from October 29, 1992 (the date of
initial public offering) through December 31, 1992. These financial statements
and financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Premium Fund, Inc. -- International Equity Series at December 31,
1995, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the three years in the period ended December 31, 1995 and
the period from October 29, 1992 (the date of initial public offering) through
December 31, 1992, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
--------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
February 9, 1996
<PAGE>
DELAWARE GROUP PREMIUM INTERNATIONAL EQUITY
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
THREE
YEARS
- ----------------
3
$1000(1 - T) = $1,355.80
T = 10.68%
<PAGE>
DELAWARE GROUP PREMIUM INTERNATIONAL EQUITY
TOTAL RETURN PERFORMANCE
THREE YEARS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.03
Initial Shares 99.701
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1993 99.701 $0.010 0.099 99.800
- -------------------------------------------------------------------------------
1994 99.800 $0.080 0.667 100.467
- -------------------------------------------------------------------------------
1995 100.467 $0.330 2.950 103.417
- -------------------------------------------------------------------------------
Ending Shares 103.417
Ending NAV x $13.11
------------
Investment Return $1,355.80
Total Return Performance
- ------------------------
Investment Return $1,355.80
Less Initial Investment $1,000.00
----------
$355.80/$1,000.00 x 100
Total Return: 35.58%
<TABLE> <S> <C>
<PAGE>
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<NAME> DELAWARE GROUP PREMIUM FUND, INC.
<SERIES>
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<NAME> EQUITY INCOME SERIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 93,824,368
<INVESTMENTS-AT-VALUE> 108,855,898
<RECEIVABLES> 1,199,417
<ASSETS-OTHER> 1,950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,057,265
<PAYABLE-FOR-SECURITIES> 902,937
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 150,872
<TOTAL-LIABILITIES> 1,053,809
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<SHARES-COMMON-PRIOR> 6,336,687
<ACCUMULATED-NII-CURRENT> 852,092
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,762,314
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,031,530
<NET-ASSETS> 109,003,456
<DIVIDEND-INCOME> 3,371,106
<INTEREST-INCOME> 138,169
<OTHER-INCOME> 0
<EXPENSES-NET> 617,380
<NET-INVESTMENT-INCOME> 2,891,895
<REALIZED-GAINS-CURRENT> 8,991,108
<APPREC-INCREASE-CURRENT> 15,300,401
<NET-CHANGE-FROM-OPS> 27,183,404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,866,310
<DISTRIBUTIONS-OF-GAINS> 1,335,871
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,543,303
<NUMBER-OF-SHARES-REDEEMED> 877,396
<SHARES-REINVESTED> 345,969
<NET-CHANGE-IN-ASSETS> 36,278,673
<ACCUMULATED-NII-PRIOR> 826,507
<ACCUMULATED-GAINS-PRIOR> 1,107,077
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 528,481
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 617,380
<AVERAGE-NET-ASSETS> 89,260,102
<PER-SHARE-NAV-BEGIN> 11.480
<PER-SHARE-NII> 0.416
<PER-SHARE-GAIN-APPREC> 3.574
<PER-SHARE-DIVIDEND> 0.430
<PER-SHARE-DISTRIBUTIONS> 0.210
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.830
<EXPENSE-RATIO> 0.690
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<NAME> DELAWARE GROUP PREMIUM FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> HIGH YIELD SERIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 53,247,057
<INVESTMENTS-AT-VALUE> 54,885,577
<RECEIVABLES> 1,190,210
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 721,442
<TOTAL-ASSETS> 1,911,652
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 192,272
<TOTAL-LIABILITIES> 192,272
<SENIOR-EQUITY> 587,483
<PAID-IN-CAPITAL-COMMON> 58,160,794
<SHARES-COMMON-STOCK> 6,330,569
<SHARES-COMMON-PRIOR> 5,116,064
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,781,840)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,638,520
<NET-ASSETS> 56,604,954
<DIVIDEND-INCOME> 37,188
<INTEREST-INCOME> 5,475,837
<OTHER-INCOME> 0
<EXPENSES-NET> 361,592
<NET-INVESTMENT-INCOME> 5,151,433
<REALIZED-GAINS-CURRENT> (2,216,446)
<APPREC-INCREASE-CURRENT> 4,534,509
<NET-CHANGE-FROM-OPS> 7,469,496
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,151,209
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,698,338
<NUMBER-OF-SHARES-REDEEMED> 1,066,859
<SHARES-REINVESTED> 583,026
<NET-CHANGE-IN-ASSETS> 12,919,286
<ACCUMULATED-NII-PRIOR> (223)
<ACCUMULATED-GAINS-PRIOR> (1,565,394)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 311,242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 361,592
<AVERAGE-NET-ASSETS> 52,171,233
<PER-SHARE-NAV-BEGIN> 8.540
<PER-SHARE-NII> 0.872
<PER-SHARE-GAIN-APPREC> 0.400
<PER-SHARE-DIVIDEND> 0.872
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.940
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
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<NAME> DELAWARE GROUP PREMIUM FUND, INC.
<SERIES>
<NUMBER> 003
<NAME> CAPITAL RESERVES SERIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 27,116,620
<INVESTMENTS-AT-VALUE> 27,714,955
<RECEIVABLES> 1,361,921
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,361,921
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,097,137
<TOTAL-LIABILITIES> 1,097,137
<SENIOR-EQUITY> 286,671
<PAID-IN-CAPITAL-COMMON> 23,380,408
<SHARES-COMMON-STOCK> 2,812,927
<SHARES-COMMON-PRIOR> 2,793,817
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,330,677)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 598,335
<NET-ASSETS> 27,934,739
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,947,644
<OTHER-INCOME> 0
<EXPENSES-NET> 188,766
<NET-INVESTMENT-INCOME> 1,758,878
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