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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-14363
File No. 811-5162
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 22 [X]
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 22
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DELAWARE GROUP PREMIUM FUND, INC.
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(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) 255-2923
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George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: March 31, 1998
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It is proposed that this filing will become effective:
______ immediately upon filing pursuant to paragraph (b)
______ on (date) pursuant to paragraph (b)
______ 60 days after filing pursuant to paragraph (a)(1)
______ on (date) pursuant to paragraph (a)(1)
______ 75 days after filing pursuant to paragraph (a)(2)
___X__ on March 31, 1998 pursuant to paragraph (a)(2) of Rule 485
Title of Securities Being Registered
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REIT Series
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--- C O N T E N T S ---
This Post-Effective Amendment No. 22 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
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CROSS-REFERENCE SHEET
PART A
Item No. Description Location in Prospectus
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1 Cover Page ........................... Cover
2 Synopsis ............................. Synopsis
3 Condensed Financial Information ...... N/A
4 General Description of Registrant .... Investment Objectives and
Policies; Description of Fund
Shares; Other Considerations
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
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CROSS-REFERENCE SHEET
PART B
Location in Statement of
Item No. Description Additional Information
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10 Cover Page ........................... Cover
11 Table of Contents .................... Table of Contents
12 General Information and History ...... General Information
13 Investment Objectives and Policies ... Investment Objective
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
Agreement; Officers and
Directors; General Information
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
Agreement
22 Calculation of Performance Data ....... Performance Information
23 Financial Statements .................. N/A
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CROSS-REFERENCE SHEET
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PART C
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Item No. Description Location in Part C
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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
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PROSPECTUS
MARCH 31, 1998
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DELAWARE GROUP
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PREMIUM FUND, INC.
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REIT SERIES
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1818 Market Street
Philadelphia, PA 19103
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TABLE OF CONTENTS
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Cover Page
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Synopsis
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Investment Objective and Policies
Introduction
Investment Strategy
Special Risk Factors
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Purchase and Redemption
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Dividends and Distributions
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Taxes
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Calculation of Offering Price and Net Asset Value Per Share
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Management of the Fund
Performance Information
Distribution and Service
Expenses
Description of Fund Shares
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Other Considerations
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This Prospectus describes the REIT Series (the "Series") of Delaware
Group Premium Fund, Inc. (the "Fund"). The Series' objective is to seek to
achieve maximum long-term total return. Capital appreciation is a secondary
objective. It seeks to achieve its objectives by investing in securities of
companies primarily engaged in the real estate industry. This Series has the
same objective and investment discipline as The Real Estate Investment Trust
Portfolio and The Real Estate Investment Trust Portfolio II of Delaware Pooled
Trust, Inc., separate Delaware Group funds, which also invest in securities of
companies primarily engaged in the real estate industry.
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
Series in accordance with allocation instructions received from contract
owners. Although the 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. Part B of
the Fund's registration statement, dated March 31, 1998, as it may be amended
from time to time, contains additional information about the Series and has
been filed with the Securities Exchange Commission. Part B is incorporated by
reference into this Prospectus and is available, without charge, by writing to
Delaware Distributors, L.P. (the "Distributor") at the above address or by
calling 1-800-523-1918. The Series' financial statements will appear in the
Fund's Annual Report, and will accompany any response to requests for Part B.
The Securities and Exchange Commission also maintains a Web site
(http://www.sec.gov) that contains Part B, material we incorporated by
reference, and other information regarding registrants that electronically
file with the Securities and Exchange Commission.
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
SERIES 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 THE PRINCIPAL AMOUNT INVESTED.
SHARES OF THE SERIES ARE NOT BANK OR CREDIT UNION DEPOSITS.
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SYNOPSIS
Investment Objective
The investment objective of the Series is to seek to achieve maximum
long-term total return. Capital appreciation is a secondary objective. It
seeks to achieve its objectives by investing in securities of companies
primarily engaged in the real estate industry. Under normal circumstances, at
least 65% of the Series' total assets will be invested in equity securities of
real estate investment trusts ("REITs"). For further details, see Investment
Objective and Policies and Other Considerations.
Risk Factors and Special Considerations
The Series concentrates its investments in the real estate industry,
so its net asset value can be expected to fluctuate in light of factors
affecting that industry and may fluctuate more widely than a portfolio that
invests in a broader range of industries. By investing primarily in securities
of REITs, the Series is also subject to interest rate risk.
The Series may invest up to 10% of its total assets in foreign
securities, including securities of issuers in emerging markets. Those
securities pose special risks that do not typically arise in connection with
investments in U.S. securities.
The Series may use futures contracts, options on futures contracts
and options on stock and may engage in foreign currency options and futures
transactions for hedging purposes. There are special risks that result from
the use of options and futures.
The Series is considered a nondiversified investment company under
the Investment Company Act of 1940 (the "1940 Act") and may be subject to
greater risks than if the Series were diversified. A nondiversified portfolio
of securities is believed to be subject to greater risk because adverse
effects on the portfolio's security holdings may affect a larger portion of
its overall assets.
See Investment Objective and Policies concerning these and other
investment policies of the Series.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of the
Board of Directors. The Manager also provides investment management services to
certain of the other funds in the Delaware Group. Lincoln Investment Management,
Inc. ("Lincoln" or "Sub-Adviser"), a wholly owned subsidiary of Lincoln National
Corporation, acts as sub-adviser to the Manager with respect to the Fund.
Delaware Distributors, L.P. (the "Distributor") is the national distributor for
the Fund and for all of the other mutual funds in the Delaware Group. Delaware
Service Company, Inc. (the "Transfer Agent") is the shareholder servicing,
dividend disbursing, accounting services and transfer agent for the Fund and for
all of the other mutual funds in the Delaware Group. See Management of the Fund
for further information regarding the Manager and the Sub-Adviser and the fees
payable under the Fund's Investment Management Agreement and Sub-Advisory
Agreement.
Open-End Investment Company
The Fund was organized as a Maryland corporation on February 19,
1987, and is an open-end management investment company. See Shares under
Management of the Fund.
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INVESTMENT OBJECTIVE AND POLICIES
INTRODUCTION
The Fund, a corporation organized in Maryland on February 19, 1987,
is an open-end management investment company offering multiple series of
shares. This Prospectus offers shares of the REIT Series.
The objective of the Series is to seek to achieve maximum long-term
total return. Capital appreciation is a secondary objective. It seeks to
achieve its objectives by investing in securities of companies primarily
engaged in the real estate industry. The Series is considered a nondiversified
investment company under the 1940 Act and may be subject to greater risks than
if the Series were diversified. A nondiversified portfolio of securities is
believed to be subject to greater risk because adverse effects on the
portfolio's security holdings may affect a larger portion of its overall
assets.
The Series may be suitable for the patient investor interested in
long-term capital appreciation with the potential for current income.
Investors should be willing to accept the risks associated with investments in
a portfolio of equity securities and convertible securities issued by domestic
and foreign issuers concentrated in the real estate industry. Because current
income is a secondary objective of the Series, the Series is not suitable as
an investment vehicle for investors whose primary investment goal is current
income.
The risks associated with an investment in the Series are discussed
below under Special Risk Factors.
The investment objective of the Series is described below, together
with the policies the Series employs in its efforts to achieve its objective.
There is no assurance that the Series will attain its objective. The
investment objective of the Series is nonfundamental and may be changed by
without approval of shareholders. Unless otherwise noted, the investment
policies described below are not fundamental policies and may be changed
without shareholder approval. Part B provides more information on the Series'
investment policies and restrictions.
INVESTMENT STRATEGY
The investment objective of the Series is to achieve maximum
long-term total return. Capital appreciation is a secondary objective. The
Series seeks to achieve its objectives by investing in securities of companies
principally engaged in the real estate industry. Under normal circumstances,
at least 65% of the Series' total assets will be invested in equity securities
of real estate investment trusts ("REITs"). The Series will operate as a
nondiversified fund as defined by the 1940 Act.
The Series invests in equity securities of REITs and other real
estate industry operating companies ("REOCs"). For purposes of the Series'
investments, a REOC is a company that derives at least 50% of its gross
revenues or net profits from either (1) the ownership, development,
construction, financing, management or sale of commercial, industrial or
residential real estate, or (2) products or services related to the real
estate industry, such as building supplies or mortgage servicing. The Series'
investments in equity securities of REITs and REOCs may include, from time to
time, sponsored or unsponsored American Depositary Receipts ("ADRs") actively
traded in the United States. Equity securities for this purpose include common
stocks, securities convertible into common stocks and securities having common
stock characteristics, such as rights and warrants to purchase common stocks.
The Series may also purchase preferred stock. The Series may invest up to 10%
of its assets in foreign securities (not including ADRs), and in convertible
securities. See Foreign Investment Information, Depositary Receipts and
Convertible, Debt and Non-Traditional Equity Securities under Other
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Considerations for further discussion of these investment policies. The Series
may also invest in mortgage-backed securities. See Mortgage-Backed Securities
under Other Considerations for more detailed information about this investment
policy.
The Series may hold cash or invest in short-term debt securities and
other money market instruments when, in the Manager's opinion, such holdings
are prudent given then prevailing market conditions. Except when the Manager
believes a temporary defensive approach is appropriate, the Series will not
hold more than 5% of its total assets in cash or such short-term investments.
All these short-term investments will be of the highest quality as determined
by a nationally-recognized statistical rating organization (e.g. AAA by S&P or
Aaa by Moody's) or be of comparable quality as determined by the Manager. See
Other Considerations for further details concerning these and other investment
policies.
Although the Series does not invest directly in real estate, the
Series does invest primarily in REITs, and may purchase equity securities of
REOCs. Thus, because the Series concentrates its investments in the real
estate industry, an investment in the Series may be subject to certain risks
associated with direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in
the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition; property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties resulting from, environmental problems;
casualty for condemnation losses, uninsured damages from floods, earthquakes
or other natural disasters; limitations on and variations in rents; and
changes in interest rates.
The Series may invest without limitation in shares of REITs. REITs
are pooled investment vehicles which invest primarily in income-producing real
estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. Like investment companies such as the Series, REITs are not taxed on
income distributed to shareholders provided they comply with several
requirements in the Internal Revenue Code of 1986, as amended (the "Code").
REITs are subject to substantial cash flow dependency, defaults by borrowers,
self-liquidation, and the risk of failing to qualify for tax-free pass-through
of income under the Code, and/or to maintain exemptions from the 1940 Act. By
investing in REITs indirectly through the Series, a shareholder bears not only
a proportionate share of the expenses of the Series, but also, indirectly,
similar expenses of the REITs. For a further discussion of the risks presented
by investing in REITs, see Other Considerations--REITs.
While the Series does not intend to invest directly in real estate,
the Series could, under certain circumstances, own real estate directly as a
result of a default on securities that it owns. In addition, if the Series has
rental income or income from the direct disposition of real property, the
receipt of such income may adversely affect the Series' ability to retain its
tax status as a regulated investment company.
The Series may also, to a limited extent, enter into futures
contracts on stocks, purchase or sell options on such futures, engage in
certain options transactions on stocks and enter into closing transactions
with respect to those activities. However, these activities will not be
entered into for speculative purposes, but rather to hedge uninvested cash
against movements in the prices of securities in which the Series intends to
invest. Such positions will generally be eliminated when it becomes possible
to invest in such securities. See Other
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Considerations--Futures Contracts and Options on Futures Contracts and Options
for a further discussion of these investment policies.
In connection with the Series' ability to invest up to 10% of its
total assets in the securities of foreign issuers, currency considerations may
present risks if the Series holds international securities. Currency
considerations carry a special risk for a portfolio of international
securities. In this regard, the Series may actively carry on hedging
activities, and may invest in forward foreign currency exchange contracts to
hedge currency risks associated with the purchase of individual securities
denominated in a particular currency. See Other Considerations--Forward
Foreign Currency Exchange Contracts.
The Manager does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Manager may take advantage of short-term opportunities that are
consistent with the Series' investment objectives. It is anticipated that the
annual turnover rate of the Series, under normal circumstances, will generally
not exceed 100%. See Portfolio Trading Practices.
SPECIAL RISK FACTORS
An investment in the Series entails certain risks and considerations
about which an investor should be aware.
The Series may invest up to 10% of its total assets in securities of
foreign issuers which normally are denominated in foreign currencies, and may
hold foreign currency directly. Investments in securities of non-United States
issuers which are generally denominated in foreign currencies involve certain
risk and opportunity considerations not typically associated with investing in
United States companies. Consequently, the Series may be affected by changes
in currency rates and exchange control regulations and may incur costs in
connection with conversions between currencies. To hedge this currency risk
associated with investments in non-U.S. dollar denominated securities, the
Series may invest in forward foreign currency contracts. Those activities pose
special risks which do not typically arise in connection with investments in
U.S. securities. In addition, the Series may engage in foreign currency
options and futures transactions. For a discussion of the risks associated
with foreign securities see Foreign Investment Information and for those
concerning these hedging instruments see Risks of Transactions in Options,
Futures and Forward Contracts, both of which references appear under the
heading Other Considerations.
The Series may commit its assets eligible for foreign investment to
securities of issuers located in emerging markets. Investments in securities
of companies in emerging markets present a greater degree of risk than tends
to be the case for foreign investments in Western Europe and other developed
markets. Among other things, there is a greater possibility of expropriation,
nationalization, confiscatory taxation, income earned or other special taxes,
foreign exchange restrictions, limitations on the repatriation of income and
capital from investments, defaults in foreign government debt, and economic,
political or social instability. In addition, in many emerging markets, there
is substantially less publicly available information about issuers and the
information that is available tends to be of a lesser quality. Economic
markets and structures tend to be less mature and diverse and the securities
markets which are subject to less government regulation or supervision may
also be smaller, less liquid and subject to greater price volatility. See
Other Considerations--Foreign Investment Information for a more extensive
discussion of these and other factors.
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The foreign securities in which the Series may invest from time to
time may be listed primarily on foreign exchanges which trade on days when the
New York Stock Exchange is closed (such as Saturday). As a result, the net
asset value of the Series may be significantly affected by such trading on
days when shareholders will have no access to the Series. See Calculation of
Offering Price and Net Asset Value.
The Series also may, under certain circumstances, use certain futures
contracts and options on futures contracts, as well as options on stock. The
Series will only enter into these transactions for hedging purposes. See
Futures Contracts and Options on Futures Contracts and Risks of Transactions
in Options, Futures and Forward Contracts, both of which references appear
under the heading Other Considerations.
The Series concentrates its investments in the real estate industry.
As a consequence, the net asset value of the Series can be expected to
fluctuate in light of the factors affecting that industry, and may fluctuate
more widely than a portfolio that invests in a broader range of industries.
The Series may be more susceptible to any single economic, political or
regulatory occurrence affecting the real estate industry.
The Series, by investing primarily in securities of real estate
investment trusts, is subject to interest rate risk, in that as interest rates
decline, the value of the Series' investments in REITs holding fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of the Series' investments in REITs holding fixed rate obligations can
be expected to decline. See Other Considerations--REITs.
The Series may lend its portfolio securities, may invest in
repurchase agreements and may purchase securities on a when-issued basis.
While the Series intends to seek to qualify as a "diversified"
investment company under provisions of Subchapter M of the Code, it 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, certain qualifying
securities 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 of the investment strategies identified above involves special
risks which are described under Other Considerations in this Prospectus and
Investment Policies, Portfolio Techniques and Risk Considerations in Part B.
* * *
Part B sets forth other more specific investment restrictions and
descriptions of Moody's and S&P ratings.
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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. Contract owners do not deal directly with the Fund with
respect to the acquisition or redemption of Fund shares.
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DIVIDENDS AND DISTRIBUTIONS
The Series will normally make payments from net investment income and
net realized securities, if any, [quarterly]. The Fund's fiscal year ends on
December 31.
Both dividends and distributions, if any, are automatically
reinvested in additional Series shares.
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TAXES
The Fund intends to qualify 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 and
it satisfies certain other requirements relating to the sources of its income
and diversification of its assets. 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.
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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 NAV are computed
as of the close of regular trading on the New York Stock Exchange (ordinarily,
4 p.m., Eastern time) on days when the Exchange is open.
The Series' NAV per share is computed by adding the value of all
securities and other assets in the Series' portfolio, deducting any
liabilities of the Series (expenses and fees are accrued daily) and dividing
by the number of the 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 the 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 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.
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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 Manager
Delaware Management Company, Inc. (the "Manager") furnishes
investment advisory services to the Series. Lincoln Investment Management,
Inc. ("Lincoln"), a wholly owned subsidiary of Lincoln National Corporation
("Lincoln National"), acts as sub-adviser to the Manager with respect to
Series. In its capacity as sub-adviser, Lincoln furnishes the Manager with
investment recommendations, asset allocation advice, research, economic
analysis and other investment services with respect to the securities in which
the Series may invest.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On January 31, 1998, the Manager and its affiliates
within the Delaware Group including, Delaware International Advisers Ltd.,
were managing in the aggregate more than $00 billion in assets in the various
institutional or separately managed (approximately $00,000,000,000) and
investment company (approximately $00,000,000,000) accounts. Lincoln was
incorporated in 1930. Lincoln's primary activity is institutional fixed-income
investment management and consulting. Such activity includes fixed-income
portfolios, private placements, real estate debt and equity, and
asset/liability management. As of January 31, 1998, Lincoln had over $00
billion in assets under management. Lincoln provides investment management
services to Lincoln National Corporation, its principal subsidiaries and
affiliated registered investment companies, and acts as investment adviser to
other unaffiliated clients.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and
a wholly owned subsidiary of Lincoln National was completed. DMH and the
Manager are now indirect, wholly owned subsidiaries, and subject to the
ultimate control, of Lincoln National. Lincoln, the sub-adviser to the Manager
with respect to the Series, is also a wholly owned subsidiary of Lincoln
National. The Manager and Lincoln may be deemed to be affiliated persons under
the 1940 Act, as the two companies are each under 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. The
Manager's address is One Commerce Square, 2005 Market Street, Philadelphia, PA
19103. Lincoln's address is 200 E. Berry Street, Fort Wayne, IN 46802.
The Manager has entered into an Investment Advisory Agreement with
the Fund on behalf of the Series. The Manager has also entered into a
Sub-Advisory Agreement with Lincoln with respect to the Series. Under these
Agreements, the Manager, subject to the control and supervision of the Fund's
Board of Directors and in conformance with the stated investment objectives
and policies of the Series, manages the investment and reinvestment of the
assets of the Series. In this regard, it is the Manager's responsibility to
make investment decisions for the Series.
As compensation for the services to be rendered under the advisory
agreement, the Manager is entitled to an annual advisory fee equal to 0.75% of
the Series' average daily net assets. Lincoln receives 00% of the advisory fee
paid to the Manager for acting as sub-adviser to the Manager with respect to
the Series. The directors of the Fund annually review fees paid to the Manager
and the Sub-Adviser. See Expenses for a discussion of a voluntary waiver of
its management fee undertaken by the Manager.
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Babak Zenouzi has primary responsibility for making day-to-day
investment decisions for the Fund and has had such responsibility since its
inception. Mr. Zenouzi holds a BS in Finance and Economics from Babson College
in Wellesley, Massachusetts, and an MS in Finance from Boston College. Prior
to joining the Manager in 1992, he was with The Boston Company where he held
the positions of assistant vice president, senior financial analyst, financial
analyst and portfolio accountant.
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 Series' investment objective, the annual
portfolio turnover rate is not expected to exceed 100%. The Manager uses its
best efforts to obtain the best available price and most favorable execution
for Series portfolio transactions. Orders may be placed with brokers or
dealers who provide brokerage and research services to the Manager or its
respective advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the
Manager may consider a broker/dealer's sales of shares of funds in the
Delaware Group of funds in placing portfolio orders, and may place orders with
broker/dealers that have agreed to defray certain expenses of such funds, such
as custodian fees.
PERFORMANCE INFORMATION
From time to time, the Series may quote 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 Series may also advertise aggregate and average total
return information over additional periods of time.
Because securities' prices fluctuate, investment results of the
Series will fluctuate over time and past performance should not be considered
as a representation of future results.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. serves as the national
distributor for the Series' shares under a Distribution Agreement dated March
31, 1998. It bears all of the costs of promotion and distribution.
Delaware Service Company, Inc. (the "Transfer Agent") serves as the
Series' shareholder servicing, dividend disbursing and transfer agent under
the Amended and Restated Shareholders Services Agreement dated March 31, 1998.
The Transfer Agent also provides accounting services to the Series pursuant to
the terms of a separate Fund Accounting Agreement. The directors of the Fund
annually review service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly
owned subsidiaries of DMH.
EXPENSES
The Series is responsible for all of its own expenses other than
those borne by the Manager under the Investment Management Agreement and those
borne by the Distributor under the Distribution Agreement. The Series'
expenses include: its 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.
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The Manager elected voluntarily to waive its fee and pay the expenses
of the Series to the extent that the Series' annual operating expenses,
exclusive of taxes, interest, brokerage commissions and extraordinary
expenses, do not exceed 0.85% of average daily net assets for the period from
commencement of the public offering for the Series through June 30, 1998.
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 State
Mutual Life Assurance Company of America and Separate Accounts VA-K, VEL, VEL
II and Inheiritage of SMA Life Assurance 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.
The Fund was organized as a Maryland corporation on February 19,
1987. The authorized capital stock of the Fund consists of one billion shares
of common stock, $.01 par value. The Series is currently allocated fifty
million shares.
The Series' shares have equal voting rights and are equal in all
other respects. 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. Shareholders
of the Series are entitled to a pro-rata share of all dividends and
distributions arising from an investment in the 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 prospectus
for the separate account which invests in the Fund, the voting instructions
received from contract owners may be disregarded.
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OTHER CONSIDERATIONS
REITS
The Series' investments in REITs present certain further risks that
are unique and in addition to the risks associated with investing in the real
estate industry in general. Equity REITs may be affected by changes in the
value of the underlying property owned by the REITs, while mortgage REITs may
be affected by the quality of any credit extended. REITs are dependent on
management skills, are not diversified, and are subject to the risks of
financing projects. REITs whose underlying assets include long-term health
care properties, such as nursing, retirement and assisted living homes, may be
impacted by federal regulations concerning the health care industry.
REITs (especially mortgage REITs) are also subject to interest rate
risks -- when interest rates decline, the value of a REIT's investment in
fixed rate obligations can be expected to rise. Conversely, when interest
rates rise, the value of a REIT's investment in fixed rate obligations can be
expected to decline. In contrast, as interest rates on adjustable rate
mortgage loans are reset periodically, yields on a REIT's investments in such
loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
REITs may have limited financial resources, may trade less frequently
and in a limited volume, and may be subject to more abrupt or erratic price
movements than other securities.
U.S. Government Securities
The U.S. government securities in which the Series may invest for
temporary purposes and otherwise (see Investment Objective and Policies),
include a variety of securities which are issued or guaranteed as to the payment
of principal and interest by the U.S. government, and by various agencies or
instrumentalities which have been established or sponsored by the U.S.
government. An instrumentality of the U.S. government is an entity organized
under Federal charter with government supervision.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and
U.S. government sponsored instrumentalities may or may not be backed by the
full faith and credit of the United States. In the case of securities not
backed by the full faith and credit of the United States, investors in such
securities look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the United States itself in the event the agency or
instrumentality does not meet its commitment. Agencies which are backed by the
full faith and credit of the United States include the Export-Import Bank,
Farmers Home Administration, Federal Financing Bank, and others. Certain
agencies and instrumentalities, such as the Government National Mortgage
Association ("GNMA"), are, in effect, backed by the full faith and credit of
the United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, are not
guaranteed by the United States, but those institutions are protected by the
discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institutions in meeting their debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under U.S. government supervision, but their debt securities are
backed only by the creditworthiness of those institutions, not the U.S.
government.
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Mortgage-Backed Securities
The Series may invest in mortgage-backed securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or by
government sponsored corporations. Those securities include, but are not
limited to, GNMA certificates. Such securities differ from other fixed-income
securities in that principal is paid back by the borrower over the length of
the loan rather than returned in a lump sum at maturity. When prevailing
interest rates rise, the value of a GNMA security may decrease as do other
debt securities. When prevailing interest rates decline, however, the value of
GNMA securities may not rise on a comparable basis with other debt securities
because of the prepayment feature of GNMA securities. Additionally, if a GNMA
certificate is purchased at a premium above its principal value because its
fixed rate of interest exceeds the prevailing level of yields, the decline in
price to par may result in a loss of the premium in the event of prepayment.
Funds received from prepayments may be reinvested at the prevailing interest
rates which may be lower than the rate of interest that had previously been
earned.
The Series also may invest in collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs are
debt securities issued by U.S. government agencies or by financial
institutions and other mortgage lenders and collateralized by a pool of
mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in
sequence as the underlying mortgages are repaid. REMICs, which were authorized
under the Tax Reform Act of 1986, are private entities formed for the purpose
of holding a fixed pool of mortgages secured by an interest in real property.
REMICs are similar to CMOs in that they issue multiple classes of securities.
To the extent any privately-issued CMOs or REMICs in which the Series may
invest are considered by the U.S. Securities and Exchange Commission (the
"Commission") to be investment companies, the Series will limit its
investments in such securities in a manner consistent with the provisions of
the 1940 Act.
The mortgages backing these securities include conventional 30-year
fixed rate mortgages, graduated payment mortgages and adjustable rate
mortgages. These mortgages may be supported by various types of insurance, may
be backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by the U.S. government, its agencies or instrumentalities. However,
the guarantees do not extend to the mortgage-backed securities' value, which
is likely to vary inversely with fluctuations in interest rates. These
certificates are in most cases "pass-through" instruments, through which the
holder receives a share of all interest and principal payments from the
mortgages underlying the certificate. Because the prepayment characteristics
of the underlying mortgages vary, it is not possible to predict accurately the
average life or realized yield of a particular issue of pass-through
certificates. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Series may reinvest the prepaid
amounts in securities, the yield of which reflects interest rates prevailing
at the time. Moreover, prepayments of mortgages which underlie securities
purchased at a premium could result in capital losses.
Certain CMOs and REMICs may have variable or floating interest rates
and others may be stripped. Stripped mortgage securities have greater market
volatility than other types of mortgage securities in which the Series may
invest. Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from
the mortgage assets, while the other class will receive most of the interest
and the remainder of the principal. In the most extreme case, one class will
receive all of the interest (the "interest-only" class), while the other class
will receive all of the principal (the "principal-only" class). The yield to
maturity on an interest-only class is extremely sensitive not only to changes
in prevailing interest rates but also to the rate of principal payments
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(including prepayments) on the related underlying mortgage assets, and a rapid
rate of principal payments may have a material adverse effect on the Series'
yield to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Series may fail to fully recoup its
initial investment in these securities even if the securities are rated in the
highest rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a
result, established trading markets have not yet been fully developed and,
accordingly, these securities are generally illiquid and to such extent,
together with any other illiquid investments, will not exceed 15% of a
Series's net assets.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. The Series may
invest in such private-backed securities, but the Series will do so (i) only
if the securities are 100% collateralized at the time of issuance by
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and (ii) currently, only if they are rated at the time of
purchase in the two highest grades by a nationally recognized statistical
rating agency.
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Short-Term Investments
The short-term investments in which the Series may invest consistent
with the limits described under Investment Objective and Policies are:
(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a
U.S. commercial bank. Time deposits are non-negotiable deposits maintained in
a banking institution for a specified period of time at a stated interest
rate. Time deposits maturing in more than seven days will not be purchased by
the Series, and time deposits maturing from two business days through seven
calendar days will not exceed 15% of the total assets of the Series.
Certificates of deposit are negotiable short-term obligations issued by
commercial banks against funds deposited in the issuing institution. Variable
rate certificates of deposit are certificates of deposit on which the interest
rate is periodically adjusted prior to their stated maturity based upon a
specified market rate. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods).
The Series will not invest in any security issued by a commercial
bank unless (i) the bank has total assets of at least $1 billion or, in the
case of a bank which does not have total assets of at least $1 billion, the
aggregate investment made in any one such bank is limited to $100,000 and the
principal amount of such investment is insured in full by the Federal Deposit
Insurance Corporation, (ii) it is a member of the Federal Deposit Insurance
Corporation, and (iii) the bank or its securities have received the highest
quality rating by a nationally recognized statistical rating organization;
(2) Commercial paper with the highest quality rating by a nationally
recognized statistical rating organization (e.g., A-1 by S&P or Prime-1 by
Moody's) or, if not so rated, of comparable quality as determined by the
Manager;
(3) Short-term corporate obligations with the highest quality rating
by a nationally recognized statistical rating organization (e.g., AAA by S&P
or Aaa by Moody's) or, if not so rated, of comparable quality as determined by
the Manager;
(4) U.S. government securities (see U.S. Government Securities); and
(5) Repurchase agreements collateralized by securities listed above.
When-Issued and Delayed Delivery Securities
The Series may purchase securities on a when-issued or delayed
delivery basis. In such transactions, instruments are purchased with payment
and delivery taking place in the future in order to secure what is considered
to be an advantageous yield or price at the time of the transaction. Delivery
of and payment for these securities may take as long as a month or more after
the date of the purchase commitment. The Series will maintain with its
Custodian Bank a separate account with a segregated portfolio of securities in
an amount at least equal to these commitments. The payment obligation and the
interest rates that will be received are each fixed at the time the Series
enters into the commitment and no interest accrues to the Series until
settlement. Thus, it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general
level of interest rates has changed. It is a current policy of the Series not
to enter into when-issued commitments exceeding in the aggregate 15% of the
market value of the Series' total assets less liabilities other than the
obligations created by these commitments.
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Repurchase Agreements
The Series may enter into repurchase agreements with brokers, dealers
or banks deemed to be creditworthy by the Manager under guidelines of the
Fund's directors. In a repurchase agreement, the Series buys securities from a
seller that has agreed to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement.
The term of these agreements is usually from overnight to one week and never
exceeds one year. Not more than 15% of the Series' assets may be invested in
repurchase agreements having a maturity in excess of seven days. Repurchase
agreements may be viewed as a fully collateralized loan of money by the Series
to the seller. The Series always receives securities as collateral with a
market value at least equal to the purchase price and this value is maintained
during the term of the agreement. If the seller defaults and the collateral
value declines, the Series might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Series' realization upon the
collateral may be delayed or limited. The Series may invest cash balances in a
joint repurchase agreement in accordance with an Order the Delaware Group has
obtained from the Commission under Section 17(d) of the 1940 Act.
Securities Lending Activities
The 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.
The major risk to which the 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, the Series will only enter into loan
arrangements after a review of all pertinent facts by the 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 investment
adviser.
Borrowing from Banks
The Series may borrow money as a temporary measure or to facilitate
redemptions. The Series has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and, consistent with
Commission rules, immediately after any borrowing in an amount which exceeds
5% of its net assets, there must be asset coverage of at least 300%. In the
event the asset coverage declines below 300%, the Series would take steps to
reduce the amount of its borrowings so that asset coverage would equal at
least 300%. Securities will not be purchased while the Series has an
outstanding borrowing.
Foreign Investment Information
Up to 10% of the total assets of the Series may be invested in
securities of foreign issuers and foreign currency. The Series has the right
to purchase securities in any developed, underdeveloped or emerging country.
Investors should consider carefully the substantial risks involved in
investing in securities issued by companies and governments of foreign
nations. These risks are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations, foreign exchange
control (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or
social instability or diplomatic developments which could affect investments
in securities of issuers in those nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about
companies in the United States and this information tends to be of a lesser
quality. Foreign companies are not subject to uniform accounting, auditing and
financial reporting standards,
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and auditing practices and requirements may not be comparable to those
applicable to United States companies. In particular, the assets and profits
appearing on the financial statements of a developing or emerging country
issuer may not reflect its financial position or results of operations in the
way they would be reflected had the financial statements been prepared in
accordance with United States generally accepted accounting principles. Also,
for an issuer that keeps accounting records in local currency, inflation
accounting rules may require for both tax and accounting purposes, that
certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses or profits. Consequently,
financial data may be materially affected by restatements for inflation and
may not accurately reflect the real condition of those issuers and securities
markets.
It is also expected that the expenses for custodial arrangements of
the Series' foreign securities will be somewhat greater than the expenses for
the custodial arrangements for U.S. securities of equal value. Dividends and
interest paid by foreign issuers may be subject to withholding and other
foreign taxes. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion of foreign withholding taxes will
reduce the income the Series receives from the companies comprising the
Series' investments.
Further, the 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, and may be subject to administrative
uncertainties. In many foreign countries, there is less government supervision
and regulation of business and industry practices, stock exchanges, brokers
and listed companies than in the United States, and capital requirements for
brokerage firms are generally lower. The foreign securities markets of many of
the countries in which the 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 volatile social conditions, relatively unstable governments
and political systems, economies based on only a few industries, economic
structures that are less diverse and mature, and securities markets that trade
a small number of securities, which can result in a low or nonexistent volume
of trading. Prices in these securities markets tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain
(as well as loss) than securities of companies located in developed countries.
Until recently, there has been an absence of a capital market structure or
market-oriented economy in certain emerging countries. Further, investments
and opportunities for investments by foreign investors are subject to a
variety of national policies and restrictions in many emerging countries.
These restrictions may take the form of prior governmental approval, limits on
the amount or type of securities held by foreigners, limits on the types of
companies in which foreigners may invest and prohibitions on foreign
investments in issuers or industries deemed sensitive to national interests.
Additional restrictions may be imposed at any time by these or other countries
in which the Series invests. Also, the repatriation of both investment income
and capital from several foreign countries is restricted and controlled under
certain regulations, including, in some cases, the need for certain
governmental consents. Although these restrictions may in the future make it
undesirable to invest in emerging countries, the Manager does not believe that
any current repatriation restrictions would affect their decision to invest in
such countries. Countries such as those in which the Series may invest have
historically experienced and may continue to experience substantial, and in
some periods extremely high, rates of inflation for many years, as well as
high interest rates, exchange rate fluctuations or currency depreciation,
large amounts of external debt, balance of payments and trade difficulties and
extreme poverty and unemployment. Other factors which may influence the
ability or willingness to service debt include, but are not limited to, a
country's cash flow situation, the
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availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, its
government's policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints to which a
government debtor may be subject.
With respect to investment in debt issues of foreign governments, the
ability of a foreign government or government-related issuer to make timely
and ultimate payments on its external debt obligations will also be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain
strategic imports could be vulnerable to fluctuations in international prices
of these commodities or imports. To the extent that a country receives payment
for its exports in currencies other than dollars, its ability to make debt
payments denominated in dollars could be adversely affected. If a foreign
government or government-related issuer cannot generate sufficient earnings
from foreign trade to service its external debt, it may need to depend on
continuing loans and aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign investment. The commitment
on the part of these foreign governments, multilateral organizations and
others to make such disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due may
curtail the willingness of such third parties to lend funds, which may further
impair the issuer's ability or willingness to service its debts in a timely
manner. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates because many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. The ability to service external debt will also depend on the
level of the relevant government's international currency reserves and its
access to foreign exchange. Currency devaluations may affect the ability of a
government issuer to obtain sufficient foreign exchange to service its
external debt.
As a result of the foregoing, a foreign governmental issuer may
default on its obligations. If such a default occurs, the Series may have
limited effective legal recourse against the issuer and/or guarantor. Remedies
must, in some cases, be pursued in the courts of the defaulting party itself,
and the ability of the holder of foreign government and government-related
debt securities to obtain recourse may be subject to the political climate in
the relevant country. In addition, no assurance can be given that the holders
of commercial bank debt will not contest payments to the holders of other
foreign government and government-related debt obligations in the event of
default under their commercial bank loan agreements.
Forward Foreign Currency Exchange Contracts
As noted above, the foreign investments made by the Series present
currency considerations which pose special risks. The Manager uses a
purchasing power parity approach to evaluate currency risk. A purchasing power
parity approach attempts to identify the amount of goods and services that a
dollar will buy in the United States and compares that to the amount of a
foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less abroad, the foreign currency may be
considered to be overvalued. When the dollar buys more abroad, the foreign
currency may be considered to be undervalued. Eventually, currencies should
trade at levels that should make it possible for the dollar to buy the same
amount of goods and services overseas as in the United States.
Although the Series 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,
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purchase or sell foreign currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of 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). The Series will convert currency on
a spot basis from time to time, and investors should be aware of the costs of
currency conversion.
A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract, agreed upon by the parties, at a price set at the
time of the contract. 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.
For example, when the Manager believes that the currency of a
particular foreign country may suffer a significant decline against the U.S.
dollar or against another currency, the Series may enter 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 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.
The Series may enter into forward contracts to hedge the currency
risk associated with the purchase of individual securities denominated in
particular currencies. In the alternative, the Series may also engage in
currency "cross hedging" when, in the opinion of the Manager, as appropriate,
the historical relationship among foreign currencies suggests that the Series
may achieve the same protection for a foreign security at reduced cost and/or
administrative burden through the use of a forward contract relating to a
currency other than the U.S. dollar or the foreign currency in which the
security is denominated.
At the maturity of a forward contract, 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 precise matching of forward foreign currency 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 strategies are highly
uncertain. It is impossible to forecast the market value of the Series'
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
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decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of a security if its market value
exceeds the amount of foreign currency the Series is obligated to deliver.
Futures Contracts and Options on Futures Contracts
In order to remain fully invested, to facilitate investments in
equity securities and to reduce transaction costs, the Series may, to a
limited extent, enter into futures contracts, purchase or sell options on
futures contracts and engage in certain transactions in options on securities,
and may enter into closing transactions with respect to such activities. The
Series will only enter into these transactions for hedging purposes if it is
consistent with the Series' investment objectives and policies and the Series
will not engage in such transactions to the extent that obligations relating
to futures contracts, options on futures contracts and options on securities
(see Options on Securities, below), in the aggregate, exceed 25% of the
Series' assets.
The Series may enter into contracts for the purchase or sale for
future delivery of securities. When a futures contract is sold, the Series
incur a contractual obligation to deliver the securities underlying the
contract at a specified price on a specified date during a specified future
month. A purchase of a futures contract means the acquisition of a contractual
right to obtain delivery to the Series of the securities called for by the
contract at a specified price during a specified future month. Because futures
contracts require only a small initial margin deposit, the Series would then
be able to keep a cash reserve applicable to meet potential redemptions while
at the same time being effectively fully invested.
The Series may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options except that options on
futures give the purchaser the right, in return for the premium paid, to
assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during
the period of the option. The Series will not enter into futures contracts and
options thereon to the extent that 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 futures contracts and options thereon would
not exceed 20% of the Series' total assets. In the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded
in calculating the 5%.
To the extent that interest or exchange rates 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 would prevent
the Series from closing out its positions relating to futures.
Options
Options on Securities
The Series may write covered call options on U.S. securities,
purchase call options on such securities and enter into closing transactions
related thereto. The Series may also purchase put options on U.S. securities,
may write secured put options on such securities and enter into closing
transactions related thereto.
A covered call option obligates the writer, in return for the premium
received, to sell one of its securities to the purchaser of the option for an
agreed price up to an agreed date. The advantage is that the writer receives
premium income and the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy. The Series will only write call
options on securities it owns, or will segregate with its
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Custodian Bank and mark to market daily cash or securities in an amount not
less than the market price of the security. The Series will only purchase call
options to the extent that premiums paid on all outstanding call options do
not exceed 2% of the Series' total assets.
A put option obligates the writer, in return for the premium
received, to buy the security underlying the option at the exercise price
during the option period, and the purchaser of the option has the right to
sell the security to the writer. The advantage is that the writer receives
premium income while the purchaser can be protected should the market value of
the security decline. The Series will only write put options on a secured
basis, which means that the Series will maintain, in a segregated account with
its Custodian Bank, cash or U.S. government securities in an amount not less
than the exercise price of the option at all times during the option period.
The Series will only purchase put options if the Series owns the security
covered by the put option at the time of purchase and to the extent that the
premiums on all outstanding put options do not exceed 2% of the Series' total
assets.
Closing transactions essentially let the Series offset put options or
call options prior to exercise or expiration. If the Series cannot effect
closing transactions, it may have to hold a security it would otherwise sell
or deliver a security it might want to hold.
The Series may use both exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Series will only invest
in such options to the extent consistent with their 15% limit on investments
in illiquid securities.
With respect to writing covered call options, the Series may lose the
potential market appreciation of the securities subject to the option if the
Manager's judgment is wrong and the price of the security moves in the
opposite direction from what was anticipated. 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. When writing
put options, the Series may be required, when the put is exercised, to
purchase securities at higher prices than current market prices.
Risks of Transactions in Options, Futures and Forward Contracts
The use of futures contracts, options on futures contracts, forward
contracts and certain options for hedging and other non-speculative purposes
as described above involves certain risks. For example, a lack of correlation
between price changes of an option or futures contract and the assets being
hedged could render the Series' hedging strategy unsuccessful and could result
in losses. The same results could occur if movements of foreign currencies do
not correlate as expected by the investment adviser at a time when the Series
is using a hedging instrument denominated in one foreign currency to protect
the value of a security denominated in a second foreign currency against
changes caused by fluctuations in the exchange rate for the dollar and the
second currency. If the direction of securities prices, interest rates or
foreign currency prices is incorrectly predicted, the Series will be in a
worse position than if such transactions had not been entered into. In
addition, since there can be no assurance that a liquid secondary market will
exist for any contract purchased or sold, the Series may be required to
maintain a position (and in the case of written options may be required to
continue to hold the securities used as cover) until exercise or expiration,
which could result in losses. Further, options and futures contracts on
foreign currencies and forward contracts entail particular risks related to
conditions affecting the underlying currency. Over-the-counter transactions in
options and forward contracts also involve risks arising from the lack of an
organized exchange trading environment.
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Restricted/Illiquid Securities
The Series may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933 ("1933 Act"). Rule 144A exempts
many privately placed and legally restricted securities from the registration
requirements of the 1933 Act and permits such securities to be freely traded
among certain institutional buyers such as the Series.
The Series may invest no more than 15% of the value of its net assets
in illiquid securities. Illiquid securities, for purposes of this policy,
include repurchase agreements maturing in more than seven days.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Series' limitation on
investments in illiquid assets. The Board has instructed the Manager 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; and (iv) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Series' holdings of illiquid securities exceed the Series' 15% limit on
investment in such securities, the investment adviser will determine what
action shall be taken to ensure that the Series continues to adhere to such
limitation.
Convertible, Debt and Non-Traditional Equity Securities
A portion of the Series' assets may be invested in convertible
securities of issuers in the real estate industry. A convertible security is a
security which may be converted at a stated price within a specified period of
time into a certain quantity of the common stock of the same or a different
issuer. Convertible and debt securities are senior to common stocks in a
corporation's capital structure, although convertible securities are usually
subordinated to similar nonconvertible securities. Convertible and debt
securities provide a fixed-income stream and the opportunity, through its
conversion feature, to participate in the capital appreciation resulting from
a market price advance in the convertible security's underlying common stock.
Just as with debt securities, convertible securities tend to increase in
market value when interest rates decline and tend to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the security's underlying common stock and
tends to increase as the market value of the underlying stock rises, whereas
it tends to decrease as the market value of the underlying stock declines.
Convertible and debt securities acquired by the Series may be rated below
investment grade, or unrated. These lower rated convertible and debt
securities are subject to credit risk considerations substantially similar to
such considerations affecting high risk, high-yield bonds, commonly referred
to as "junk bonds."
The Series may invest in convertible preferred stocks that offer
enhanced yield features, such as Preferred Equity Redemption Cumulative Stock
("PERCS"), which provide an investor, such as the Series, with the opportunity
to earn higher dividend income than is available on a company's common stock.
A PERCS is a preferred stock which generally features a mandatory conversion
date, as well as a capital appreciation limit which is usually expressed in
terms of a stated price. Upon the conversion date, most PERCS convert into
common stock of the issuer (PERCS are generally not convertible into cash at
maturity). Under a typical arrangement, if after a predetermined number of
years the issuer's common stock is trading at a price below that set by the
capital appreciation limit, each PERCS would convert to one share of common
stock. If, however, the
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issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a
call premium over the market price to the investor. This call premium declines
at a preset rate daily, up to the maturity date of the PERCS.
The Series may also invest in other enhanced convertible securities.
These include but are not limited to ACES (Automatically Convertible Equity
Securities), PEPS (Participating Equity Preferred Stock), PRIDES (Preferred
Redeemable Increased Dividend Equity Securities), SAILS (Stock Appreciation
Income Linked Securities), TECONS (Term Convertible Notes), QICS (Quarterly
Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS and DECS all have the
following features: they are company-issued convertible preferred stock;
unlike PERCS, they do not have capital appreciation limits; they seek to
provide the investor with high current income, with some prospect of future
capital appreciation; they are typically issued with three to four-year
maturities; they typically have some built-in call protection for the first
two to three years; investors have the right to convert them into shares of
common stock at a preset conversion ratio or hold them until maturity; and
upon maturity, they will automatically convert to either cash or a specified
number of shares of common stock.
Depositary Receipts
The Series may invest in sponsored and unsponsored American
Depositary Receipts ("ADRs") that are actively traded in the United States.
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 depositary, and "unsponsored" ADRs are issued without the participation
of the issuer of the deposited security. Holders of unsponsored ADRs generally
bear all the costs of such facilities and the depositary of an unsponsored ADR
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. ADRs may be listed on a national securities exchange or may
be traded in the over-the-counter market. ADR prices are denominated in U.S.
dollars although the underlying securities are denominated in a foreign
currency. Investments in ADRs involve risks similar to those accompanying
direct investments in foreign securities.
Zero Coupon Securities
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 intends to
qualify 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.
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PART B--STATEMENT OF ADDITIONAL INFORMATION
MARCH 31, 1998
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DELAWARE GROUP PREMIUM FUND, INC.
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1818 Market Street
Philadelphia, PA 19103
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TABLE OF CONTENTS
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Cover Page
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Investment Objective and Policies
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Accounting and Tax Issues
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Performance Information
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Trading Practices and Brokerage
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Offering Price
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Dividends and Realized Securities Profits
Distributions
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Taxes
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Investment Management Agreement
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Officers and Directors
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General Information
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Appendix A--Description of Ratings
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Financial Statements
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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 multiple separate Portfolios. 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 Prospectus of
the REIT Series (the "Series") of the Fund dated March 31, 1998, as it may be
amended from time to time, and describes only the Series. It should be read in
conjunction with the prospectuses for the variable contract and the Series. Part
B is not itself a Prospectus but is, in its entirety, incorporated by reference
into the Series' Prospectus. The Series' Prospectus may be obtained by writing
or calling your investment dealer or by contacting the Series national
distributor, Delaware Distributors, L.P. (the "Distributor"), 1818 Market
Street, Philadelphia, PA 19103.
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INVESTMENT OBJECTIVE AND POLICIES
The Series' objective is to seek to achieve maximum long-term total
return. Capital appreciation is a secondary objective. It seeks to achieve its
objectives by investing in securities of companies primarily engaged in the
real estate industry. This Series has the same objective and investment
discipline as The Real Estate Investment Trust Portfolio and The Real Estate
Investment Trust Portfolio II of Delaware Pooled Trust, Inc., separate
Delaware Group funds.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions for the Series which
may not be amended without approval of a majority of the outstanding voting
securities of the Series, which is the lesser of more than 50% of the
outstanding voting securities or 67% of the voting securities of the 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.
1. The Series will concentrate its investments in the real estate
industry. The Series will not invest more than 25% of its total assets in any
other single industry, provided that there is no limitation with respect to
investments in obligations issued or guaranteed as to principal or interest by
the U.S. Government, its agencies or instrumentalities.
2. The Series will not make loans other than by the purchase of all or
a portion of a publicly or privately distributed issue of bonds, debentures or
other debt securities of the types commonly offered publicly or privately and
purchased by financial institutions (including repurchase agreements and loan
participations), whether or not the purchase was made upon the original
issuance of the securities, and except that the Series may loan its assets to
qualified broker/dealers or institutional investors.
3. The Series will not engage in underwriting of securities of other
issuers, except that portfolio securities, including securities purchased in
private placements, may be acquired under circumstances where, if sold, the
Series might be deemed to be an underwriter under the Securities Act of 1933.
No limit is placed on the proportion of the Series' assets which may be
invested in such securities.
4. The Series will not borrow money or issue senior securities, except
to the extent permitted by the 1940 Act or any rule or order thereunder or
interpretation thereof. Subject to the foregoing, the Series may engage in
short sales, purchase securities on margin, and write put and call options.
5. The Series will not purchase or sell physical commodities or
physical commodity contracts, including physical commodity option or futures
contracts in a contract market or other futures market.
6. The Series will not purchase or sell real estate; provided, that the
Series may invest in securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein; provided
further, that the Series may own real estate directly as a result of a default
on securities the Series owns.
In addition to the above fundamental investment restrictions, the
Series has the following investment restrictions which may be amended or
changed without approval of shareholders.
1. The Series will not invest for the purpose of acquiring control of
any company.
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2. To the extent that a Portfolio invests in securities of other
investment companies, it will only do so in accordance with the provisions of
the Investment Company Act in effect at the time of the investment.
3. The Series will not invest in interests in oil, gas and other
mineral leases or other mineral exploration or development programs.
4. The Series will not purchase securities on margin except short-term
credits that may be necessary for the clearance of purchases and sales of
securities. This restriction does not apply to the purchase of futures or
options contracts.
Foreign Investment Information
Investors in the Series should recognize that investing in securities
issued by foreign corporations and foreign governments involves certain
considerations, including those set forth in the Prospectus, which are not
typically associated with investments in United States issuers. Since the
securities of foreign issuers are frequently denominated in foreign
currencies, and since 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 the Series permit it to enter into forward foreign
currency exchange contracts. See Foreign Currency Transactions, below.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Series. Payment
of such interest equalization tax, if imposed, would reduce the 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
issuers. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include,
as relevant, the following: (i) the acquisition of, or becoming the obligor
under, a bond or other debt instrument (including, to the extent provided in
Treasury Regulations, preferred stock); (ii) the accruing of certain trade
receivables and payables; and (iii) the entering into or acquisition of any
forward contract and similar financial instrument if such instrument is not
"marked to market." The disposition of a currency other than the U.S. dollar
by a U.S. taxpayer is also treated as a transaction subject to the special
currency rules. With respect to transactions covered by the special rules,
foreign currency gain or loss is calculated separately from any gain or loss
on the underlying transaction and is normally taxable as ordinary gain or
loss. A taxpayer may elect to treat as capital gain or loss foreign currency
gain or loss arising from certain identified forward contracts that are
capital assets in the hands of the taxpayer and which are not part of a
straddle. The Treasury Department has authority to issue regulations under
which certain transactions subject to the special currency rules that are part
of a "section 988 hedging transaction" (as defined in the Internal Revenue
Code of 1986, as amended (the "Code"), and the Treasury Regulations) will be
integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. Any gain or loss attributable to the
foreign currency component of a transaction engaged in by the Series which is
not subject to the special currency rules (such as foreign equity investments
other than certain preferred stocks) will be treated as capital gain or loss
and will not be segregated from the gain or loss on the underlying
transaction. It is anticipated that some of the non-U.S. dollar denominated
investments and foreign currency contracts the Series may make or enter into
will be subject to the special currency rules described above.
As disclosed in the related Prospectus, there are a number of risks
involved in investing in foreign securities, including securities of issuers
in emerging market countries in which the Series may invest. For example, the
assets
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and profits appearing on the financial statements of a developing or emerging
country issuer may not reflect its financial position or results of operations
in the way they would be reflected had the financial statements been prepared
in accordance with United States generally accepted accounting principles.
Also, for an issuer that keeps accounting records in a local currency,
inflation accounting rules may require both tax and accounting purposes, that
certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses on profits.
With reference to the Series' investments in foreign government
securities, there is the risk that a foreign governmental issuer may default
on its obligations. If such a default occurs, the Series may have limited
effective legal recourse against the issuer and/or guarantor. Remedies must,
in some cases, be pursued in the courts of the defaulting party itself, and
the ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government and government-related debt obligations in the event of default
under their commercial bank loan agreements.
The issuers of foreign government and government-related debt
securities have in the past experienced substantial difficulties in servicing
their external debt obligations, which have led to defaults on certain
obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit
agreements or converting outstanding principal and unpaid interest to Brady
Bonds, and obtaining new credit to finance interest payments. Holders of
certain foreign government and government-related high-yield securities may be
requested to participate in the restructuring of such obligations and to
extend further loans to their issuers. There can be no assurance that Brady
Bonds and other foreign government and government-related securities will not
be subject to similar defaults or restructuring arrangements which may
adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
Investments and opportunities for investments by foreign investors in
emerging market countries are subject to a variety of national policies and
restrictions. These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by foreigners,
limits on the types of companies in which foreigners may invest and
prohibitions on foreign investments in issuers or industries deemed sensitive
to national interests. Additional restrictions may be imposed at any time by
these or other countries in which the Series invest. Although these
restrictions may in the future make it undesirable to invest in emerging
countries, the Manager does not believe that any current registration
restrictions would affect its decision to invest in such countries.
Foreign Currency Transactions
The Series, consistent with its limited ability to invest in foreign
securities, may purchase or sell currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio
transactions and to minimize currency value fluctuations.
Forward foreign currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit requirement,
and no commissions are charged at any stage for trades. The Series will
account for forward contracts by marking to market each day at daily exchange
rates.
When the 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 its assets denominated in
such
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<PAGE>
foreign currency, its Custodian Bank will place or will cause to be placed
cash or liquid equity or debt securities in a separate account of the Series
in an amount not less than the value of the 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 on Securities, Futures Contracts and Options on Futures Contracts
In order to remain fully invested, and to reduce transaction costs, the
Series may, to the limited extent identified in the related Prospectus, use
futures contracts, options on futures contracts and options on securities and
may enter into closing transactions with respect to such activities. The
Series may only enter into these transactions for hedging purposes, if it is
consistent with its investment objectives and policies. The Series will not
engage in such transactions to the extent that obligations resulting from
these activities in the aggregate exceed 25% of the Series' assets.
Options
The Series may purchase call options, write call options on a covered
basis, write secured put options, which put options will be on a covered basis
only.
The Series may invest in options that are either exchange-listed or
traded over-the-counter. Certain over-the-counter options may be illiquid.
Thus, it may not be possible to close options positions and this may have an
adverse impact on the Series' ability to effectively hedge its securities. The
Series will not invest more than 15% of its assets in illiquid securities.
A. Covered Call Writing--The Series may write covered call options from
time to time on such portion of its securities as the Manager determines is
appropriate given the limited circumstances under which the Series intends to
engage in this activity. A call option gives the purchaser of such option the
right to buy and the writer (in this case the Series) the obligation to sell
the underlying security at the exercise price during the option period. If the
security rises in value, however, 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 options on actual portfolio securities owned by the
Series, 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.
Consistent with the limited purposes for which the Series intends to
engage in the writing of covered calls, closing purchase transactions will
ordinarily be effected to realize a profit on an outstanding call option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to enable the 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
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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.
The 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
they 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 Call Options--The Series may purchase call options to the
extent that premiums paid by the Series does not aggregate more than 2% of its
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
positions 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.
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C. Purchasing Put Options--The Series may purchase put options to the
extent premiums paid by the Series do not aggregate more than 2% of its total
assets. 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 them the right to sell one
of their securities for an agreed price up to an agreed date. Consistent with
the limited purposes for which the Series intends to purchase put options, the
Series intends to purchase put options in order to protect against a decline
in the market value of the underlying security below the exercise price less
the premium paid for the option ("protective puts"). The ability to purchase
put options will allow the 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. The 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 the 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.
D. Writing Put Options--A put option written by the Series obligates it
to buy the security underlying the option at the exercise price during the
option period and the purchaser of the option has the right to sell the
security to the Series. During the option period, the Series, as writer of the
put option, may be assigned an exercise notice by the broker/dealer through
whom the option was sold requiring the Series to make payment of the exercise
price against delivery of the underlying security. The obligation terminates
upon expiration of the put option or at such earlier time at which the writer
effects a closing purchase transaction. The Series may write put options on a
secured basis which means that the Series will maintain in a segregated
account with its Custodian Bank, cash or U.S. government securities in an
amount not less than the exercise price of the option at all times during the
option period. The amount of cash or U.S. government securities held in the
segregated account will be adjusted on a daily basis to reflect changes in the
market value of the securities covered by the put option written by the
Series. Consistent with the limited purposes for which the Series intends to
engage in the writing of put options, secured put options will generally be
written in circumstances where the Manager wishes to purchase the underlying
security for the Series at a price lower than the current market price of the
security. In such event, the Series would write a secured put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay.
Following the writing of a put option, the Series may wish to terminate
the obligation to buy the security underlying the option by effecting a
closing purchase transaction. This is accomplished by buying an option of the
same series as the option previously written. The Series may not, however,
effect such a closing transaction after they have been notified of the
exercise of the option.
Futures and Options on Futures
Consistent with the limited circumstances under which the Series will
use futures, the Series may enter into contracts for the purchase or sale for
future delivery of securities. While futures contracts provide for the
delivery of securities, deliveries usually do not occur. Contracts are
generally terminated by entering into an offsetting transaction. When the
Series enters into a futures transaction, it must deliver to the futures
commission merchant selected by the Series an amount referred to as "initial
margin." This amount is maintained by the futures commission merchant in an
account at the Series' Custodian Bank. Thereafter, a "variation margin" may be
paid by
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the Series to, or drawn by the Series from, such account in accordance with
controls set for such account, depending upon changes in the price of the
underlying securities subject to the futures contract.
Consistent with the limited purposes for which the Series may engage in
these transactions, the Series may enter into such futures contracts to
protect against the adverse effects of fluctuations in interest rates without
actually buying or selling the securities. For example, if interest rates are
expected to increase, the Series might enter into futures contracts for the
sale of debt securities. Such a sale would have much the same effect as
selling an equivalent value of the debt securities owned by the Series. If
interest rates did increase, the value of the debt securities in the portfolio
would decline, but the value of the futures contracts to the Series would
increase at approximately the same rate, thereby keeping the net asset value
of the Series from declining as much as it otherwise would have. Similarly,
when it is expected that interest rates may decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of securities at
higher prices. Because the fluctuations in the value of futures contracts
should be similar to those of debt securities, the Series could take advantage
of the anticipated rise in value of debt securities without actually buying
them until the market had stabilized. At that time, the futures contracts
could be liquidated and the Series could then buy debt securities on the cash
market.
With respect to options on futures contracts, when the Series is not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a
call option on a futures contract is similar in some respects to the purchase
of a call option on an individual security. Depending on the pricing of the
option compared to either the price of the futures contract upon which it is
based, or the price of the underlying debt securities, it may or may not be
less risky than ownership of the futures contract or underlying debt
securities.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration
of the option is below the exercise price, the 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' holdings. The writing of a put
option on a futures contract constitutes a partial hedge against the
increasing price of the security which is deliverable upon exercise of the
futures contract. If the futures price at the expiration of the option is
higher than the exercise price, the Series will retain the full amount of
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 that the 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 futures positions,
the Series' losses from existing options on futures may, to some extent, be
reduced or increased by changes in the value of portfolio securities. The
purchase of a put option on a futures contract is similar in some respects to
the purchase of protective puts on portfolio securities. For example,
consistent with the limited purposes for which the Series will engage in these
activities, the Series will purchase a put option on a futures contract to
hedge the Series' securities against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Series may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if the Series
is hedged against the possibility of an increase in interest rates which would
adversely affect the price of securities held in its portfolio and interest
rates decrease instead, the Series will lose part or all of the benefit of the
increased value of its securities which it has because it will have offsetting
losses in its futures position. In addition, in such situations, if the Series
had insufficient cash, it may be required to sell securities from its
portfolio to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which
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reflect the rising market. The Series may be required to sell securities at a
time when it may be disadvantageous to do so.
Further, with respect to options on futures contracts, the Series may
seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same exercise
price and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market, which
cannot be assured.
Repurchase Agreements
While the Series is permitted to do so, it normally does not invest in
repurchase agreements, except to invest cash balances or for temporary
defensive purposes.
The funds in the Delaware Group, including the Fund, 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. The
Series may invest cash balances in a joint repurchase agreement in accordance
with the terms of the Order and subject generally to the conditions described
below.
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to
the Series, if any, would be the difference between the repurchase price and
the market value of the security. The Series will limit its investments in
repurchase agreements to those which the Manager, under the guidelines of the
Board of Directors, determines to present minimal credit risks and which are
of high quality. In addition, the Series must have collateral of at least 102%
of the repurchase price, including the portion representing the Series' yield
under such agreements which is monitored on a daily basis.
Portfolio Loan Transactions
The 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 Fund that the staff of the Commission
permits portfolio lending by registered investment companies if certain
conditions are met. These conditions are as follows: 1) each transaction must
have 100% collateral in the form of cash, short-term U.S. government
securities, or irrevocable letters of credit payable by banks acceptable to
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 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;
and 6) the voting rights on the lent securities may pass to the borrower;
however, if the Board of Directors 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 the 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, the Series will only enter into loan
arrangements after a review of all pertinent facts by the 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
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received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Restricted and Rule 144A Securities
The Series may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A Securities are traded
among qualified institutional investors. While maintaining oversight, the
Board of Directors has delegated to the Manager the day-to-day function of
determining whether or not individual Rule 144A Securities are liquid for
purposes of the Series' limitation (15% of total assets) on investments in
illiquid assets. The Board has instructed the Manager to consider the
following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the
number of other potential purchasers; (iii) whether at least two dealers are
making a market in the security; and (iv) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
Investing in Rule 144A Securities could have the effect of increasing
the level of the Series' illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. After the purchase of a Rule 144A Security, however, the Board of
Directors and the Manager will continue to monitor the liquidity of that
security to ensure that the Series has no more than 15% of its total assets in
illiquid securities.
ACCOUNTING AND TAX ISSUES
When the Series writes a call, or purchases a put option, an amount
equal to the premium received or paid by it is included in the section of the
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 ask prices. If an option which the
Series has written expires on its stipulated expiration date, the Series
recognizes a short-term capital gain. If the Series enters into a closing
purchase transaction with respect to an option which the Series has written,
the Series realizes a short-term gain (or loss if the cost of the closing
transaction exceeds the premium received when the option was sold) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a call option which the
Series has written is exercised, the Series realizes a capital gain or loss
from the sale of the underlying security on foreign currency and the proceeds
from such sale are increased by the premium originally received.
The premium paid by the Series for the purchase of a put option is
reported in the section of 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 ask prices. If an option
which the Series has purchased expires on the stipulated expiration date, the
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 the 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
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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 Series at the end of each fiscal
year on a broad-based stock index will be required to be "marked to market"
for federal income tax purposes. Generally, 60% of any net gain or loss
recognized on such deemed sales or on any actual sales will be treated as
long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss.
Other Tax Requirements
The Series intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, the Series will not be subject to federal
income tax, or to any excise tax, to the extent its earnings are distributed
as provided in the Code and it satisfies other requirements relating to the
sources of its income and diversification of its assets.
In order to qualify as a regulated investment company for federal
income tax purposes, the Series must meet certain specific requirements,
including:
(i) The Series must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Series' total
assets, and, with respect to 50% of the Series' total assets, no investment
(other than cash and cash items, U.S. government securities and securities of
other regulated investment companies) can exceed 5% of the Series' total
assets;
(ii) The Series must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Series must distribute to its shareholders at least 90% of
its net investment income and net tax-exempt income for each of its fiscal
years, and
(iv) The Series must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets
that have been held by the Series for less than three months ("short-short
income"). The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30%
short-short income test for tax years of regulated investment companies
beginning after August 5, 1997; however, this rule may have continuing effect
in some states for purposes of classifying the Series as a regulated
investment company.
The Code requires the Series to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain
net income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the
Series) to you by December 31 of each year in order to avoid federal excise
taxes. The Series intends as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by you as received in
December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
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The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any,
can be recognized in the year of loss. Deferred losses will be carried forward
and recognized in the year that unrealized losses exceed unrealized gains.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Series must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Series will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end
of the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Series is
authorized to invest a limited amount in foreign securities. Such investments,
if made, will have the following additional tax consequences to the Series:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time the Series accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time the Series actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "Section 988" gains or losses, may increase or decrease the
amount of the Series' net investment company taxable income, which, in turn,
will affect the amount of income to be distributed to you by the Series.
If the Series' Section 988 losses exceed the Series' other net
investment company taxable income during a taxable year, the Series generally
will not be able to make ordinary dividend distributions to you for that year,
or distributions made before the losses were realized will be recharacterized
as return of capital distributions of federal income tax purposes, rather than
as an ordinary dividend or capital gain distribution. If a distribution is
treated as a return of capital, your tax basis in your Series shares will be
reduced by a like amount (to the extent of such basis), and any excess of the
distribution over your tax basis in your Series shares will be treated as
capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than
two years after the taxable year to which they relate. This new law may
require the Series to track and record adjustments to foreign taxes paid on
foreign securities in which it invests. Under the Series' current reporting
procedure, foreign security transactions are recorded generally at the time of
each transaction using the foreign currency spot rate available for the date
of each transaction. Under the new law, the Series will be required to record
a fiscal year end (and at calendar year end for excise tax purposes) an
adjustment that reflects the difference between the spot rates recorded for
each transaction and the year-end average exchange rate for all of the Series'
foreign securities transactions. There is a possibility that the mutual fund
industry will be given relief from this new provision, in which case no
year-end adjustments will be required.
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The Series may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of the
Series at the end of its fiscal year are invested in securities of foreign
corporations, the Series may elect to pass-through to you your pro rata share
of foreign taxes paid by the Series. If this election is made, you will be:
(i) required to include in your gross income your pro rata share of foreign
source income (including any foreign taxes paid by the Series) and (ii)
entitled to either deduct your share of such foreign taxes in computing your
taxable income or to claim a credit for such taxes against your U.S. income
tax, subject to certain limitations under the Code. You will be informed by
the Fund at the end of each calendar year regarding the availability of any
such foreign tax credits and the amount of foreign source income (including
any foreign taxes paid by the Series). If the Series elects to pass-through to
you the foreign income taxes that it has paid, you will be informed at the end
of the calendar year of the amount of foreign taxes paid and foreign source
income that must be included on your federal income tax return. If the Series
invests 50% or less of its total assets in securities of foreign corporations,
it will not be entitled to pass-through to you your pro-rata shares of foreign
taxes paid by the Series. In this case, these taxes will be taken as a
deduction by the Series, and the income reported to you will be the net amount
after these deductions. The 1997 Act also simplifies the procedures by which
investors in funds that invest in foreign securities can claim tax credits on
their individual income tax returns for the foreign taxes paid by the Series.
These provisions will allow investors who pay foreign taxes of $300 or less on
a single return or $600 or less on a joint return during any year (all of
which must be reported on IRS Form 1099-DIV from the Series to the investor)
to claim a tax credit against their U.S. federal income tax for the amount of
foreign taxes paid by the Series. This process will allow you, if you qualify,
to bypass the burdensome and detailed reporting requirements on the foreign
tax credit schedule (Form 1116) and report your foreign taxes paid directly on
page 2 of Form 1040. You should note that this simplified procedure will not
be available until calendar year 1998.
Investment in Passive Foreign Investment Company securities--The Series
may invest in shares of foreign corporations which may be classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If the Series receives an "excess distribution" with
respect to PFIC stock, the Series itself may be subject to U.S. federal income
tax on a portion of the distribution, whether or not the corresponding income
is distributed by the Series to you. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Series held the PFIC shares. The Series itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Series taxable years, and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years. In
this case, you would not be permitted to claim a credit on your own tax return
for the tax paid by the Series. Certain distributions from a PFIC as well as
gain from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain distribution might have been classified
as capital gain. This may have the effect of increasing Series distributions
to you that are treated as ordinary dividends rather than long-term capital
gain dividends.
The Series may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, the Series generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC during such period. If this
election were made, the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition, the 1997 Act
provides for another election that would involve marking-to-market the Series'
PFIC shares at the end of each taxable year (and on certain other dates as
prescribed in the Code), with the result that unrealized gains would be
treated as though they were realized. The Series would also be allowed an
ordinary deduction for the excess, if any, of the adjusted basis of its
investment in the PFIC stock over its fair market value at the end of the
taxable year. This deduction would be limited to the amount of any net
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mark-to-market gains previously included with respect to that particular PFIC
security. If the Series were to make this second PFIC election, tax at the
Series level under the PFIC rules would generally be eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by the Series (if any), the amounts distributable to you
by the Series, the time at which these distributions must be made, and whether
these distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign
corporation is a PFIC, and that there is always a possibility that a foreign
corporation will become a PFIC after the Series acquires shares in that
corporation. While the Series will generally seek to avoid investing in PFIC
shares to avoid the tax consequences detailed above, there are no guarantees
that it will do so and it reserves the right to make such investments as a
matter of its fundamental investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be
aware that any foreign exchange losses realized by the Series, including any
losses realized on the sale of foreign debt securities, are generally treated
as ordinary losses for federal income tax purposes. This treatment could
increase or reduce the Series' income available for distribution to you, and
may cause some or all of the Series' previously distributed income to be
classified as a return of capital.
PERFORMANCE INFORMATION
From time to time, the Fund may state the 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. The Fund may also advertise aggregate and average total return
information of the Series over additional periods of time. Advertisements of
performance of the underlying Series, if any, will be accompanied by a
statement of performance of the separate account.
The 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.
Comparative Information
From time to time, performance of the Series may be compared to various
industry indices.
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The Fund may quote the Series' actual total return performance,
dividend results and other performance information in advertising and other
types of literature 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 the Series' investment objective, the Series'
portfolio may include common stocks considered by the Manager to be more
aggressive than those tracked by these indices.
The 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.
The Fund may also state the Series' 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 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 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.
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<PAGE>
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 non-industrial companies.
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. In
addition, the performance of multiple indices compiled and maintained
by these firms may be combined to create a blended performance result
for comparative performances. Generally, the indices selected will be
representative of the types of securities in which the Series may
invest and the assumptions that were used in calculating the blended
performance will be described.
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.
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 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.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick
the highs and the lows. By using a strategy known as dollar-cost averaging,
you schedule your investments ahead of time. If you invest a set amount on a
regular basis, that money will always buy more 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
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<PAGE>
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 the Series.
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 the Series. This gives your investment yet another opportunity to
grow. It's called the Power of Compounding.
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<PAGE>
TRADING PRACTICES AND BROKERAGE
The Fund selects brokers or dealers to execute transactions for the
purchase or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is
to have 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. A number of trades are made on a net basis where securities
either are purchased directly from the dealer or are sold to the dealer. In
these instances, there is no direct commission charged but there is a spread
(the difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its
trading department as to rates paid and charged for similar transactions
throughout the securities industry. In some instances, the Fund pays a minimal
share transaction cost when the transaction presents no difficulty.
Securities transactions for the Series may be effected in foreign
markets which may not allow negotiation of commissions or where it is
customary to pay fixed rates.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities
or industries; providing information on economic factors and trends; assisting
in determining portfolio strategy; providing computer software and hardware
used in security analyses; and providing portfolio performance evaluation and
technical market analyses. Such services are used by the Manager in connection
with its investment decision-making process with respect to one or more funds
and accounts it manages, and may not be used, or used exclusively, with
respect to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 and the Series'
Investment Management Agreement, higher commissions are permitted to be paid
to broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, 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 Manager which constitute in some part brokerage and research
services used by the Manager in connection with its investment decision-making
process and constitute in some part services used by it in connection with
administrative or other functions not related to their investment
decision-making process. In such cases, the Manager will make a good faith
allocation of brokerage and research services and will pay out of its own
resources for services used by it 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.
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<PAGE>
Combined orders for two or more accounts or funds engaged in the
purchase or sale of the same security may be placed if the judgment is made
that joint execution is in the best interest of each participant and will
result in best price and execution. Transactions involving commingled orders
are allocated in a manner deemed equitable to each account or fund. When a
combined order is executed in a series of transactions at different prices,
each account participating in the order may be allocated an average price
obtained from the executing broker. It is believed that the ability of the
accounts to participate in volume transactions will generally be beneficial to
the accounts and funds. Although it is recognized that, in some cases, the
joint execution of orders could adversely affect the price or volume of the
security that a particular account or fund may obtain, it is the opinion of
the Manager and the Fund's Board of Directors that the advantages of combined
orders outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution,
orders may be placed with broker/dealers that have agreed to defray certain
Series expenses, such as custodian fees.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the
Series' objective in relation to anticipated movements in the general level of
interest rates. The Series is free to dispose of portfolio securities at any
time, subject to complying with the Code and the 1940 Act, when changes in
circumstances or conditions make such a move desirable in light of the
investment objective. The Series will not attempt to achieve or be limited to
a predetermined rate of portfolio turnover. Such a turnover always will be
incidental to transactions undertaken with a view to achieving the Series'
investment objective.
The degree of portfolio activity may affect brokerage costs of the
Series and taxes payable by the Series' securities at the beginning of the
year were replaced by the end of the year. In investing for capital
appreciation, the Series may hold securities for any period of time. Portfolio
turnover will also be increased if the Series writes a large number of call
options which are subsequently exercised. To the extent the Series realizes
gains on securities held for less than six months, such gains are taxable to
the shareholder subject to tax or to the Series at ordinary income tax rates.
The turnover rate also may be affected by cash requirements from redemptions
and repurchases of Series shares. Total brokerage costs generally increase
with higher portfolio turnover rates.
Under normal circumstances the annual portfolio turnover rate of the
Series is not expected to exceed 100%. The portfolio turnover rate of the
Series is calculated by dividing the lesser of purchases or sales of
securities for the particular fiscal year by the monthly average of the value
of the securities owned by the Series during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one
year or less.
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<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 the 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, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When
the New York Stock Exchange is closed, the 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 will
be included in the Series' financial statements which will be 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 the Series' portfolio, deducting any
liabilities of the Series and dividing by the number of the 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 the Series of securities owned by it is not reasonably
practical, or it is not reasonably practical for the 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 determined next
after the suspension has been terminated.
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<PAGE>
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
The Series normally will make payments from its net investment income
on a [quarterly] basis. Payments from the Series' net realized securities
profits, if any, normally will be made following the close of the fiscal year.
All dividends and distributions are automatically reinvested.
TAXES
The Series intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, as amended. As such, the Fund will
not be subject to federal income tax to the extent its earnings are
distributed and it satisfies other requirements relating to the sources of its
income and diversification of its assets.
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 the
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.
The Series does not have a 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, the Series
intends to offset realized securities profits to the extent of the capital
losses carried forward.
All dividends out of net investment income, together with distributions
from short-term capital gains, will be taxable to those shareholders who are
subject to income taxes as ordinary income. (These distributions may be
eligible for the dividends-received deductions for corporations.) Any net
long-term capital gains distributed to those shareholders who are subject to
income tax will be taxable as such, regardless of the length of time a
shareholder has owned their shares.
Under the Taxpayer Relief act of 1997 (the "1997 Act"), the Series is
required to track its sales of portfolio securities and to report its capital
gain distributions to you according to the following categories of holding
periods:
"Pre-Act long-term capital gains": securities sold before May 7, 1997,
that were held for more than 12 months. These gains will be taxable to
individual investors at a maximum rate of 28%.
"Mid-term capital gains" or "28 percent rate gain": securities sold by
the Series after July 28, 1997 that were held more than one year but
not more than 18 months. These gains will be taxable to individual
investors at a maximum rate of 28%.
"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold between May 7, 1997 and July 28, 1997 that were held
for more than 12 months, and securities sold by the Series after July
28, 1997 that were held for more than 18 months. These gains will be
taxable to individual investors at a maximum rate of 20% for investors
in the 28% or higher federal income tax brackets, and at a maximum rate
of 10% for investors in the 15% federal income tax bracket.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
5-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject
to tax at higher rate brackets, qualified 5-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than 5 years. Taxpayers subject to tax at
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<PAGE>
higher rate brackets may also make an election for shares held on
January 1, 2001 to recognize gain on their shares in order to qualify
such shares as qualified 5-year property. These gains will be taxable
to individual investors at a maximum rate of 18% for investors in the
28% or higher federal income tax brackets, and at a maximum rate of 8%
for investors in the 15% federal income tax bracket.
INVESTMENT MANAGEMENT AGREEMENT
Delaware Management Company, Inc. (the "Manager"), One Commerce Square,
Philadelphia, PA 19103, furnishes investment management services to the Series.
Such services are provided subject to the supervision and direction of the
Fund's Board of Directors. Lincoln Investment Management, Inc. ("Lincoln")
serves as sub-adviser to the Manager with respect to the Series. Lincoln's
address is 200 E. Berry Street, Fort Wayne, Indiana 46802.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On December 31, 1997, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $39 billion in assets in the various
institutional or separately managed (approximately $24,040,760,000) and
investment company (approximately $15,705,742,000) accounts.
Lincoln (formerly Lincoln National Investment Management Company) was
incorporated in 1930. As of December 31, 1997, Lincoln had over $____ billion in
assets under management.
The Investment Management Agreement between the Fund on behalf of the
Series and the Manager is dated March 31, 1998 and was approved by the initial
shareholder on that date. The Agreement will remain in effect for an initial
period of two years. The Agreement may be renewed only if 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 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 Agreement is terminable without penalty on 60 days'
notice by the directors of the Fund or by the Manager. The Agreement will
terminate automatically in the event of an assignment.
The Manager manages the Series' investments. The annual compensation
paid by the Series is equal to 0.75% of its average daily net assets.
The Manager has entered into a sub-advisory agreement with Lincoln with
respect to the Series. As compensation for its services as sub-adviser to the
Manager, Lincoln is entitled to receive a sub-advisory fee equal to 00% of the
investment management fee under the Investment Management Agreement with Fund on
behalf of the Series.
Except for those borne by Delaware International under the Investment
Management Agreement and the Distributor under the Distribution Agreement, the
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.
The Manager has voluntarily elected to waive its fee and reimburse the Series to
the extent the Series' annual operating expenses, exclusive of taxes, interest,
brokerage commissions and extraordinary expenses exceed 0.85% for the period
from the commencement of the Series' operations through [6/30/98].
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Distribution and Service
Delaware Distributors, L.P., located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of the Series' shares
under a Distribution Agreement dated March 31, 1998. It is an affiliate of the
Manager and bears all of the costs of promotion and distribution. Delaware
Distributors, L.P. is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH").
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves
as the Fund's shareholder servicing, dividend disbursing and transfer agent
for the Series pursuant to the Amended and Restated Shareholders Services
Agreement dated March 31, 1998. The Transfer Agent also provides accounting
services to the Series pursuant to the terms of a separate Fund Accounting
Agreement. For its services, the Transfer Agent is paid a fee based on total
assets of all funds in the Delaware Group for which it provides such
accounting services. Such fee is equal to 0.25% multiplied by the total amount
of assets in the complex for which the Transfer Agent furnishes accounting
services, where such aggregate complex assets are $10 billion or less, and
0.20% of assets if such aggregate complex assets exceed $10 billion. The fees
are charged to each fund, including the Series, on an aggregate pro-rata
basis. The asset-based fee payable to the Transfer Agent is subject to a
minimum fee calculated by determining the total number of investment
portfolios and associated classes. The Transfer Agent is also an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
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., Delvoy, Inc., 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
Capital Management, Inc. and Delaware Investment & Retirement Services, Inc.
are direct or indirect, wholly owned subsidiaries of DMH. On April 3, 1995, a
merger between DMH and a wholly owned subsidiary of Lincoln National
Corporation ("Lincoln National") was completed. DMH and the Manager are now
indirect, wholly owned subsidiaries, and subject to the ultimate control, of
Lincoln National. Lincoln National, with headquarters in Fort Wayne, Indiana,
is a diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
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.
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<PAGE>
*Wayne A. Stork (60)
Chairman, President, Chief Executive Officer, Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, 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. and Delaware International Holdings Ltd.
Chairman and Director of the Fund, 32 other investment companies in the
Delaware Group, Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.
President and Chief Executive Officer of Delvoy, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
* Jeffrey J. Nick (45)
President, Chief Executive Officer and Director and/or Trustee of the
Fund and 32 other investment companies in the Delaware Group.
President, Chief Executive Officer and Director of Delaware Management
Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc.
President of Lincoln Funds Corporation.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln National
UK plc and from 1989 to 1992, he was Senior Vice President
responsible for corporate planning and development for Lincoln
National Corporation.
Richard G. Unruh, Jr. (58)
Executive Vice President of the Fund, each of the other 32 investment
companies in the Delaware Group, Delaware Management Holdings,
Inc. and Delaware Capital Management, Inc.
Executive Vice President and Director of Delaware Management Company,
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.
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of the
Fund, each of the other 32 investment companies in the Delaware
Group, Delaware Management Company, Inc. and Delaware Management
Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation.
Director of HYPPCO Finance Company Ltd.
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.
- ----------------------
*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
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<PAGE>
Walter P. Babich (70)
Director and/or Trustee of the Fund and each of the other 32 investment
companies 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 (59)
Director and/or Trustee of the Fund and each of the other 32 investment
companies 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 (57)
Director and/or Trustee of the Fund and each of the other 32 investment
companies 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.
W. Thacher Longstreth (77)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Thomas F. Madison (62)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996. From February to September 1994, Mr.
Madison served as Vice Chairman--Office of the CEO of The
Minnesota Mutual Life Insurance Company and from 1988 to 1993, he
was President of U.S. WEST Communications--Markets.
Charles E. Peck (72)
Director and/or Trustee of the Fund and each of the other 32 investment
companies 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.
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David K. Downes (58)
Executive Vice President,Chief Operating Officer,Chief Financial Officer
of the Fund, each of the other 32 investment companies in the
Delaware Group, Delaware Management Holdings, Inc, Founders CBO
Corporation, Delaware Capital Management, Inc. and Delaware
Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc., DMH
Corp., Delaware Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.
President, Chief Executive Officer,Chief Financial Officer and Director
of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director
of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Management
Trust Company and Delaware Investment & Retirement Services, Inc.
Director of Delaware International Advisers Ltd. and Delaware Voyageur
Holding, Inc.
Vice President of Lincoln Funds Corporation
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.
George M. Chamberlain, Jr. (51)
Senior Vice President,Secretary and General Counsel of the Fund, each of
the other 32 investment companies in the Delaware Group, Delaware
Distributors, L.P. and Delaware Management Holdings, Inc.
Senior Vice President, Secretary, General Counsel and Director of DMH
Corp., Delaware Management Company, Inc., Delaware Distributors,
Inc., Delaware Service Company, Inc., Founders Holdings, Inc.,
Delaware Investment & Retirement Services, Inc., Delaware Capital
Management, Inc. and Delvoy, Inc.
Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company.
Senior Vice President and Director of Delaware International Holdings
Ltd.
Director of Delaware International Advisers Ltd. and Delaware Voyageur
Holding, Inc.
Secretary of Lincoln Funds Corporation
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
-27-
<PAGE>
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of the Fund, each of the
other 32 investment companies in the Delaware Group and Founders
Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc., Delaware International Holdings Ltd.
and Delvoy, Inc.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Senior Vice President/Assistant Treasurer of Founders CBO Corporation.
Treasurer of Lincoln Funds 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 (35)
Senior Vice President/Treasurer of the Fund, each of the other 32
investment companies in the Delaware Group and Founders Holdings,
Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc. and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting of
Delawre Distributors, L.P.
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
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.
-28-
<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
fiscal year ended December 31, 1996 and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of December 31, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 18
Compensation as Part of Upon Delaware
Name from Fund Fund Expenses Retirement* Group Funds
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,150 None $38,500 $43,948
Ann R. Leven $2,514 None $38,500 $52,033
Walter P. Babich $2,475 None $38,500 $51,075
Anthony D. Knerr $2,475 None $38,500 $51,075
Charles E. Peck $2,317 None $38,500 $47,243
Thomas F. Madison** N/A None $38,500 N/A
</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, 1997, he or she would be
entitled to annual payments totaling $38,500, 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.
** Mr. Madison joined the Board of Directors on April 30, 1997.
-29-
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager for the Series and several other
funds in the Delaware Group. The Manager, through a separate division, also
manages private investment accounts. While investment decisions for the 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 the Manager or its affiliates, are permitted to engage in personal
securities transactions subject to the exceptions set forth in Rule 17j-1 and
the following general restrictions and procedures: (1) certain blackout
periods apply to personal securities transactions of those persons; (2)
transactions must receive advance clearance and must be completed on the same
day as the clearance is received; (3) certain persons are prohibited from
investing in initial public offerings of securities and other restrictions
apply to investments in private placements of securities; (4) opening
positions 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.
In addition, Delaware Service Company, Inc., an affiliate of the
Manager, 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. The Transfer Agent also
provides accounting services to the Series. Those services include performing
all functions related to calculating the Series' net asset value and providing
all financial reporting services, regulatory compliance testing and other
related accounting services.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of the Fund's advisory
relationship with the Manager or its distribution relationship with Delaware
Distributors, L.P., the Manager and its affiliates could cause the Fund to
delete the words "Delaware Group" from the Fund's name.
The Series commenced operations on ______________.
-30-
<PAGE>
Capitalization
The Fund has a present authorized capitalization of one billion shares
of capital stock with a $.01 par value per share. The Board of Directors has
allocated fifty million shares to the Series. While all shares have equal
voting rights on matters affecting the entire Fund, the Series would vote
separately on any matter which affects only that Series, such as investment
objectives and policies, and as otherwise prescribed by the 1940 Act. Shares
of the Series have a priority in that 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.
-31-
<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 Investor 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
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
-32-
<PAGE>
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.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditor for the Series and
the Fund and, in its capacity as such, will audit the financial statements of
the Series that will be contained in the Fund's Annual Report.
-33-
<PAGE>
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
SUB-ADVISER
Lincoln Investment Management, Inc.
200 E. Berry Street
Fort Wayne, Indiana 46802
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Sutherland, Asbill & Brennan
1257 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
- ------------------------------------------------------------
DELAWARE GROUP PREMIUM FUND
- ------------------------------------------------------------
REIT
- ------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------------------------------
MARCH 31, 1998
DELAWARE
GROUP
---------
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Inapplicable
Part B - Inapplicable
(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) Executed Articles Supplementary to Articles
of Incorporation (April 23, 1996)
incorporated into this filing by reference
to Post-Effective Amendment No. 18 filed
October 29, 1996.
(c) Form of Articles Supplementary to Articles
of Incorporation (April 1997) incorporated
into this filing by reference to
Post-Effective Amendment No. 20 filed April
29, 1997.
(d) Form of Articles of Amendment to Articles of
Incorporation (April 1997) incorporated into
this filing by reference to Post-Effective
Amendment No. 20 filed April 29, 1997.
(e) Form of Articles Supplementary to Articles
of Incorporation (April 1997) incorporated
into this filing by reference to
Post-Effective Amendment No. 20 filed April
29, 1997.
(f) Form of Articles Supplementary to Articles
of Incorporation to be filed by Amendment.
(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.
<PAGE>
PART C- Other Information
(continued)
(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), Article
Second of Articles Supplementary
(October 11, 1993) and Article Second
of Articles Supplementary (April 23,
1996) incorporated into this filing by
reference to Post-Effective Amendment
No. 16 filed January 22, 1996.
(ii) Executed Article Fourth to Articles
Supplementary (April 23, 1996)
incorporated into this filing by
reference to Post-Effective
Amendment No. 18 filed October 29,
1996.
(iii) Form of Articles Supplementary (April
1997) incorporated into this filing
by reference to Post-Effective
Amendment No. 20 filed April 29, 1997.
(iv) Form of Articles Supplementary to
Articles of Incorporation to be filed
by Amendment.
(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) Executed Investment Management Agreement
(April 3, 1995) between Delaware Management
Company, Inc. and the Registrant on behalf
of Emerging Growth Series (renamed Trend
Series) incorporated into this filing by
reference to Post-Effective Amendment No. 15
filed April 27, 1995.
(b) Executed Investment Management Agreement
(April 3, 1995) between Delaware Management
Company, Inc. and the Registrant
<PAGE>
PART C- Other Information
(continued)
on behalf of Growth Series (renamed DelCap
Series) incorporated into this filing by
reference to Post-Effective Amendment No. 15
filed April 27, 1995.
(c) Executed Investment Management Agreement
(April 3, 1995) between Delaware
International Advisers Ltd. and the
Registrant on behalf of International Equity
Series incorporated into this filing by
reference to Post-Effective Amendment No. 15
filed April 27, 1995.
(d) Executed Investment Management Agreement
(April 3, 1995) between Delaware Management
Company, Inc. and the Registrant on behalf
of the Money Market Series (renamed Cash
Reserve Series) incorporated into this
filing by reference to Post-Effective
Amendment No. 15 filed April 27, 1995.
(e) Executed Investment Management Agreement
(April 3, 1995) between Delaware Management
Company, Inc. and the Registrant on behalf
of the Equity/Income Series (renamed Decatur
Total Return Series), High Yield Series
(renamed Delchester Series), Capital
Reserves Series and Multiple Strategy Series
(renamed Delaware Series) incorporated into
this filing by reference to Post-Effective
Amendment No. 15 filed April 27, 1995.
(f) Executed Investment Management Agreement
(April 3, 1995) between Delaware Management
Company, Inc. and the Registrant on behalf
of Value Series incorporated into this
filing by reference to Post-Effective
Amendment No. 15 filed April 27, 1995.
(g) Executed Investment Management Agreement
(May 1, 1996) between Delaware International
Advisers Ltd. and the Registrant on behalf
of Global Bond Series incorporated into this
filing by reference to Post-Effective
Amendment No. 18 filed October 29, 1996.
(h) Form of Investment Management Agreement (May
1997) between Delaware Management Company,
Inc. and the Registrant on behalf of
Strategic Income Series incorporated into
this filing by reference to Post-Effective
Amendment No. 20 filed April 29, 1997.
(i) Form of Investment Management Agreement (May
1997) between Delaware Management Company,
Inc. and the Registrant on behalf of Devon
Series incorporated into this filing by
reference to Post-Effective Amendment No.
20 filed April 29, 1997.
<PAGE>
(j) Form of Investment Management Agreement (May
1997) between Delaware International
Advisers Ltd. and the Registrant on behalf
of Emerging Markets Series incorporated into
this filing by reference to Post-Effective
Amendment No. 20 filed April 29, 1997.
(k) Form of Investment Management Agreement (May
1997) between Delaware Management Company,
Inc. and the Registrant on behalf of
Convertible Securities Series incorporated
into this filing by reference to
Post-Effective Amendment No. 20 filed April
29, 1997.
(l) Form of Investment Management Agreement (May
1997) between Delaware Management Company,
Inc. and the Registrant on behalf of Quantum
Series incorporated into this filing by
reference to Post-Effective Amendment No.
20 filed April 29, 1997.
(m) Proposed Investment Management Agreement
(1998) between Delaware Management Company,
Inc. and the Registrant on behalf of REIT
Series attached as Exhibit.
(n) Form of Sub-Advisory Agreement (May 1997)
between Delaware Management Company, Inc.
and Delaware International Advisers Ltd. on
behalf of Strategic Income Series
incorporated into this filing by reference
to Post-Effective Amendment No. 20 filed
April 29, 1997.
(o) Form of Sub-Advisory Agreement (May 1997)
between Delaware Management Company, Inc.
and Vantage Global Advisors, Inc. on behalf
of Quantum Series incorporated into this
filing by reference to Post-Effective
Amendment No. 20 filed April 29, 1997.
(p) Proposed Sub-Advisory Agreement (1998) between
Delaware Management Company, Inc. and Lincoln
Investment Management, Inc. on behalf of REIT
Series attached as Exhibit.
<PAGE>
PART C- Other Information
(continued)
(6) Distribution Agreements.
(a) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P.
and the Registrant on behalf of
Equity/Income Series (renamed Decatur Total
Return Series), High Yield Series (renamed
Delchester Series), Capital Reserves Series
and Multiple Strategy Series (renamed
Delaware Series) incorporated into this
filing by reference to Post-Effective
Amendment No. 16 filed January 22, 1996.
(b) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P.
and the Registrant on behalf of Money Market
Series (renamed Cash Reserve Series)
incorporated into this filing by reference
to Post-Effective Amendment No. 16 filed
January 22, 1996.
(c) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P.
and the Registrant on behalf of Growth
Series (renamed DelCap Series) incorporated
into this filing by reference to
Post-Effective Amendment No. 16 filed
January 22, 1996.
(d) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P.
and the Registrant on behalf of
International Equity Series incorporated
into this filing by reference to Post-
Effective Amendment No. 16 filed January 22,
1996.
(e) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P.
and the Registrant on behalf of Value Series
incorporated into this filing by reference
to Post-Effective Amendment No. 16 filed
January 22, 1996.
(f) Executed Distribution Agreement (April 3,
1995) between Delaware Distributors, L.P.
and the Registrant on behalf of Emerging
Growth Series (renamed Trend Series)
incorporated into this filing by reference
to Post-Effective Amendment No. 16 filed
January 22, 1996.
(g) Executed Distribution Agreement (May 1,
1996) between Delaware Distributors, L.P.
and the Registrant on behalf of Global Bond
Series incorporated into this filing by
reference to Post-Effective Amendment No. 18
filed October 29, 1996.
<PAGE>
PART C- Other Information
(continued)
(h) Form of Distribution Agreement (May 1997)
between Delaware Distributors, L.P. and the
Registrant on behalf of Convertible
Securities Series, Devon Series, Emerging
Markets Series, Quantum Series and Strategic
Income Series incorporated into this filing
by reference to Post-Effective Amendment No.
20 filed April 29, 1997.
(i) Proposed Distribution Agreement (1998) between
Delaware Distributors, L.P. and the Registrant
on behalf of REIT Series attached as Exhibit.
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing Plan
(November 17, 1994) incorporated into this
filing by reference to Post-Effective
Amendment No. 15 filed April 27, 1995.
(b) Amendment to Profit Sharing Plan (December 21,
1995) incorporated into this filing by
reference to Post-Effective Amendment No. 16
filed January 22, 1996.
(8) Custodian Agreements.
(a) Executed Custodian Agreement (1996) (Module)
between The Chase Manhattan Bank and the
Registrant incorporated into this filing by
reference to Post-Effective Amendment No. 18
filed October 29, 1996.
(i) Amendment (November 20, 1997) to
Custodian Agreement between The Chase
Manhattan Bank and the Registrant on
behalf of each Series attached as
Exhibit.
(b) Form of Securities Lending Agreement (1996)
between The Chase Manhattan Bank and the
Registrant incorporated into this filing by
reference to Post-Effective Amendment No. 18
filed October 29, 1996.
(9) Other Material Contracts.
(a) Executed Shareholders Services Agreement (June
29, 1988) between Delaware Service Company,
Inc. and the Registrant on behalf of Money
Market Series (renamed Cash Reserve Series)
incorporated into this filing by reference to
Post-Effective Amendment No. 18 filed October
29, 1996.
<PAGE>
PART C- Other Information
(continued)
(b) Executed Amended and Restated Shareholders
Services Agreement (May 1, 1996) between
Delaware Service Company, Inc. and the
Registrant on behalf of High Yield Series
(renamed Delchester Series), Capital Reserves
Series, Equity/Income Series (renamed Decatur
Total Return Series), Multiple Strategy Series
(renamed Delaware Series), Growth Series
(renamed DelCap Series), International Equity
Series, Value Series, Emerging Growth Series
(renamed Trend Series) and Global Bond Series
incorporated into this filing by reference to
Post-Effective Amendment No. 18 filed October
29, 1996.
(c) Form of Amended and Restated Shareholders
Services Agreement (May 1997) between Delaware
Service Company, Inc. and the Registrant on
behalf of High Yield Series (renamed
Delchester Series), Capital Reserves Series,
Equity/Income Series (renamed Decatur Total
Return Series), Multiple Strategy Series
(renamed Delaware Series), Growth Series
(renamed DelCap Series), International Equity
Series, Value Series, Emerging Growth Series
(renamed Trend Series), Global Bond Series,
Strategic Income Series, Devon Series,
Emerging Markets Series, Convertible
Securities Series and Quantum Series
incorporated into this filing by reference to
Post-Effective Amendment No. 20 filed April
29, 1997.
(d) Proposed Amended and Restated Shareholder
Services Agreement (1998) between Delaware
Service Company, Inc. and the Registrant on
behalf of High Yield Series (renamed
Delchester Series), Capital Reserves Series,
Equity/Income Series (renamed Decatur Total
Return Series), Multiple Strategy Series
(renamed Delaware Series), Growth Series
(renamed DelCap Series), International Equity
Series, Value Series, Emerging Growth Series
(renamed Trend Series), Global Bond Series,
Strategic Income Series, Devon Series,
Emerging Markets Series, Convertible
Securities Series, Quantum Series and REIT
Series attached as Exhibit.
(e) Executed Delaware Group of Funds Fund
Accounting Agreement (August 19, 1996)
(Module) between Delaware Service Company,
Inc. and the Registrant incorporated into
this filing by reference to Post-Effective
Amendment No. 18 filed October 29, 1996.
(i) Executed Amendment No. 6 (July 21,
1997) to Delaware Group of Funds Fund
Accounting Agreement incorporated into
this filing by reference to Post-
Effective Amendment No. 21 filed
October 30, 1997.
(ii) Form of Schedule A to Delaware Group of
Funds Fund Accounting Agreement
included as Module.
(10) Opinion of Counsel. Inapplicable.
(11) Consent of Auditors. Inapplicable.
(12) Inapplicable.
<PAGE>
PART C- Other Information
(continued)
(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.
(a) Incorporated into this filing by reference
to Post-Effective Amendment No. 15 filed
April 27, 1995, Post-Effective Amendment No.
17 filed March 29, 1996, Post-Effective
Amendment No. 18 filed October 29, 1996,
Post-Effective Amendment No. 20 filed April
29, 1997 and Post-Effective Amendment No. 21
filed October 30, 1997.
(17) Financial Data Schedules. Inapplicable.
(18) Inapplicable.
(19) Other: Directors' Power of Attorney. Incorporated into
this filing by reference to Post-Effective Amendment No.
15 filed April 27, 1995 and October 30, 1997.
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.
Delchester Series Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share December 31, 1997
<PAGE>
PART C- Other Information
(continued)
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Premium Fund, Inc.
Decatur Total Return Series
Common Stock Par Value 8 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Delaware Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Cash Reserve Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
DelCap Series
Common Stock Par Value 5 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
International Equity Series
Common Stock Par Value 2 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Value Series
Common Stock Par Value 3 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Trend Series
Common Stock Par Value 5 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Global Bond Series
Common Stock Par Value 5 Accounts as of
$.01 Per Share December 31, 1997
<PAGE>
PART C- Other Information
(continued)
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Premium Fund, Inc.
Strategic Income Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Devon Series
Common Stock Par Value 3 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Emerging Markets Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
Quantum Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Premium Fund, Inc.
REIT Series
Common Stock Par Value 0 Accounts as of
$.01 Per Share December 31, 1997
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. Delaware
Management Company, Inc. (the "Manager") serves as investment
manager to the Registrant and also serves as investment manager or
sub-adviser to certain of the other funds in the Delaware Group
(Delaware Group Equity Funds I, Inc., Delaware Group Equity
<PAGE>
PART C- Other Information
(continued)
Funds II, Inc., Delaware Group Equity Funds III, Inc., Delaware Group Equity
Funds IV, Inc., Delaware Group Equity Funds V, Inc., Delaware Group Government
Fund, Inc., Delaware Group Income Funds, Inc., Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware Group
Tax-Free Fund, Inc., Delaware Group State Tax-Free Income Trust, Delaware
Group Tax-Free Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware
Group Global & International Funds, Inc., Delaware Pooled Trust, Inc.,
Delaware Group Adviser Funds, Inc., Delaware Group Dividend and Income Fund,
Inc., Delaware Group Global Dividend and Income Fund, Inc., Delaware Group
Foundation Funds, Inc., Voyageur Tax-Free Funds, Inc., Voyageur Intermediate
Tax-Free Funds, Inc., Voyageur Insured Funds, Inc., Voyageur Funds, Inc.,
Voyageur Investment Trust, Voyageur Investment Trust II, Voyageur Mutual
Funds, Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual Funds III, Inc.,
Voyageur Arizona Municipal Income Fund, Inc., Voyageur Colorado Insured
Municipal Income Fund, Inc., Voyageur Florida Insured Municipal Income Fund,
Voyageur Minnesota Municipal Fund, Inc., Voyageur Minnesota Municipal Fund II,
Inc. and Voyageur Minnesota Municipal Fund III, Inc.) and provides investment
advisory services to institutional accounts, primarily retirement plans and
endowment funds. In addition, certain directors of the Manager also serve as
directors/trustees of the other Delaware Group funds, and certain officers are
also officers of these other funds. A company owned by the Manager'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
services, dividend disbursing, accounting servicing and transfer agent for all
of the mutual funds in the Delaware Group.
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Wayne A. Stork Chairman of the Board, President, Chief
Executive Officer, Chief Investment Officer and Director
of Delaware Management Company, Inc.; Chairman of the
Board, President, Chief Executive Officer and Director of
DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.; Chairman, Chief Executive Officer and
Director of Delaware International Holdings Ltd. and
Delaware International Advisers Ltd.; Chairman of the
Board and Director of the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc., and Delaware Capital Management, Inc.;
Chairman of Delaware Distributors, L.P.; President and
Chief Executive Officer of Delvoy, Inc.; and Director of
Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President
of the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc.
and Delaware Capital Management, 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, AAA Mid Atlantic, Inc. since 1989,
2040 Market Street, Philadelphia, PA; Board of
Directors, Metron, Inc. since 1995, 11911
Freedom Drive, Reston, VA
Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the
Delaware Group and Delaware Management Holdings,
Inc.; Executive Vice President and Director of
Founders Holdings, Inc.; Executive Vice President
of Delaware Capital Management, Inc.; and Director
of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
David K. Downes Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Executive Vice President, Chief
Operating Officer and Chief Financial Officer of
the Registrant and each of the other funds in the
Delaware Group, Delaware Management Holdings,
Inc., Founders CBO Corporation, Delaware Capital
Management, Inc. and Delaware Distributors, L.P.;
President, Chief Executive Officer, Chief
Financial Officer and Director of Delaware Service
Company, Inc.; President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman, Chief
Executive Officer and Director of Delaware
Investment & Retirement Services, Inc.; Chairman
and Director of Delaware Management Trust Company;
Director of Delaware International Advisers Ltd.;
and Vice President of Lincoln Funds Corporation
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square,
PA
George M. Senior Vice President, General Counsel, Secretary
Chamberlain, Jr. and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc.,
Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Delvoy,
Inc.; Senior Vice President, Secretary and General
Counsel of the Registrant, each of the other funds
in the Delaware Group, Delaware Distributors, L.P.
and Delaware Management Holdings, Inc.; Senior
Vice President and Director of Delaware
International Holdings Ltd.; Executive Vice
President, Secretary, General Counsel and Director
of Delaware Management Trust Company; Director of
Delaware International Advisers Ltd.; Secretary of
Lincoln Funds Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard J. Flannery Senior Vice President/Corporate and International
Affairs of the Registrant, each of the other funds
in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Management
Trust Company, Delaware Capital Management, Inc.,
Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.; Executive
Vice President/Corporate & International Affairs
and Director of Delaware International Holdings
Ltd.; Senior Vice President/ Corporate and
International Affairs and Director of Founders
Holdings, Inc. and Delvoy, Inc.; Senior Vice
President of Founders CBO Corporation; and
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bulltown Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall Links,
Inc. since 1991, Bulltown Rd., Elverton, PA
Michael P. Bishof Senior Vice President and Treasurer of the
Registrant, each of the other funds in the
Delaware Group and Founders Holdings, Inc.; Senior
Vice President/Investment Accounting of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.; Senior Vice President and
Treasurer/Manager, Investment Accounting of
Delaware Distributors, L.P.; Assistant Treasurer
of Founders CBO Corporation; and Senior Vice
President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Joseph H. Hastings Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital
Management, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., Delaware
International Holdings Ltd. and Delvoy, Inc.;
Senior Vice President/Corporate Controller of the
Registrant, each of the other funds in the
Delaware Group and Founders Holdings, Inc.;
Executive Vice President, Chief Financial Officer
and Treasurer of Delaware Management Trust
Company; Chief Financial Officer and Treasurer of
Delaware Investment & Retirement Services, Inc.;
Senior Vice President/Assistant Treasurer of
Founders CBO Corporation; and Treasurer of Lincoln
Funds Corporation.
Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc.
Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Investment and
Retirement Services, Inc. and Delaware Service
Company, Inc.; Senior Vice President/Operations
and Director of Delaware Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of
Delaware Management Company, Inc., Delaware
Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant and each of the
other funds in the Delaware Group, 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,
Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment &
Retirement Services, Inc.; and Vice President and
Assistant Secretary of Delvoy, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
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 Capital
Management, Inc., Delaware Investment & Retirement
Services, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Vice President and Secretary of
Delaware International Holdings Ltd.; and
Secretary of Founders CBO Corporation;
Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA
Richard Salus(1) Vice President/Assistant Controller of Delaware
Management Company, Inc. and Delaware Management
Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.; Vice
President/Director of Internal Audit of Delvoy,
Inc.
Steven T. Lampe 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, Delaware Capital Management, Inc.,
Delaware Investment & Retirement Services, Inc.
and Delvoy, Inc.
Christopher Adams Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Susan L. Hanson Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Dennis J. Mara(2) Vice President/Acquisitions of Delaware Management
Company, Inc.
Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Lisa O. Brinkley 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 Capital
Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Vice President of
Delvoy, Inc.
Rosemary E. Milner Vice President/Legal Registrations of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Distributors, Inc.
Mary Ellen Carrozza Vice President/Client Services of Delaware
Management Company, Inc. and the Registrant
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, Assistant Secretary and Director of
Founders CBO Corporation
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 President and Director of Founders CBO
Corporation.
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 Capital
Management, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
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 and Delaware Capital
Management, Inc.
Roger A. Early 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
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant
and each of the tax-exempt and fixed income funds
in the Delaware Group
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
and each of the equity funds in the Delaware Group
and Delaware Capital Management, Inc.
Gerald S. Frey(4) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant
and each of the equity funds in the Delaware Group
Christopher Beck(5) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant
and each of the equity funds in the Delaware Group
Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and the
Delaware-Voyageur Tax-Free Minnesota Intermediate,
Delaware-Voyageur Minnesota Insured, Delaware-
Voyageur Tax-Free Minnesota, Delaware-Voyageur
Tax-Free Idaho, Delaware-Voyageur Tax-Free Kansas,
Delaware-Voyageur Tax-Free Missouri,
Delaware-Voyageur Tax-Free Oregon,
Delaware-Voyageur Tax-Free Washington,
Delaware-Voyageur Tax-Free Iowa and
Delaware-Voyageur Tax-Free Wisconsin Funds.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Andrew M. McCullagh(7) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and the
Delaware-Voyageur Tax-Free Arizona Insured,
Delaware-Voyageur Tax-Free Arizona,
Delaware-Voyageur Tax-Free California Insured,
Delaware-Voyageur Tax-Free Colorado,
Delaware-Voyageur Tax-Free New Mexico,
Delaware-Voyageur Tax-Free North Dakota and
Delaware-Voyageur Tax-Free Utah Funds.
Babak Zenouzi Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant
and each of the equity funds and the closed-end
funds in the Delaware Group
Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each
of the tax-exempt and fixed income funds in the
Delaware Group
Marshall T. Bassett Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity
funds in the Delaware Group.
John Heffern Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity
funds in the Delaware Group.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR, FINANCIAL
PLANNING, Decision One prior to March 1996.
3 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
4 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
5 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
6 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
7 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset Management
LLC prior to May 1997.
<PAGE>
PART C- Other Information
(continued)
Delaware International Advisers Ltd. ("Delaware International") serves
as sub-investment adviser to the International Equity, Global Bond and Emerging
Markets Series of the Registrant. Delaware International serves as sub-adviser
to Strategic Income Series. In addition, Delaware International also serves as
investment manager or sub-adviser to certain other funds in the Delaware Group
(Delaware Group Global Dividend and Income Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group Adviser
Funds, Inc. and Delaware Group Income Funds, 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.
Positions and Offices with Delaware International
Name and Principal Advisers Ltd. and its Affiliates and Other
Business Address Positions and Offices Held
------------------ ---------------------------------------------------
*Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.; Chairman of the
Board, President, Chief Executive Officer and
Director of DMH Corp., Delaware Distributors, Inc.
and Founders Holdings, Inc.; Chairman, Chief
Executive Officer and Director of Delaware
International Holdings Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board
and Director of the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc. and Delaware Capital Management,
Inc.; President and Chief Executive Officer of
Delvoy, Inc.; Chairman of Delaware Distributors,
L.P.; and Director of Delaware Service Company,
Inc. and Delaware Investment & Retirement Services,
Inc.
**G. Roger H. Kitson Vice Chairman and Director of Delaware
International Advisers Ltd.
**Ian G. Sims Deputy Managing Director/Chief Investment
Officer/Global Fixed Income and Director of
Delaware International Advisers Ltd.
**David G. Tilles Managing Director, Chief Investment Officer and
Director of Delaware International Advisers Ltd.
and Chief Investment Officer and Director of
Delaware International Holdings, Ltd.
**John Emberson Secretary, Compliance Officer, Finance Director and
Director of Delaware International Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
<PAGE>
PART C- Other Information
(continued)
Positions and Offices with Delaware International
Name and Principal Advisers Ltd. and its Affiliates and Other
Business Address Positions and Offices Held
------------------ ---------------------------------------------------
**Nigel G. May Director/Head of Pacific Basin Group and Director
of Delaware International Advisers Ltd.
**Elizabeth A. Desmond Director/Head of European Group and Director of
Delaware International Advisers Ltd.
*David K. Downes Director of Delaware International Advisers Ltd.
and Delaware Voyageur Holding, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management
Company, Inc., DMH Corp, Delaware Distributors,
Inc., Founders Holdings, Inc. and Delvoy, Inc.;
Executive Vice President, Chief Operating Officer
and Chief Financial Officer of the Registrant and
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc. and
Delaware Distributors, L.P.; President, Chief
Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.;
President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware International
Holdings Ltd.; Chairman, Chief Executive Officer
and Director of Delaware Investment & Retirement
Services, Inc.; Chairman and Director of Delaware
Management Trust Company; and Vice President of
Lincoln Funds Corporation
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square,
PA
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
<PAGE>
PART C- Other Information
(continued)
Positions and Offices with Delaware International
Name and Principal Advisers Ltd. and its Affiliates and Other
Business Address Positions and Offices Held
------------------ ---------------------------------------------------
*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, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc
and Delaware Capital Management, 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;
Board of Directors, Metron, Inc. since 1995, 11911
Freedom Drive, Reston, VA
*Richard J. Flannery Director of Delaware International Advisers Ltd.;
Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President
of the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc
and Delaware Capital Management, 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;
Board of Directors, Metron, Inc. since 1995, 11911
Freedom Drive, Reston, VA
*John C. E. Campbell Director of Delaware International Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
<PAGE>
PART C- Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address Affiliates and Other Positions and Offices Held
------------------ ---------------------------------------------------
*George M. Chamberlain, Jr. Director of Delaware International Advisers Ltd.
and Delaware Voyageur Holding, Inc.; Senior Vice
President, General Counsel, Secretary and Director
of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware
Capital Management, Inc., Delaware Investment &
Retirement Services, Inc. and Delvoy, Inc.; Senior
Vice President, Secretary and General Counsel of
the Registrant, each of the other funds in the
Delaware Group, Delaware Distributors, L.P. and
Delaware Management Holdings, Inc.; Senior Vice
President and Director of Delaware International
Holdings Ltd.; Executive Vice President, Secretary,
General Counsel and Director of Delaware Management
Trust Company; and Secretary of Lincoln Funds
Corporation
*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.
**Gavin A. Hall Senior Portfolio Manager of Delaware International
Advisers Ltd.
**Robert Akester Senior Portfolio Manager of Delaware International
Advisers Ltd.
**Hywel Morgan Senior Portfolio Manager of Delaware International
Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
<PAGE>
PART C- Other Information
(continued)
Vantage Global Advisors, Inc. ("Vantage"), 630 Fifth Avenue, New
York, NY 10111, is an indirect, wholly owned subsidiary of Lincoln National
Corporation and an affiliate of Delaware Management Company, Inc. Vantage
provides investment advice to pension plans, endowments, insurance and
commingled products. Vantage serves as sub-adviser to Quantum Series. Vantage
also serves as sub-adviser to Delaware Group Equity Funds II, Inc. The
directors and officers of Vantage are listed below. Unless otherwise
indicated, the principal business address of each person is 630 Fifth Avenue,
New York, NY 10111.
Positions and Offices with Vantage Global Advisors,
Name and Principal Inc. and its Affiliates and Other Positions and
Business Address Offices Held
------------------ ---------------------------------------------------
T. Scott Wittman President, Chief Investment Officer and Director of
Vantage Global Advisors, Inc.
Elliot M. Gartner Senior Vice President of Vantage Global Advisors,
Inc.
John B. Guerard Senior Vice President of Vantage Global Advisors,
Inc.
Marc C. Viani Vice President of Vantage Global Advisors, Inc.
Florence P. Leong Vice President of Vantage Global Advisors, Inc.
Evelyn M. Poy Vice President of Vantage Global Advisors, Inc.
Dennis A. Blume Director of Vantage Global Advisors, Inc.
Senior Vice President and Director of Lincoln
Investment Management, Inc. since 1982, 200 East
Berry Street, Fort Wayne, IN; Director of Lynch &
Mayer, Inc. since 1996, 520 Madison Avenue, New
York, NY
*H. Thomas McMeekin Director of Vantage Global Advisors, Inc.
President and Director of Lincoln Investment
Management, Inc., Lincoln National Convertible
Securities Fund, Inc., Lincoln National Income
Fund, Inc. since 1994; Executive Vice President
and Chief Investment Officer of Lincoln National
Corporation since 1994; President, Chief
Executive Officer and Director of Lincoln
National Mezzanine Corporation, 200 East Berry
Street, Fort Wayne, IN; Director of Lynch &
Mayer, Inc., 520 Madison Avenue, New York, NY
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
** Business address is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
Positions and Offices with Vantage Global Advisors,
Name and Principal Inc. and its Affiliates and Other Positions and
Business Address Offices Held
------------------ ---------------------------------------------------
**Bruce D. Barton(1) Director of Vantage Global Advisors, Inc.
President and Chief Executive Officer of Delaware
Distributors, L.P. since 1996, 1818 Market Street,
Philadelphia, PA
(1) SENIOR VICE PRESIDENT AND DIRECTOR, Lincoln National Investment
Companies February 1996 to October 1996; VICE PRESIDENT, Lincoln
National Corporation May 1992 to October 1996.
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
** Business address is 1818 Market Street, Philadelphia, PA 19103.
Lincoln Investment Management Company, Inc. serves as sub-adviser to
The Real Estate Investment Trust Portfolio and The Real Estate Investment Trust
Portfolio II. Lincoln Investment Management Company, Inc. also serves as
investment manager to Lincoln National Convertible Securities Fund, Inc.,
Lincoln National Income Fund, Inc., Lincoln National Aggressive Growth Fund,
Inc., Lincoln National Bond Fund, Inc., Lincoln National Capital Appreciation
Fund, Inc., Lincoln National Equity-Income Fund, Inc., Lincoln National Global
Asset Allocation Fund, Inc., Lincoln National Growth and Income Fund, Inc.,
Lincoln National International Fund, Inc., Lincoln National Managed Fund, Inc.,
Lincoln National Money Market Fund, Inc., Lincoln National Social Awareness
Fund, Inc., Lincoln National Special Opportunities Fund, Inc. and to other
clients. Lincoln Investment Management Company, Inc. is registered with the
Securities and Exchange Commission as an investment adviser and has acted as an
investment adviser to investment companies for over 40 years.
<PAGE>
PART C- Other Information
(continued)
Information regarding the officers and directors of Lincoln
Investment Management Company, Inc. and the positions they held during the past
two years follows:
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
------------------ ---------------------------------------------------
*H. Thomas McMeekin President and Director of Lincoln Investment
Management, Inc., Lincoln National Convertible
Securities Fund, Inc. and Lincoln National Income
Fund, Inc.; President, Chief Executive Officer and
Director of Lincoln National Mezzanine Corporation;
Executive Vice President (previously Senior Vice
President) and Chief Investment Officer of
Lincoln National Corporation; and Director of The
Lincoln National Life Insurance Company, and Vantage
Global Advisors, Inc.
*Dennis A. Blume Senior Vice President and Director of Lincoln
Investment Management, Inc. and Lincoln National
Realty Corporation; and Director of Vantage Global
Advisors, Inc.
*Steven R. Brody Director, Senior Vice President of Lincoln
Investment Management, Inc.; Director and Vice
President of Lincoln National Mezzanine Corporation;
Vice President of The Lincoln National Life
Insurance Company; Director of Lincoln National
Realty Corporation; Treasurer of Lincoln National
Convertible Securities Fund, Inc. and Lincoln
National Income Fund, Inc.; and Assistant Treasurer
of Lincoln Financial Group, Inc., Lincoln National
Aggressive Growth Fund, Inc., Lincoln National Bond
Fund, Inc., Lincoln National Capital Appreciation
Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund,
Inc., Lincoln National Growth and Income Fund, Inc.,
Lincoln National Health & Casualty Insurance
Company, Lincoln National International Fund, Inc.,
Lincoln National Life Reinsurance Company, Lincoln
National Managed Fund, Inc., Lincoln National Money
Market Fund, Inc., Lincoln National Reassurance
Company, Lincoln National Social Awareness Fund,
Inc. and Lincoln National Special Opportunities
Fund, Inc.
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C- Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ------------------ ---------------------------------------------------
*Ann L. Warner Senior Vice President (previously Vice President) of
Lincoln Investment Management, Inc.; Second Vice
President of Lincoln Life & Annuity Company of New
York; Director of Lincoln National Convertible
Sccurities Fund, Inc.; and Director and Vice
President of Lincoln National Income Fund, Inc.
*JoAnn E. Becker Vice President of Lincoln Investment Management,
Inc. and The Lincoln National Life Insurance
Company; and Director of LNC Equity Sales
Corporation, The Richard Leahy Corporation and
Professional Financial Planning, Inc.
*David A. Berry Vice President of Lincoln Investment Management,
Inc., Lincoln National Convertible Securities Fund,
Inc. and Lincoln National Income Fund, Inc.; and
Second Vice President of Lincoln Life & Annuity
Company of New York
*Anne E. Bookwalter Vice President (previously Second Vice President) of
Lincoln Investment Management, Inc.; and Director of
Professional Financial Planning, Inc.
*Philip C. Byrde Vice President of Lincoln Investment Management,
Inc.
*Patrick R. Chasey Vice President of Lincoln Investment Management,
Inc.
*Garrett W. Cooper Vice President of Lincoln Investment Management,
Inc.
*David C. Fischer Vice President of Lincoln Investment Management,
Inc. and Lincoln National Income Fund, Inc.
*Luc N. Girard Vice President of Lincoln Investment Management,
Inc. and The Lincoln National Life Insurance Company
*Donald P. Groover Vice President of Lincoln Investment Management,
Inc.
Previously Senior Economist/Senior Consultant,
Chalke, Inc., Chantilly, VA
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C- Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
------------------ ---------------------------------------------------
*William N. Holm, Jr. Vice President of Lincoln Investment Management,
Inc.; and Vice President and Director of Lincoln
National Mezzanine Corporation
*Jennifer C. Hom Vice President (previously Portfolio Manager) of
Lincoln Investment Management, Inc.
*John A. Kellogg Vice President of Lincoln Investment Management,
Inc. and Lincoln National Realty Corporation
*Timothy H. Kilfoil Vice President of Lincoln Investment Management,
Inc.
*Lawrence T. Kissko Vice President of Lincoln Investment Management,
Inc.; Vice President and Director Lincoln National
Realty Corporation; and Vice President of The
Lincoln National Life Insurance Company
*Walter M. Korinke Vice President of Lincoln Investment Management,
Inc.
*Lawrence M. Lee Vice President of Lincoln Investment Management,
Inc. and Lincoln National Realty Corporation
*John David Moore Vice President of Lincoln Investment Management,
Inc.
*Oliver H.G. Nichols Vice President of Lincoln Investment Management,
Inc., The Lincoln National Life Insurance Company
and Lincoln National Realty Corporation
*David C. Patch Vice President of Lincoln Investment Management,
Inc.
*Joseph T. Pusateri Vice President of Lincoln Investment Management,
Inc. and Lincoln National Realty Corporation
*Gregory E. Reed Vice President of Lincoln Investment Management,
Inc.
*Bill L. Sanders Vice President of Lincoln Investment Management,
Inc.; and Sales Vice President of The Lincoln
National Life Insurance Company
*Milton W. Shuey Vice President of Lincoln Investment Management,
Inc.
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C- Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ------------------ ---------------------------------------------------
*Gerald M. Weiss Vice President of Lincoln Investment Management,
Inc.
**Jon A. Boscia Director (previously President) of Lincoln
Investment Management, Inc.; Director of Lincoln
National Foundation, Inc., Lincoln Life & Annuity
Company of New York and First Penn-Pacific Life
Insurance Company; President, Chief Executive
Officer and Director of The Lincoln National Life
Insurance Company; and President of Lincoln
Financial Group, Inc.
*Janet C. Whitney Vice President and Treasurer of Lincoln Investment
Management, Inc., The Financial Alternative, Inc.,
Financial Alternative Resources, Inc., Financial
Choices, Inc., Financial Investments, Inc.,
Financial Investment Services, Inc., The Financial
Resources Department, Inc., Investment Alternatives,
Inc., The Investment Center, Inc., The Investment
Group, Inc., LNC Administrative Services
Corporation, LNC Equity Sales Corporation, The
Richard Leahy Corporation, Lincoln National
Aggressive Growth Fund, Inc., Lincoln National Bond
Fund, Inc., Lincoln National Capital Appreciation
Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Assets Allocation
Fund, Inc., Lincoln National Growth and Income Fund,
Inc., Lincoln National Health & Casualty Insurance
Company, Lincoln National Intermediaries, Inc.,
Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National
Management Services, Inc., Lincoln National
Mezzanine Corporation, Lincoln National Money Market
Fund, Inc., Lincoln National Realty Corporation,
Lincoln National Risk Management, Inc., Lincoln
National Social Awareness Fund, Inc., Lincoln
National Special Opportunities Fund, Inc., Lincoln
National Structured Settlement, Inc., Personal
Financial Resources, Inc., Personal Investment
Services, Inc., Special Pooled Risk Administrators,
Inc., Underwriters & Management Services, Inc.; Vice
President and Treasurer (previously Vice President
and General Auditor) of Lincoln National
Corporation; and Assistant Treasurer of First
Penn-Pacific Life Insurance Company
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
** Business address is 1300 S. Clinton Street, Fort Wayne, IN 46802.
<PAGE>
PART C- Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ------------------ ---------------------------------------------------
*C. Suzanne Womack Secretary of Lincoln Investment Management, Inc.,
Corporate Benefit Systems Services Corporation, The
Financial Alternative, Inc., Financial Alternative
Resources, Inc., Financial Choices, Inc., The
Financial Resources Department Inc., Financial
Investment Services, Inc., Financial Investments,
Inc., Insurance Services, Inc., Investment
Alternatives, Inc., The Investment Center, Inc.
(TN), The Investment Group, Inc., LNC Administrative
Services Corporation, LNC Equity Sales Corporation,
The Richard Leahy Corporation, Lincoln Life Improved
Housing, Inc., Lincoln National (China) Inc.,
Lincoln National Convertible Securities Fund, Inc.,
Lincoln National Health & Casualty Insurance
Company, Lincoln National Income Fund, Inc., Lincoln
National Intermediaries, Inc., Lincoln National Life
Reinsurance Company, Lincoln National Management
Services, Inc., Lincoln National Mezzanine
Corporation, Lincoln National Realty Corporation,
Lincoln National Reassurance Company, Lincoln
National Reinsurance Company (Barbados) Limited,
Lincoln National Reinsurance Company Limited,
Lincoln National Risk Management Inc., Lincoln
National Structured Settlement, Inc., Old Fort
Insurance Company, Ltd., Personal Financial
Resources, Inc., Personal Investment Services, Inc.,
Professional Financial Planning, Inc., Reliance Life
Insurance Company of Pittsburgh, Special Pooled Risk
Administrators, Inc. and Underwriters & Management
Services, Inc.; Vice President, Secretary and
Director of Lincoln National Foundation, Inc.;
Secretary and Assistant Vice President of Lincoln
National Corporation and The National Life Insurance
Company; and Assistant Secretary of Lincoln National
Aggressive Growth Fund, Inc., Lincoln National Bond
Fund, Inc., Lincoln National Capital Appreciation
Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund,
Inc., Lincoln National Growth and Income Fund, Inc.,
Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money
Market Fund, Inc., Lincoln National Social Awareness
Fund, Inc., Lincoln National Special Opportunities
Fund, Inc., Lincoln National Variable Annuity Funds
A & B and Lincoln Life & Annuity Company of New York
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for
all the mutual funds in the Delaware Group.
(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
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief Executive None
Officer
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
David K. Downes Executive Vice President, Executive Vice
Chief Operating Officer President/Chief
and Chief Financial Officer Operating Officer/
Chief Financial Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary/ Senior Vice President/
General Counsel Secretary/General Counsel
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/
and International Affairs Corporate and
International Affairs
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/ Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Dana B. Hall Senior Vice President/ None
Key Accounts
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
William F. Hostler Senior Vice President/ None
Marketing Services
J. Chris Meyer Senior Vice President/ None
Director Product Management
Stephen H. Slack Senior Vice President/Wholesaler None
William M. Kimbrough Senior Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Eric E. Miller Vice President/Assistant Secretary/ Vice President/
Deputy General Counsel Assistant Secretary/
Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance
Rosemary E. Milner Vice President/Legal Registrations Vice President/Legal
Registrations
Daniel H. Carlson Vice President/Strategic Marketing None
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Joanne A. Mettenheimer Vice President/New Business None
Development
Scott Metzger Vice President/Business Development Vice President/Business
Development
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/National Accounts None
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Vice President/Product None
Development
Andrew W. Whitaker Vice President/Financial Institutions None
Jesse Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Susan T. Friestedt Vice President/Client Service None
Dinah J. Huntoon Vice President/Product None
Manager Equity
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C- Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
Holly W. Reimel Vice President/Manager, Key Accounts None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
</TABLE>
<PAGE>
PART C- Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Thomas P. Kennett Vice President/Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
</TABLE>
<PAGE>
PART C- Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
John A. Wells Vice President/Marketing Technology None
Scott Whitehouse Vice President/Wholesaler None
Frank C. Tonnemaker Vice President None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Inapplicable.
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, in London at Third Floor, 80 Cheapside,
London, England EC2V 6EE, in New York at 630 Fifth Avenue, New
York, NY 10111 or in Fort Wayne at 200 Berry Street, Fort Wayne,
IN 46802 or 1300 S. Clinton Street, Fort Wayne, IN 46802.
Item 31. Management Services. None.
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 public
offering of shares of the REIT 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 14th day of January, 1998.
DELAWARE GROUP PREMIUM FUND, INC.
By /s/Wayne A. Stork
------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------- --------------------------------------- ----------------
<S> <C> <C>
/s/ Wayne A. Stork Chairman of the Board and Director January 14, 1998
- ----------------------------
Wayne A. Stork
/s/David K. Downes Executive Vice President/Chief Operating
- ---------------------------- Officer/Chief Financial Officer (Principal
David K. Downes Financial Officer and Principal Accounting
Officer) January 14, 1998
/s/Walter P. Babich Director January 14, 1998
- ----------------------------
Walter P. Babich
/s/W. Thacher Longstreth Director January 14, 1998
- ----------------------------
W. Thacher Longstreth
/s/ Thomas F. Madison Director January 14, 1998
- ----------------------------
Thomas F. Madison
/s/Charles E. Peck Director January 14, 1998
- ----------------------------
Charles E. Peck
/s/Ann R. Leven Director January 14, 1998
- ----------------------------
Ann R. Leven
/s/Anthony D. Knerr Director January 14, 1998
- ----------------------------
Anthony D. Knerr
/s/ Jeffrey J. Nick Director January 14, 1998
- ----------------------------
Jeffrey J. Nick
</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.B5M Proposed Investment Management Agreement (1998)
EX-99.B5P Proposed Sub-Advisory Agreement (1998)
EX-99.B6I Proposed Distribution Agreement (1998)
EX-99.B8AI Amendment (November 20, 1997) to Custodian Agreement
EX-99.B9D Proposed Amended and Restated Shareholder Services
Agreement (1998)
EX-99.B9EII Form of Schedule A to Delaware Group of Funds Fund
(Module name Accounting Agreement
ACCT__AGT__SCHD__A)
<PAGE>
PROPOSED EX-99.B5M
SUBJECT TO BOARD APPROVAL Exhibit 24(b)(5)(m)
DELAWARE GROUP PREMIUM FUND, INC.
REIT SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP PREMIUM FUND, INC. (the
"Fund"), a Maryland corporation, for the REIT SERIES (the "Series") and DELAWARE
MANAGEMENT COMPANY, INC. (the "Investment Manager"), a Delaware corporation.
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, the Investment Manager serves as the investment manager for
other series of the Fund, and the Fund desires to retain the Investment
Manager to serve as the investment manager for this Series effective as of the
date of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The 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
<PAGE>
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 following: 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. [The Series shall bear
all of its own organizational costs.]
Directors, officers and employees of the Investment Manager may be
directors, officers and employees of the funds of which Delaware Management
Company, Inc. is Investment Manager. Directors, officers and employees of the
Investment Manager who are directors, officers and/or employees of the funds
shall not receive any compensation from the funds for acting in such dual
capacity.
In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Fund and Investment Manager may share
facilities common to each, with appropriate proration of expenses between them.
-2-
<PAGE>
3. (a) The Fund shall place and execute its own orders for the
purchase and sale of domestic portfolio securities with broker/dealers. Subject
to the primary objective of obtaining the best available prices and execution,
the Fund will place orders for the purchase and sale of portfolio securities
with such broker/dealers selected from among those designated from time to time
by the Investment Manager, 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
Management Company, Inc. or 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 or 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
-3-
<PAGE>
Series' assets a fee (at an annual rate) equal to 0.75% 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 Investment Manager may, at its expense, select and contract
with one or more registered investment advisers (the "Sub-Adviser") for the Fund
to perform some or all of the services for the Series for which it is
responsible under this Agreement. Notwithstanding Paragraph 3 hereof, such
Sub-Adviser may be responsible for executing orders for the purchase and sale of
portfolio securities. The Investment Manager will compensate any Sub-Adviser for
its services to the Fund. The Investment Manager may terminate the services of
any Sub-Adviser at any time in its sole discretion, and shall at such time
assume the responsibilities of such Sub-Adviser unless and until a successor
Sub-Adviser is selected.
6. 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.
7. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
8. 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
-4-
<PAGE>
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.
9. 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 from
such date and may be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of
Directors of the Fund 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. 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 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.
10. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
-5-
<PAGE>
11. 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 day of March ,
1998.
DELAWARE GROUP PREMIUM FUND, INC.
for REIT SERIES
By:_____________________________________
Name:
Title:
Attest:_________________________________
Name:
Title:
DELAWARE MANAGEMENT COMPANY, INC.
By:_____________________________________
Name:
Title:
Attest:_________________________________
Name:
Title:
-6-
<PAGE>
EX-99.B5P
Exhibit 24(b)(5)(p)
PROPOSED
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP PREMIUM, INC.
REIT SERIES
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation ("Investment Manager"), and LINCOLN INVESTMENT
MANAGEMENT, INC., an Illinois corporation ("Sub-Adviser").
W I T N E S S E T H:
WHEREAS, DELAWARE GROUP PREMIUM FUND, INC., a Maryland corporation
("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 and the Fund on behalf of the REIT
Series ("Series") have entered into an agreement of even date herewith
("Investment Management Agreement") whereby the Investment Manager will
provide investment advisory services to the Fund on behalf of the Series; and
WHEREAS, the Investment Management Agreement permits the Investment
Manager to hire one or more sub-advisers to assist the Investment Manager in
providing investment advisory services to the Fund on behalf of the Series;
and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
Investment Advisers under the Investment Advisers Act of 1940 and engage in
the business of providing investment management services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
<PAGE>
1. The Investment Manager hereby employs the Sub-Adviser to furnish
the Investment Manager with investment recommendations, asset allocation
advice, research, economic analysis and other investment services with respect
to securities in which the Series may invest, subject to the direction of the
Board and officers of the Fund for the period and on the terms hereinafter set
forth. The Sub-Adviser hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or represent
the Fund in any way, or in any way be deemed an agent of the Fund. The
Sub-Adviser shall furnish the Board of Directors of the Fund with such
information and reports regarding its activities as the Investment Manager
deems appropriate or as the Directors of the Fund may reasonably request
consistent with the provisions of Section 15(c) of the Investment Company Act
of 1940.
2. Under the terms of the Investment Management Agreement, 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 repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. Without limiting the foregoing, except as the Investment
Manager and the Sub-Adviser may agree in writing from time to time, the
Sub-Adviser shall have no responsibility for record maintenance and
preservation obligations under Section 31 of the Investment Company Act of
1940. Directors, officers and employees of the Sub-Adviser may be directors,
officers and employees of other funds which have employed the Sub-Adviser as
sub-adviser or investment manager.
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<PAGE>
In the conduct of the respective business of the parties hereto and
in the performance of this Agreement, the Fund, the Investment Manager and the
Sub-Adviser may share facilities common to each, with appropriate proration of
expenses between and among them.
3. As compensation for the services to be rendered to the Fund for
the benefit of the Series by the Sub-Adviser under the provisions of this
Agreement, the Investment Manager shall pay to the Sub- Adviser a monthly fee
equal to _____% of the fee paid to the Investment Manager under the terms of
the Investment Management Agreement.
If this Agreement is terminated prior to the end of any calendar
month, the Sub-Advisory fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days, during which the Agreement is in effect, bears to the number
of calendar days in the month, and shall be payable within 10 days after the
date of termination.
4. The services to be rendered by the Sub-Adviser to the Fund for the
benefit of the Series under the provisions of this Agreement are not to be
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
5. The Sub-Adviser, its directors, officers, employees, agents and
shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
The Investment Manager agrees that it shall not use the Sub-Adviser's
name or otherwise refer to the Sub-Adviser in any materials distributed to
third parties, including the Series' shareholders, without the prior written
consent of the Sub-Adviser.
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<PAGE>
6. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of its duties as
Sub-Adviser to the Fund, the Sub-Adviser shall not be subject to liability to
the Fund, to the Investment Manager 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.
7. This Agreement shall be executed and become effective as of the
date written below if approved by the vote of a majority of the outstanding
voting securities of the Series. 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 the 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. Notwithstanding the foregoing,
this Agreement may be terminated by the Investment Manager or the Fund at any
time, without the payment of a penalty, on sixty days' written notice to the
Sub-Adviser, of the Investment Manager's or the Fund's intention to do so, in
the case of the Fund pursuant to action by the Board of Directors of the Fund
or pursuant to the vote of a majority of the outstanding voting securities of
the Series. The Sub-Adviser may terminate this Agreement at any time, without
the payment of a penalty on sixty days' written notice to the Investment
Manager and the 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
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<PAGE>
Agreement committed prior to such termination, and except for the obligation
of the Investment Manager to pay to the Sub-Adviser the fee provided in
Paragraph 4 hereof, prorated to the date of termination. This Agreement shall
automatically terminate in the event of its assignment. This Agreement shall
automatically terminate upon the termination of the Investment Management
Agreement.
8. This Agreement shall extend to and bind the successors of the
parties hereto.
9. For the purposes of this Agreement, the terms "vote of a majority of
the outstanding voting securities"; "interested person"; and "assignment" shall
have the meaning defined in the Investment Company Act of 1940.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their corporate
seals to be affixed and duly attested and their presents to be signed by their
duly authorized officers as of the day of March, 1998.
DELAWARE MANAGEMENT COMPANY, INC.
By:_______________________________________
Name:
Title:
Attest:____________________________________
LINCOLN INVESTMENT MANAGEMENT, INC.
By:______________________________________
Name:
Title:
Attest:___________________________________
Agreed to and accepted as of the day and year first above written:
DELAWARE GROUP PREMIUM FUND, INC.
on behalf of The REIT SERIES
By: _________________________________
Wayne A. Stork
Chairman
Attest: _____________________________
-6-
<PAGE>
EX-99.B6I
Exhibit 24(b)(6)(i)
PROPOSED
SUBJECT TO BOARD APPROVAL
DELAWARE GROUP PREMIUM FUND, INC.
REIT SERIES
DISTRIBUTION AGREEMENT
Distribution Agreement made as of this day of March, 1998 by and
between DELAWARE GROUP PREMIUM FUND, INC., a Maryland corporation (the "Fund"),
on behalf of its REIT 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:
<PAGE>
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
-2-
<PAGE>
the authorized but unissued Series' shares as the
Distributor shall require from time to time, all
subject to the further provisions of this contract,
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:
-3-
<PAGE>
(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
-4-
<PAGE>
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 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
-5-
<PAGE>
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
(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
-6-
<PAGE>
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
Conduct Rules 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
-7-
<PAGE>
be made when and where accepted by Delaware Service
Company.
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.
-8-
<PAGE>
(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.
-9-
<PAGE>
12. Copies of financial reports, registration statements and
prospectuses, as well as demands, notices, requests,
consents, waivers, and other communications in writing
which it may be necessary or desirable for either party
to deliver or furnish to the other will be duly delivered
or furnished, if delivered to such party at its address
shown below during regular business hours, or if sent to
that party by registered mail or by prepaid telegram
filed with an office or with an agent of Western Union,
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
-10-
<PAGE>
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
-11-
<PAGE>
be suspended, or in case Stop Order proceedings are
initiated by the U. S. Securities and Exchange
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
-12-
<PAGE>
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 REIT SERIES
________________________________ By:___________________________
Name: Name:
Title: Title:
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<PAGE>
EX-99.B8AI
Exhibit 24(b)(8)(a)(i)
AMENDMENT, dated November 20, 1997 to the May 1, 1996 custody
agreement ("Agreement"), between those registered investment companies listed
on Schedule A to the Agreement (each a "Customer"), having a place of business
at 1818 Market Street, Philadelphia, PA 19103 and The Chase Manhattan Bank
("Bank"), having a place of business at 270 Park Ave., New York, N.Y.
10017-2070.
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in
all respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended by deleting the mutual fund rider
thereto and inserting, in lieu thereof, the following mutual fund rider:
1. Add a new Section 15 to the Agreement as follows:
15. Compliance with SEC rule 17f-5 ("Rule 17f-5").
(a) Customer's board of directors (or equivalent body) (hereinafter
"Board") hereby delegates to Bank, and Bank hereby accepts the delegation to
it, of the obligation to perform as Customer's "Foreign Custody Manager" (as
that term is defined in Rule 17f-5(a)(2)) adopted under the Investment Company
Act of 1940 ("Act"), as amended ("1940 Act"), the following responsibilities
in a manner consistent with Rule 17f-5, to: (i) select Eligible Foreign
Custodians (as that term is defined in Rule 17f-5(a)(1), and as the same may
be amended from time to time, or that have otherwise been made exempt pursuant
to an SEC exemptive order); (ii) enter into written contracts with such
Eligible Foreign Custodians that are banks or trust companies and with
Eligible Foreign Custodians that are "Securities Depositories" (as defined in
Rule 17f-5(a)(6)) and that are not Compulsory Depositories (as defined below)
where the Depository has such a contract; and (iii) to monitor the
appropriateness of maintaining Assets of the series of the Customer with such
Eligible Foreign Custodians; provided that, Bank shall not be responsible for
these duties with respect to any compulsory Securities Depository ("Compulsory
Depository"). A Compulsory Depository shall mean a Securities Depository or
clearing agency the use of which is compulsory because: (1) its use is
required by law or regulation or (2) maintaining securities outside the
depository is not consistent with prevailing custodial practices in the
<PAGE>
country which the Depository serves. Compulsory Depositories used by Chase as
of the date hereof are set forth in Appendix 1-A hereto. Appendix 1-A may be
amended on notice to Customer from time to time. In that connection, Bank
shall notify Customer promptly of pending changes to Appendix 1-A.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports to Customer's Board upon the placement of
Assets with a particular Eligible Foreign Custodian and of any
Material Change (as defined below) in the arrangements with such
Eligible Foreign Custodians, with such reports to be provided to
Customer's Board at such times as the Board deems reasonable and
appropriate based on the circumstances of Customer's foreign custody
arrangements (and until further notice from Customer such reports
shall be provided within 30 days after Bank becomes aware of any such
Material Change. For purposes of the foregoing, a Material Change
shall include, but shall not be limited to, Bank's decision to remove
Customer's Assets from a particular Eligible Foreign Custodian, an
event that has a material adverse affect on an Eligible Foreign
Custodian's financial or operational strength, any non-compliance by
an Eligible Foreign Custodian with a "Material Term" of Bank's
subcustodian agreement with such Eligible Foreign Custodian (as
defined below) or any failure by an Eligible Foreign Custodian to
meet the requirements for its status as such under Rule 17f-5. A
Material Term shall mean a term which provides that (a) the Customer
will be adequately indemnified or its Assets adequately insured, or
an adequate combination thereof, in the event of loss; (b) the Assets
of the Series will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of an Eligible Foreign
Custodian or such Eligible Foreign Custodian's creditors, except a
claim of payment for their safe custody or administration, or in the
case of cash deposits, liens or rights in favor of creditors of the
Eligible Foreign Custodian arising under bankruptcy, insolvency or
similar laws; (c) beneficial ownership for the Assets of the Series
will be freely transferable without the payment of money or value
other than for safe custody or administration of the Assets of the
Series; (d) adequate records will be maintained identifying the
Assets as belonging to the Customer or the Series or as being held by
a third party for the benefit of the Customer or the Series; (e) the
independent auditors for the Customer will be given access to those
records or confirmation of the contents of those records; and (f) the
Customer will receive periodic reports with respect to the
safekeeping of the Series' Assets, including, but not necessarily
limited to, notification of any transfer to or from the Customer's
account or a third party account containing Assets held for the
benefit of the Customer. In addition, in the event that a contract
with an Eligible Foreign Custodian does not include any or all of the
terms described in (a) through (f) of this paragraph 15(b)(i), a
Material Term shall mean a
2
<PAGE>
term which, in the Bank's judgment, if not complied with, would cause
the contract not to provide the same or greater level of care and
protection for Customer's Assets than if the contract contained the
provisions described in (a) through (f) of this paragraph 15(b)(i).
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person having
responsibility for the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have
determined that Assets placed and maintained in the safekeeping of
such Eligible Foreign Custodian shall be subject to reasonable care,
based on the standards applicable to custodians in the relevant
market, after having considered all factors relevant to the
safekeeping of such Assets, including, without limitation, those
factors set forth in Rule 17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodian that is a
Securities Depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any
combination of the foregoing) requires that the Eligible Foreign
Custodian will provide reasonable care for Assets based on the
standards applicable to custodians in the relevant market.
(v) have established a system to monitor the continued
appropriateness of maintaining Assets with particular Eligible
Foreign Custodians based on the standards set forth herein and of the
governing contractual arrangements based on the standards set forth
in Rule 17f-5(c)(2), as it may be amended from time to time.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract which either contains the terms described in Rule
17f-5(c)(2)(i) or which, in lieu of any or all of the terms described in Rule
17f-5(c)(2)(i), contains such other provisions which the Bank determines will
provide in their entirety, the same or a greater level of care and protection
for the Customer's Assets as the provisions of Rule 17f-5(c)(2)(i) in their
entirety. The written contract shall be in such form as deemed appropriate by
Bank. In addition, with respect to Eligible Foreign Custodians that are
non-compulsory Securities Depositories, reliance may be had on such a
contract, the rules or established practices and procedures of such Depository
or any combination thereof.
3
<PAGE>
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with
the rules, regulations, interpretations and exemptive orders promulgated by or
under the authority of the SEC which are applicable to Fund's business or
which have been granted to Fund. Bank shall advise Customer of any exemptive
orders which it obtains which may have an impact on Bank's relationship with
Customer.
(d) Bank represents to Customer that it is a U.S. Bank as defined in
Rule 17f-5(a)(7). Customer represents to Bank that: (1) the Assets being
placed and maintained in Bank's custody are subject to the 1940 Act, as the
same may be amended from time to time; (2) its Board has determined that it is
reasonable to rely on Bank to perform as Customer's Foreign Custody Manager.
Nothing contained herein shall require Bank, on Customer's behalf, to make any
selection regarding countries in which Customer invests or to engage in any
monitoring of Customer's decision to invest in any particular country in which
Bank selects , contracts and monitors Eligible Foreign Custodians, as
Customer's Foreign Custody Manager pursuant to the Agreement.
(e) Bank shall provide to Customer such information as is specified
in Appendix 1-B hereto. Customer hereby acknowledges that: (i) such
information is solely designed to inform Customer of market conditions and
procedures, but is not intended to influence Customer's investment decisions;
and (ii) Bank has gathered the information from sources it considers reliable,
but that Bank shall have no responsibility for inaccuracies or incomplete
information except to the extent that Bank was negligent in selecting the
sources of such information.
2. Add the following after the first sentence of Section 3 of the
Agreement:
At the request of Customer, Bank may, but need not, add to Schedule A
an Eligible Foreign Custodian that is either a bank or a
non-Compulsory Depository where Bank has not acted as Foreign Custody
Manager with respect to the selection thereof. Bank shall notify
Customer in the event that it elects not to add any such entity.
3. Add the following language to the end of Section 3 of the
Agreement:
The term Subcustodian as used herein shall mean the following:
4
<PAGE>
(a) a "U.S. Bank," which shall mean a U.S. bank as defined in Rule
17f-5(a)(7); and
(b) with respect to Securities for which the primary market is
outside the U.S. an "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, (ii) a
majority-owned direct or indirect subsidiary of a U.S. Bank or bank
holding company which subsidiary is incorporated or organized under
the laws of a country other than the United States; (iii) a
Securities Depository or clearing agency (other than a Compulsory
Depository), incorporated or organized under the laws of a country
other than the United States, that acts as a system for the central
handling of securities or equivalent book-entries in that country and
that is regulated by a foreign financial regulatory authority as
defined under section 2(a)(50) of the 1940 Act, (iv) a Securities
Depository or clearing agency organized under the laws of a country
other than the United States that acts as a transnational system
("Transnational Depository") for the central handling of securities
or equivalent book-entries, and (v) any other entity that shall have
been so qualified by exemptive order, rule or other appropriate
action of the SEC.
The term Subcustodian as used in Section 12(a)(i) (except the last
sentence thereof) shall not include any Eligible Foreign Custodians
as to which Bank has not acted as Foreign Custody Manager, any
Compulsory Depository and any Transnational Depository.
4. Add the following after the word "administration" at the end of
Subsection 4(d)(i): "or, in the case of cash deposits, liens or rights in
favor of creditors of Subcustodian arising under bankruptcy, insolvency, or
similar laws".
5. Delete all of Subsection 4(e) after the word "located" in (ii)
thereof and add the word "and" between "Subcustodian" and "(ii)".
5
<PAGE>
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
Customer THE CHASE MANHATTAN BANK
By: /s/ Michael P. Bishof By: /s/ Rosemary M. Stidmon
-------------------------- ----------------------------
Name: Michael P. Bishof Name: Rosemary M. Stidmon
Title: Senior Vice President/ Title: Vice President
Treasurer
Date: Nov. 20, 1997 Date: Nov. 20, 1997
6
<PAGE>
APPENDIX A
Delaware Group Adviser Funds, Inc.
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc.
Blue Chip Fund
Quantum Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund
Small Cap Value Fund
Delaware Pooled Trust, Inc.
The International Equity Portfolio
The International Fixed Income Portfolio
The Global Equity Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II
The Emerging Markets Portfolio
Delaware Group Global & International Funds, Inc.
Emerging Markets Series
Global Assets Series
Global Bond Series
Global Equity Series
International Equity Series
International Small Cap Series
7
<PAGE>
APPENDIX A CON'T
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Devon Series
Emerging Markets Series
Quantum Series
Strategic Income Series
Global Bond Series
DelCap Series
International Equity Series
Delaware Series
Value Series
Voyageur Mutual Funds III, Inc.
Tax-Efficient Equity Fund
Dated: November 20, 1997
8
<PAGE>
Appendix 1-A
<TABLE>
<CAPTION>
COMPULSORY DEPOSITORIES
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Argentina Caja de Valores Equity, Corporate & Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Australia Austraclear Ltd. Corporate Debt, Money Market & Semi-Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
CHESS Equity
(Clearing House Electronic Sub-register System)
- --------------------------------------------------------------------------------------------------------------------------------
RITS Government Debt
(Reserve Bank Information and Transfer System)
- --------------------------------------------------------------------------------------------------------------------------------
Austria Oesterreichische Kontrolbank AG Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Belgium CIK Equity + Corporate Debt
(Caisse Interprofessionnelle de Depots et de
Virements de Titres)
- --------------------------------------------------------------------------------------------------------------------------------
Banque Nationale de Belgique Treasury Bills + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Brazil BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
- --------------------------------------------------------------------------------------------------------------------------------
BVRJ Equity
(Bolsa de Valores de Rio de Janeiro)
- --------------------------------------------------------------------------------------------------------------------------------
Canada CDS Equity, Corporate + Government Debt
(Canadian Depository for Securities)
- --------------------------------------------------------------------------------------------------------------------------------
China, Shanghai SSCCRC Equity
(Shanghai Securities Central Clearing and
Registration Corp.)
- --------------------------------------------------------------------------------------------------------------------------------
China, Shenzhen SSCC Equity
(Shenzhen Securities Registration Co., Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Czech Republic SCP Equity + Long-Term Government Debt
(Securities Center)
- --------------------------------------------------------------------------------------------------------------------------------
TKD Treasury Bills + Money Market
(Trh Kratkododich Dlluhopisu or Short-Term
Bond Market)
- --------------------------------------------------------------------------------------------------------------------------------
Denmark VP Equity, Corporate + Government Debt
(Vaerdipapircentralen)
- --------------------------------------------------------------------------------------------------------------------------------
Egypt Misr Clearing & Sec. Dep. Equity
- --------------------------------------------------------------------------------------------------------------------------------
Estonia EVK Equity
(Estonian Central Depository for Securities
Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Euromarket Cedel & Euroclear Euro-Debt
- --------------------------------------------------------------------------------------------------------------------------------
Finland CSR Equity + Government Debt
(Central Share Registry Finland)
- --------------------------------------------------------------------------------------------------------------------------------
Helsinki Money Market Center Ltd. Money Market
- --------------------------------------------------------------------------------------------------------------------------------
France SICOVAM Equity + Corporate Debt.
(Banque de France)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
France SATURNE Government Debt.
(Banque de France)
- --------------------------------------------------------------------------------------------------------------------------------
Germany DKV Equity, Corporate + Government Debt
(Deutscher Kassenverein)
- --------------------------------------------------------------------------------------------------------------------------------
Greece Apothetirio Titlon A.E. Equity
- --------------------------------------------------------------------------------------------------------------------------------
Bank of Greece Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Hong Kong CCASS Equity
(Central Clearing and Settlement System)
- --------------------------------------------------------------------------------------------------------------------------------
CMU Corporate + Government Debt
(Central Moneymarkets Unit)
- --------------------------------------------------------------------------------------------------------------------------------
Hungary Keler Ltd. Equity + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Ireland CREST Equity
- --------------------------------------------------------------------------------------------------------------------------------
GSO Government Debt
(Gilt Settlement Office)
- --------------------------------------------------------------------------------------------------------------------------------
Israel TASE Clearing House Equity, Corporate + Government Debt
(Tel Aviv Stock Exchange Clearing House)
- --------------------------------------------------------------------------------------------------------------------------------
Italy Monte Titoli Equity + Corporate Debt
- --------------------------------------------------------------------------------------------------------------------------------
Bank of Italy Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Japan Bank of Japan Registered Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Latvia LCD Equity + Government Debt
(Latvian Central Depository)
- --------------------------------------------------------------------------------------------------------------------------------
Lebanon Midclear Equity
(Custodian and Clearing Center of Lebanon and
the Middle East)
- --------------------------------------------------------------------------------------------------------------------------------
Luxembourg Cedel Equity
- -------------------------------------------------------------------------------------------------------------------------------
Malaysia MCD Equity
(Malaysian Central Depository Snd Bhd)
- --------------------------------------------------------------------------------------------------------------------------------
Mauritius CDS Equity
(Central Depository System)
- -------------------------------------------------------------------------------------------------------------------------------
Mexico Indeval Equity, Corporate + Government Debt.
(Institucion para el Deposito de Valores)
- --------------------------------------------------------------------------------------------------------------------------------
Morocco Maroclear Equity + Corporate Debt
- --------------------------------------------------------------------------------------------------------------------------------
Bank Al'Maghrib Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Netherlands NECIGEF/KAS Associate NV Equity, Corp. + Govt. D
- --------------------------------------------------------------------------------------------------------------------------------
De Nederlandsche Bank N.V. Money Market
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Netherlands NIEC Premium Bonds
(Nederlands Interpforessioneel Effectencentrum
B.V.)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
New Zealand Austraclear New Zealand Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Norway VPS Equity, Corporate + Government Debt
(Verdipapirsentralen)
- --------------------------------------------------------------------------------------------------------------------------------
Oman NONE
- --------------------------------------------------------------------------------------------------------------------------------
Pakistan CDC Equity
(Central Depository Company of Pakistan Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Peru CAVALI Equity
(Caja de Valores)
- -------------------------------------------------------------------------------------------------------------------------------
Philippines PCD Equity
(Philippine Central Depository)
- --------------------------------------------------------------------------------------------------------------------------------
Poland NDS Equity, Long-Term Government Debt + Vouchers
(National Securities Depository)
- --------------------------------------------------------------------------------------------------------------------------------
CRT Treasury-Bills
(Central Registry of Treasury-Bills)
- --------------------------------------------------------------------------------------------------------------------------------
Portugal Interbolsa Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Romania SNCDD - RASDAQ Equity
(National Company for Clearing, Settlement and
Depository for Securities)
- --------------------------------------------------------------------------------------------------------------------------------
Budapest Stock Exchange Registry Equity
- --------------------------------------------------------------------------------------------------------------------------------
National Bank of Romania Treasury-Bills
- --------------------------------------------------------------------------------------------------------------------------------
Russia MICEX GKO's
(Moscow Interbank Currency Exchange) (Gosudarstvennye Kratkosrochnye Obyazatelstva
[T-Bills])
OFZ's
(Obligatsyi Federalnogo Zaima [Federal Loan Bonds])s
- --------------------------------------------------------------------------------------------------------------------------------
Singapore CDP Equity + Corporate Debt and Malaysian equities
(Central Depository Pte. Ltd.) traded on CLOB
- --------------------------------------------------------------------------------------------------------------------------------
Monetary Authority of Singapore Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
Slovak Republic SCP Equity + Government Debt
(Stredisko Cennych Papiru)
- --------------------------------------------------------------------------------------------------------------------------------
National Bank of Slovakia Treasury-Bills
- --------------------------------------------------------------------------------------------------------------------------------
So. Africa CD Corporate + Government Debt
(Central Depository)
- --------------------------------------------------------------------------------------------------------------------------------
So. Korea KSD Equity, Corporate + Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Spain SCLV Equity + Corporate Debt.
(Servicio de Compensacion y Liquidacion de
Valores)
- --------------------------------------------------------------------------------------------------------------------------------
CBEO Government Debt
(Central Book Entry Office)
- --------------------------------------------------------------------------------------------------------------------------------
Sri Lanka CDS Equity
(Central Depository System (Private) Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Sweden VPC Equity, Corporate + Government Debt
(Vardepapperscentralen AB)
- -------------------------------------------------------------------------------------------------------------------------------
Switzerland SEGA Equity, Corporate + Government Debt
(Schweizerische Effekten-Giro AG)
- --------------------------------------------------------------------------------------------------------------------------------
Taiwan TSCD Equity + Government Debt
(Taiwan Securities Central Depository Co.,
Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
Thailand TSDC Equity, Corporate + Government Debt
(Thailand Securities Depository Company Ltd.)
- -------------------------------------------------------------------------------------------------------------------------------
Tunisia STICODEVAM Equity
(Societe Tunisienne Interprofessionnelle pour
la Compensation et le Depot des Valeurs
Mobilieres)
- --------------------------------------------------------------------------------------------------------------------------------
Ministry of Finance Government Debt tradable on the stock exchange
(BTNBs)
- --------------------------------------------------------------------------------------------------------------------------------
Central Bank of Tunisia Government Debt not tradable on the stock exchange
(BTCs)
- --------------------------------------------------------------------------------------------------------------------------------
Turkey Takas Bank Equity + Corporate Debt
- --------------------------------------------------------------------------------------------------------------------------------
Central Bank of Turkey Government Debt
- --------------------------------------------------------------------------------------------------------------------------------
United Kingdom CREST Equity + Corp. Debt
- --------------------------------------------------------------------------------------------------------------------------------
CMO Sterling CDs & CP
(Central Moneymarket Office)
- --------------------------------------------------------------------------------------------------------------------------------
CGO Gilts
(Central Gilts Office)
- --------------------------------------------------------------------------------------------------------------------------------
United States DTC Equity + Corporate Debt
(Depository Trust Company)
- --------------------------------------------------------------------------------------------------------------------------------
PTC Mortgage Back Debt
(Participants Trust Company)
- --------------------------------------------------------------------------------------------------------------------------------
Fed Book-Entry Government Debt.
- --------------------------------------------------------------------------------------------------------------------------------
Zambia LuSE Equity + Government Debt
(LuSE Central Shares Depository Ltd.)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer's board in its determinations regarding Country
Risk, Bank shall furnish board annually and upon the initial placing of Assets
into a country the following information (check items applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access
afforded Customer's independent public accountants to books
and records kept by an eligible foreign custodian located in
that country.
___ ii. Whether applicable foreign law would restrict the Customer's
ability to recover its assets in the event of the bankruptcy
of an Eligible Foreign Custodian located in that country.
___ iii. sWhether applicable foreign law would restrict the
Customer's ability to recover assets that are lost while
under the control of an Eligible Foreign Custodian located
in the country.
B. Written information concerning:
___ i. The likelihood of expropriation, nationalization, freezes, or
confiscation of Customer's assets.
___ ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.]
5
<PAGE>
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories
(including depository evaluation).
2. To aid Customer's board in monitoring Country Risk, Bank shall
furnish board the following additional information:
Market flashes, including with respect to changes in the information
in market reports.
6
<PAGE>
EX-99.B8AII
Exhibit 24(b)(8)(a)(ii)
APPENDIX A
Delaware Group Adviser Funds, Inc.
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc.
Blue Chip Fund
Quantum Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund
Small Cap Value Fund
Delaware Pooled Trust, Inc.
The International Equity Portfolio
The International Fixed Income Portfolio
The Global Equity Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II
The Emerging Markets Porfolio
The Diversified Core Fixed Income Portfolio (12/97)
Delaware Group Global & International Funds, Inc.
Emerging Markets Series
Global Assets Series
Global Bond Series
Global Equity Series
International Equity Series
International Small Cap Series
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Devon Series
Emerging Markets Series
Quantum Series
Strategic Income Series
Global Bond Series
DelCap Series
International Equity Series
Delaware Series
Value Series
Voyageur Mutual Funds III, Inc.
Tax-Efficient Equity Fund
Delaware Group Foundation Funds (12/97)
Income Portfolio
Balanced Portfolio
Growth Portfolio
Dated: December 18, 1997
<PAGE>
EX-99.B9D
Exhibit 24(b)(9)(d)
PROPOSED
SUBJECT TO BOARD APPROVAL
[DELAWARE GROUP _____________________]
[________] AMENDED AND RESTATED SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this ____ day of _______________, 199__ by
and between [DELAWARE GROUP ___________________________] (the "Fund"), a
[Maryland Corporation], for the [_________________ series and the
__________________________ 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. provide that the Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the
costs incurred in: the maintenance of its corporate existence; the maintenance
of its own books, records and procedures; dealing with its own shareholders;
the payment of dividends; transfers of stock, including issuance and
redemption of shares; reports and notices to stockholders; calling and holding
of stockholder meetings; miscellaneous office expenses; brokerage commissions;
legal and accounting fees; taxes; and federal and state registration fees; and
<PAGE>
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 previously entered into a Shareholder
Services Agreement dated ______________________ providing for the provision of
services to the [_______________ series]; and
WHEREAS, the Fund and DSC desire to amend and restate their
Shareholder Services Agreement dated as of ________________ to include the
Fund's new series, [the ________________________ 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.
2
<PAGE>
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;
(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, including those
relating to the Series or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of
Directors of the Fund appointing DSC as Shareholder Services Agent for the
Series and authorizing the execution of this Agreement;
(e) The forms of share certificates of the Series in the
forms approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses
and Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
3
<PAGE>
(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 certificates or the books recording
the same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting
such change;
4
<PAGE>
(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.
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
5
<PAGE>
such supply upon the request of DSC. The Fund agrees to indemnify and
exonerate, save and hold DSC harmless, from and against any and all claims or
demands that may be asserted against DSC concerning the genuineness of any
stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its
demand for, all such stock certificates: (a) as issued, showing to whom
issued, or (b) as unissued, establishing the safekeeping, cancellation or
destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in
the officers authorized to sign stock certificates or in the form thereof. If
an officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto
promptly provide to DSC any approval, adoption or ratification as may be
required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to
accounts created and maintained in the registration forms provided; as
applicable, prepare, issue and deliver stock certificates.
6
<PAGE>
(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.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Series, DSC shall disburse
and cause to be disbursed to stockholders of each Series dividends, capital
gains distributions or any payments from other sources as directed by the
Fund. In connection therewith, but not in the limitation thereof, DSC shall:
7
<PAGE>
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder,
as aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of
each Series, as aforesaid, for which Series' shares are to be issued and
authorized and instruct the issuance of Series' shares therefor in accordance
with Section IV hereof.
(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the
receipt of DSC from the Fund, or from any federal or state agency or
authority, written notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Series, DSC shall provide
those services ancillary to, but in implementation of, the services provided
under Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
8
<PAGE>
(a) Except where instructed in writing by the Fund not to do
so, and where in compliance with applicable law, accept orders on behalf of
the Fund; receive and process investments and applications; remit to the Fund
or its custodian payments for shares acquired and to be issued; and direct the
issuance of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of
stockholders and their agents.
(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.
(d) Prepare and mail proxies and material for Fund
stockholder meetings, receive and process proxies from stockholders, and
deliver such proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to
investors and stockholders of each Series, including retirement plans,
including activities not otherwise provided in Section I through V of this
Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto
shall be released by DSC only to those persons or authorities who DSC has
reason to believe are authorized to receive such information; or, as
instructed by the Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
9
<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 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
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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 their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
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.
IX. STANDARD OF CARE
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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.
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<PAGE>
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
ATTEST:______________________________ By:____________________________
Title:
[DELAWARE GROUP ___________________]
for its [____________________ and
__________________________]
ATTEST:______________________________ By:____________________________
Title:
13
<PAGE>
SCHEDULE A
----------
____________________________.
(THE "FUND")
|___| AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
1. Delaware Service Company, Inc. ("DSC") will determine and report to the
Fund, at least anually, the compensation for services to be provided to the
Fund for DSC's forthcoming fiscal year period.
2. In determining such compensation, DSC will fix and report a fee to be
charged per account and/or transaction, as may be applicable, for services
provided. DSC will bill, and the Fund will pay, such compensation monthly.
3. For the period commencing on January 1, 1998, the charge will consist of
two charges for all the Funds in the Delaware Group, except the Delaware
Group Premium Fund, Inc. and the Delaware Pooled Trust, Inc. (other than
with respect to The Real Estate Investment Trust Portfolio), an annual
charge and a per transaction charge for each account on the transfer
agent's records and each account on an automated retirement processing
system. These charges are as follows:
A. ANNUAL CHARGE
-------------
Daily Dividend Funds $11.00 Per Annum
Other Funds $ 5.50 Per Annum
Merrill Lynch - Omnibus Accounts
Regular Accounts $16.00 Per Annum
Accounts with a Contingent
Deferred Sales Charge $19.00 Per Annum
Networked Accounts $3.00-6.00 Per Annum
<PAGE>
SCHEDULE A
----------
____________________________
(THE "FUND")
|___| AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
CONTINUED
B. TRANSACTION CHARGE
------------------
Transaction Charge
----------- ------
1. Dividend Payment $ 0.25
2. New Account $ 6.00
3. Purchase:
a. Wire $ 8.00
b. Automated $ 1.50
c. Other $ 2.60
4. Transfer $ 8.00
5. Certificate Issuance $ 4.00
6. Liquidations
a. Wires $12.25
b. Drafts $ 0.75
c. Money Market Regular $ 4.50
d. Other Regular $ 4.50
7. Exchanges
a. Dividend Exchanges $ 3.00
b. Other $10.00
<PAGE>
4. For the period commencing January 1, 1998, DSC's compensation for providing
services to the Delaware Group Premium Fund, Inc. (the "Premium Fund") will
be $50,000 annually. DSC will bill, and the Premium Fund will pay, such
compensation monthly, allocated among the current Series of the Premium
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.
5. For the period commencing January 1, 1998, DSC's compensation for providing
services to the Portfolioss (other than The Real Estate Investment Trust
Portfolio) of Delaware Pooled Trust, Inc. (the "Trust") will be $25,000
annually. DSC will bill, and the Trust will pay, such compensation monthly
allocated among the current Portfolios (other than The Real Estate
Investment Trust Portfolio) of the Trust based on the relative percentage
of assets of each Portfolio at the time of billing and adjusted
appropriately to reflect the length of time a particular Portfolio is in
operation during any billing period.
<PAGE>
SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*
[NAME OF INVESTMENT COMPANIES]
- --------
* Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of _________ __, 199_ ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
Dated as of: __________ __, 199_
