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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. __ [ ]
Post-Effective Amendment No. 23 [X]
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 23
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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) 751-2923
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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: May 14, 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)
__X__ 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)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
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. 23 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
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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
<TABLE>
<CAPTION>
Location in Statement of
Item No. Description Additional Information
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<S> <C> <C>
10 Cover Page ......................................................... Cover
11 Table of Contents .................................................. Table of Contents
12 General Information and History .................................... General Information
13 Investment Objectives and Policies ................................. Investment 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
PART C
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<CAPTION>
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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(DGPF-REIT)
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PROSPECTUS
MAY 1, 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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(DGPF-REIT)
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 Investments 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 May 1, 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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(DGPF-REIT)
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 (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 Delaware Investments. 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
Investments family. 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
Investments. 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.
INVESTMENT OBJECTIVE AND POLICIES
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(DGPF-REIT)
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.
As a fundamental policy, the Series will concentrate its investments in
the real estate industry. 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
Considerations for further discussion of these investment policies. The Series
may also invest in mortgage-backed securities. See
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(DGPF-REIT)
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 as a fundamental policy the Series does not invest directly in
real estate, the Series does invest primarily in REITs, and may purchase equity
securities of REOCs, as well as own real estate directly as a result of a
default on securities the Series owns. 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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(DGPF-REIT)
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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(DGPF-REIT)
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.
As a fundamental policy, 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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(DGPF-REIT)
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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(DGPF-REIT)
DIVIDENDS AND DISTRIBUTIONS
The Series will normally make payments from net investment income and
net realized securities, if any, annually. 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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(DGPF-REIT)
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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(DGPF-REIT)
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund are managed under the direction of
its Board of Directors pursuant to Maryland law. Part B contains additional
information regarding the directors and officers.
Investment Manager
The Manager furnishes investment advisory services to the Series. In
its capacity as investment manager, the Manager makes investment decisions for
the Series, effects the purchases and sales of investments in carrying out the
Series' investment objective and policies and furnishes the Board of Directors
with information and reports regarding the Series' investments as the Manager
deems appropriate or as the Board of Directors may reasonably request. 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 Investments family since 1938. On December 31, 1997, the Manager and
its affiliates within Delaware Investments, 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 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 December 31, 1997, Lincoln had over $37.1 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 a series of Delaware Management Business Trust. The
Manager changed its form of organization from a corporation to a business trust
on March 1, 1998. 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.
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(DGPF-REIT)
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 30% 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.
Babak Zenouzi, Vice President/Senior Portfolio manager for the Series
and the Manager, 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 Investments family 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., 1818 Market Street,
Philadelphia, PA 19103, 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"), 1818 Market
Street, Philadelphia, PA 19103, 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
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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.
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 April 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 Delaware Investments 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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(DGPF-REIT)
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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(DGPF-REIT)
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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(DGPF-REIT)
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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(DGPF-REIT)
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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(DGPF/REIT-SAI/PART B)
INVESTMENT MANAGER
Delaware Management Company
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
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
- ------------------------------------------------------------
DELAWARE GROUP PREMIUM FUND
- ------------------------------------------------------------
REIT
- ------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------------------------------
MAY 1, 1998
DELAWARE (SM)
INVESTMENTS
<PAGE>
(DGPF/REIT-SAI/PART B)
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
- --------------------------------------------------------------------------------
DELAWARE GROUP PREMIUM FUND, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
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Investment Objective and Policies
- --------------------------------------------------------------------------------
Accounting and Tax Issues
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Appendix A--Description of Ratings
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
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(DGPF/REIT-SAI/PART B)
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 May 1, 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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(DGPF/REIT-SAI/PART B)
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 Investments
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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(DGPF/REIT-SAI/PART B)
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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(DGPF/REIT-SAI/PART B)
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>
(DGPF/REIT-SAI/PART B)
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 Investments family, including the Fund, have
obtained an exemption from the joint-transaction prohibitions of Section 17(d)
of the 1940 Act to allow the funds in the Delaware Investments family jointly to
invest cash balances. The 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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(DGPF/REIT-SAI/PART B)
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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(DGPF/REIT-SAI/PART B)
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 mark-to-market gains previously included with
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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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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 Investments 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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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. The Fund may include illustrations showing
the power of Compounding in advertisements and other types of literature.
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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 Investments family. 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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(DGPF/REIT-SAI/PART B)
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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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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DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
The Series normally will make payments from its net investment income on
an annual 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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(DGPF/REIT-SAI/PART B)
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 (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 Investments family since 1938. On December 31, 1997, the Manager and
its affiliates within Delaware Investments, 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 $37.1 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 Manager is a series of
Delaware Management Business Trust. The Manager changed its form of organization
from a corporation to a business trust on March 1, 1998. 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 30% of the
investment management fee under the Investment Management Agreement with Fund on
behalf of the Series.
Except for those borne by the Manager 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 April 30, 1998.
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(DGPF/REIT-SAI/PART B)
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 Investments family for which it provides such accounting
services. Such fee is equal to 0.25% multiplied by the total amount of assets in
the complex for which the Transfer Agent furnishes accounting services, where
such aggregate complex assets are $10 billion or less, and 0.20% of assets if
such aggregate complex assets exceed $10 billion. The fees are charged to each
fund, including the 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 Investments family.
DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware
Management Business Trust, Delaware Investment Advisers, Delaware Management
Company, 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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(DGPF/REIT-SAI/PART B)
*Wayne A. Stork (60)
Chairman and Director of the Fund, 33 other investment companies in the
Delaware Investments family, Delaware Management Holdings,
Inc. and Delaware Capital Management, Inc.
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, President, Chief Executive Officer and Chief Investment
Officer of Delaware Management Company.
Chairman, Chief Executive Officer, Chief Investment Officer of Delaware
Investment Advisers.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd. and Delaware International
Holdings Ltd.
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.
Trustee of Delaware Management Business Trust.
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 33 other investment companies in the Delaware
Investments family.
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 33 investment
companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Management Company and
Delaware Capital Management, Inc.
Executive Vice President and Director of Delaware Management Company,
Inc.
President of Delaware Investment Advisers.
Director of Delaware International Advisers Ltd.
Trustee of Delaware Management Business Trust.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
- ----------------------
*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
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(DGPF/REIT-SAI/PART B)
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of the
Fund, each of the other 33 investment companies in the
Delaware Investments family, Delaware Management Company,
Inc., Delaware Management Company, Delaware Investment
Advisers 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 Delaware Investments 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 Delaware Investments.
Walter P. Babich (70)
Director and/or Trustee of the Fund and each of the other 33 investment
companies in the Delaware Investments family.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (59)
Director and/or Trustee of the Fund and each of the other 33 investment
companies in the Delaware Investments family.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (57)
Director and/or Trustee of the Fund and each of the other 33 investment
companies in the Delaware Investments family.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975
to 1992, she was Adjunct Professor of Columbia Business
School.
W. Thacher Longstreth (77)
Director and/or Trustee of the Fund and each of the other 33 investment
companies in the Delaware Investments family.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
-27-
<PAGE>
(DGPF/REIT-SAI/PART B)
Thomas F. Madison (62)
Director and/or Trustee of the Fund and each of the other 33 investment
companies in the Delaware Investments family.
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 33 investment
companies in the Delaware Investments family.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive
Officer of The Ryland Group, Inc., Columbia, MD.
David K. Downes (58)
Executive Vice President, Chief Operating Officer, Chief Financial
Officer of the Fund, each of the other 33 investment companies
in the Delaware Investments family, Delaware Management
Holdings, Inc, Founders CBO Corporation, Delaware Management
Company, Delaware Investment Advisers, 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.
Trustee of Delaware Management Business Trust.
Vice President of Lincoln Funds Corporation
Before joining Delaware Investments 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.
-28-
<PAGE>
(DGPF/REIT-SAI/PART B)
George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of the Fund,
each of the other 33 investment companies in the Delaware
Investments family, Delaware Management Company, Delaware
Investment Advisers, 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.
Trustee of Delaware Management Business Trust.
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.
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of the Fund, each of the
other 33 investment companies in the Delaware Investments
family and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Management Company, 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 Investments 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 33
investment companies in the Delaware Investments family and
Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company and Delaware
Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting
of Delaware Distributors, L.P. and Delaware Investment
Advisers.
Senior Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
-29-
<PAGE>
(DGPF/REIT-SAI/PART B)
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 Investments funds for
the fiscal year ended December 31, 1997 and an estimate of annual benefits to be
received upon retirement under the Delaware Investments Retirement Plan for
Directors/Trustees as of December 31, 1997. Only the independent directors of
the Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or Total
Retirement Estimated Compensation
Benefits Annual from all 34
Aggregate Accrued Benefits Delaware
Compensation as Part of Upon Investments
Name from Fund Fund Expenses Retirement* Funds**
<S> <C> <C> <C>
W. Thacher Longstreth $3,097 None $38,500 $59,827
Ann R. Leven $3,388 None $38,500 $65,160
Walter P. Babich $3,370 None $38,500 $64,160
Anthony D. Knerr $3,370 None $38,500 $64,160
Charles E. Peck $3,002 None $38,500 $56,682
Thomas F. Madison*** $2,160 None $38,500 $43,537
</TABLE>
* Under the terms of the Delaware Investments 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 Delaware Investments 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 Delaware Investments, based on
the number of funds in Delaware Investments as of that date.
** Each independent director currently receives a total annual retainer fee
of $38,500 for serving as a director or trustee for all funds in Delaware
Investments, plus $3,145 for each Board Meeting attended. Ann R. Leven,
Walter P. Babich, and Anthony D. Knerr serve on the Fund's audit
committee; Ms. Leven is the chairperson. Members of the audit committee
currently receive additional annual compensation of $5,000 from all
funds, with the exception of the chairperson, who receives $6,000.
*** Mr. Madison joined the Board of Directors on April 30, 1997.
-30-
<PAGE>
As of March 10, 1998, management believes the following accounts held
5% or more of the outstanding shares of each series of the Fund:
<TABLE>
<CAPTION>
Series Name and Address of Account Share Amount Percentage
- ------ --------------------------- ------------ ----------
<S> <C> <C> <C>
Decatur Total SMA Life Assurance Company
Return Series Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 16,769,784 67.91%
Lincoln National Life Company
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801 6,183,803 25.04%
Delchester Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 10,624,951 94.51%
Capital Reserves SMA Life Assurance Company
Series Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 2,773,855 91.00%
Delaware Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 7,627,846 93.28%
Cash Reserve SMA Life Assurance Company
Series Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 2,858,723 86.47%
State Mutual Life Insurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 252,624 7.64%
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Series Name and Address of Account Share Amount Percentage
- ------ --------------------------- ------------ ----------
<S> <C> <C> <C>
DelCap Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 6,500,942 95.18%
International Equity SMA Life Assurance Company
Series Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 13,212,366 96.98%
Emerging Growth SMA Life Assurance Company
Series Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 3,549,652 49.56%
Lincoln National Life Company
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801 3,519,598 49.14%
Value Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 5,164,366 98.92%
Global Bond Series Lincoln National Life Company
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801 1,244,689 72.62%
SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 455,299 26.56%
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Series Name and Address of Account Share Amount Percentage
- ------ --------------------------- ------------ ----------
<S> <C> <C> <C>
Strategic Income SMA Life Assurance Company
Series Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 811,956 71.53%
Lincoln National Life Company
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801 257,050 22.64%
SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 65,988 5.81%
Devon Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 1,653,451 97.94%
Emerging Markets SMA Life Assurance Company
Series Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 472,166 69.56%
Lincoln National Life Company
Separate Account - C See Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801 206,393 30.40%
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Series Name and Address of Account Share Amount Percentage
- ------ --------------------------- ------------ ----------
<S> <C> <C> <C>
Convertible Securities Lincoln National Life Company
Series Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801 206,690 50.64%
SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 184,439 45.19%
Quantum Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 627,951 79.05%
Lincoln National Life Company
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801 152,822 19.23%
</TABLE>
34
<PAGE>
(DGPF/REIT-SAI/PART B)
GENERAL INFORMATION
The Manager is the investment manager for the Series and several other
funds in the Delaware Investments family. 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 Investments family 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 Investments family .
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.
-35-
<PAGE>
(DGPF/REIT-SAI/PART B)
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.
-36-
<PAGE>
(DGPF/REIT-SAI/PART B)
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
-37-
<PAGE>
(DGPF/REIT-SAI/PART B)
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.
-38-
<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 (March 1998)
attached as Exhibit.
(2) By-Laws. By-Laws, as amended through April 27,
1995, incorporated into this filing by reference
to Post-Effective Amendment No. 15 filed April 27,
1995.
(3) Voting Trust Agreement. Inapplicable.
<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
(March 1998) attached in Exhibit
24(b)(1)(f).
(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 on behalf of Growth Series
(renamed DelCap Series) incorporated into
this filing by reference to
Post-Effective Amendment No. 15 filed
April 27, 1995.
<PAGE>
PART C - Other Information
(continued)
(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>
PART C - Other Information
(continued)
(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) Form of Investment Management Agreement
(1998) between Delaware Management
Company, Inc. and the Registrant on
behalf of REIT Series incorporated into
this filing by reference to
Post-Effective Amendment No.
22 filed January 15, 1998.
(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) Form of Sub-Advisory Agreement (1998)
between Delaware Management Company, Inc.
and Lincoln Investment Management, Inc.
on behalf of REIT Series incorporated
into this filing by reference to
Post-Effective Amendment No. 22 filed
January 15, 1998.
<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) Form of Distribution Agreement (1998)
between Delaware Distributors, L.P. and
the Registrant on behalf of REIT Series
incorporated into this filing by
reference to Post-Effective Amendment No.
22 filed January 15, 1998.
(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 incorporated into this
filing by reference to
Post-Effective Amendment No. 22
filed January 15, 1998.
(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.
<PAGE>
PART C - Other Information
(continued)
(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.
(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) Form of 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
incorporated into this filing by
reference to Post-Effective Amendment No.
22 filed January 15, 1998.
<PAGE>
PART C - Other Information
(continued)
(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. 7
(October 14, 1997) to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(ii) Executed Amendment No. 8
(December 18, 1997) to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(iii) Form of Amendment No. 9 to
Delaware Group Funds Fund
Accounting Agreement (1998)
attached as Exhibit.
(10) Opinion of Counsel. Attached as Exhibit.
(11) Consent of Auditors. Inapplicable.
(12) Inapplicable.
(13) Subscription Agreement. Incorporated into this
filing by reference to Pre-Effective Amendment No.
1 filed October 13, 1987.
(14-15) Inapplicable.
(16) Schedules of Computation for each Performance
Quotation.
(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.
Attached as Exhibit.
<PAGE>
PART C - Other Information
(continued)
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
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Decatur Total Return Series
Common Stock Par Value 8 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Delaware Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Cash Reserve Series
Common Stock Par Value 6 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
DelCap Series
Common Stock Par Value 5 Accounts as of
$.01 Per Share February 28, 1998
<PAGE>
PART C - Other Information
(continued)
(1) (2)
Number of
Title of Class Record Holders
Delaware Group Premium Fund, Inc.
International Equity Series
Common Stock Par Value 2 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Value Series
Common Stock Par Value 3 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Trend Series
Common Stock Par Value 5 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Global Bond Series
Common Stock Par Value 5 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Strategic Income Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Devon Series
Common Stock Par Value 3 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Emerging Markets Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share February 28, 1998
<PAGE>
PART C - Other Information
(continued)
(1) (2)
Number of
Title of Class Record Holders
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
Quantum Series
Common Stock Par Value 4 Accounts as of
$.01 Per Share February 28, 1998
Delaware Group Premium Fund, Inc.
REIT Series
Common Stock Par Value 0 Accounts as of
$.01 Per Share February 28, 1998
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 (the "Manager"), a series of Delaware
Management Business Trust, serves as investment manager to the Registrant and
also serves as investment manager or sub-adviser to certain of the other funds
in the Delaware Investments family (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III, 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 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, 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.). In addition, certain officers of the Manager also serve as
directors/trustees of the other Delaware Investments funds, and certain officers
are also officers of these other funds. A company indirectly owned by the
Manager's parent company acts as principal underwriter to the mutual funds in
the Delaware Investments family (see Item 29 below) and another such company
acts as the shareholder services, dividend disbursing, accounting servicing and
transfer agent for all of the mutual funds in the Delaware Investments family.
<PAGE>
PART C - Other Information
(continued)
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 and Chief Investment Officer of Delaware
Management Company; Chairman of the Board, President,
Chief Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.;
Trustee of Delaware Management Business Trust;
Chairman of the Board, President, Chief Executive
Officer and Director of DMH Corp.; Chairman, Chief
Executive Officer, Chief Investment Officer of
Delaware Investment Advisers, 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 Investments family, 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.
Richard G. Unruh, Jr. Executive Vice President of Delaware Management
Company; Executive Vice President and Director of
Delaware Management Company, Inc.; Trustee of
Delaware Management Business Trust; Executive Vice
President of the Registrant, each of the other funds
in the Delaware Investments family, Delaware
Management Holdings, Inc. and Delaware Capital
Management, Inc; President of Delaware Investment
Advisers 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
*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
- ------------------ -----------------------------------------------
Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Delaware
Management Company, Inc., the Registrant, each of the
other funds in the Delaware Investments family;
Delaware Investment Advisers; 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.
David K. Downes Executive Vice President, Chief Operating Officer and
Chief Financial Officer of Delaware Management
Company and Delaware Investment Advisers; Trustee of
Delaware Management Business Trust; 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 Investments family,
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
*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
- ------------------ -----------------------------------------------
George M. Chamberlain, Jr. Senior Vice President, General Counsel and Secretary
of Delaware Management Company and Delaware
Investment Advisers; Trustee of Delaware Management
Business Trust; 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 Investments family,
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
Richard J. Flannery Senior Vice President/Corporate and International
Affairs of the Registrant, each of the other funds in
the Delaware Investments family, Delaware Management
Holdings, Inc., DMH Corp., Delaware Management
Company, Delaware Investment Advisers, 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
Investments family and Founders Holdings, Inc.;
Senior Vice President/Investment Accounting of
Delaware Management Company; Delaware Management
Company, Inc. and Delaware Service Company, Inc.;
Senior Vice President and Treasurer/ Manager,
Investment Accounting of Delaware Distributors, L.P.
and Delaware Investment Advisers ; 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, 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 Investments family 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 and Delaware Management Company, Inc.
Douglas L. Anderson
Senior Vice President/Operations of Delaware
Management Company, 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, 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 Investments family,
Delaware Management Company, 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. and
Delaware Investment Advisers.
*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, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant,
each of the other funds in the Delaware Investments
family, 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, Delaware Management Company, Inc.
and Delaware Management Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
Delaware Management Company, Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Investments family, 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.
Susan L. Hanson Vice President/Strategic Planning of Delaware
Management Company, Delaware Management Company, Inc.
and Delaware Service Company, Inc.
Christopher Adams Vice President/Strategic Planning of Delaware
Management Company, Delaware Management Company, Inc.
and Delaware Service Company, Inc.
Dennis J. Mara(2) Vice President/Acquisitions of Delaware Management
Company and Delaware Management Company, Inc.
Scott Metzger Vice President/Business Development of Delaware
Management Company, 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
- ------------------ -----------------------------------------------
Lisa O. Brinkley Vice President/Compliance of Delaware Management
Company, Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware
Investments family, 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, Delaware Management Company,
Inc., the Registrant, each of the other funds in the
Delaware Investments family, Delaware Distributors,
L.P. and Delaware Distributors, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant,
each of the tax-exempt funds, the fixed income funds
and the closed-end funds in the Delaware Investments
family; 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, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant,
each of the tax-exempt funds, the fixed income funds
and the closed-end funds in the Delaware Investments
family; 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, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant,
each of the tax-exempt funds and the fixed income
funds in the Delaware Investments family and Delaware
Capital Management, Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant,
each of the tax-exempt funds and the fixed income
funds in the Delaware Investments family and Delaware
Capital Management, Inc.
Roger A. Early Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant,
each of the tax-exempt funds and the fixed income
funds in the Delaware Investments family
*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
- ------------------ -----------------------------------------------
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant
and each of the tax-exempt and fixed income funds in
the Delaware Investments family
George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., the Registrant and each of the equity funds in
the Delaware Investments family
John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant
and each of the equity funds in the Delaware
Investments family and Delaware Capital Management,
Inc.
Gerald S. Frey(4) Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., the Registrant and each of the equity funds in
the Delaware Investments family
Christopher Beck(5) Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., Delaware Investment Advisers, the Registrant
and each of the equity funds in the Delaware
Investments family
Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of Delaware
Management Company, 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.
Andrew M. McCullagh(7) Vice President/Senior Portfolio Manager of Delaware
Management Company, 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.
*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
- ------------------ -----------------------------------------------
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., the Registrant and each of the equity funds and
the closed-end funds in the Delaware Investments
family
Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., the Registrant, Delaware Investment Advisers
and each of the tax-exempt and fixed income funds in
the Delaware Investments family
Marshall T. Bassett Vice President/Portfolio Manager of Delaware
Management Company, Delaware Management Company,
Inc., Delaware Investment Advisers and each of the
equity funds in the Delaware Investments family.
John Heffern Vice President/Portfolio Manager of Delaware
Management Company, Delaware Management Company, Inc.
and each of the equity funds in the Delaware
Investments family.
Mary Ellen Carrozza Vice President/Client Services of Delaware Management
Company, Delaware Management Company, Inc., Delaware
Investment Advisers and Delaware Pooled Trust, Inc.
*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 Investments family (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.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ --------------------------------------------------------
<S> <C>
*Wayne A. Stork Chairman of the Board, 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 Investments family,
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.; Chairman of the Board, President,
Chief Executive Officer and Chief Investment Officer of Delaware Management
Company and Delaware Investment Advisers; and Trustee of Delaware
Management Business Trust.
**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.
</TABLE>
* 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)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- -------------------------------------------------------
<S> <C>
**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 and Chief
Financial Officer of Delaware Management Company and Delaware Investment
Advisers; Trustee of Delaware Management Business Trust; 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 Investments family, 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
*Richard G. Unruh, Jr. Director of Delaware International Advisers Ltd.; Executive Vice President of
Delaware Management Company; Trustee of Delaware Management Business
Trust; Executive Vice President and Director of Delaware Management
Company, Inc.; Executive Vice President of the Registrant, each of the other
funds in the Delaware Investments family, Delaware Management Holdings, Inc
and Delaware Capital Management, Inc.; President of Delaware Investment
Advisers.
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
</TABLE>
* 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)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- -------------------------------------------------------
<S> <C>
*Richard J. Flannery Senior Vice President/Corporate and International Affairs of the Registrant,
each of the other funds in the Delaware Investments family, Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company,
Delaware Investment Advisers, 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.
*John C. E. Campbell Director of Delaware International Advisers Ltd.; and Executive Vice President
of Delaware Investment Advisers.
*George M. Chamberlain, Jr. Director of Delaware International Advisers Ltd. and Delaware Voyageur
Holding, Inc.; Senior Vice President, General Counsel and Secretary of
Delaware Management Company and Delaware Investment Advisers; Trustee
of Delaware Management Business Trust; 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 Investments family, 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. and Vice President/Senior
Portfolio Manager of Delaware Investment Advisers.
</TABLE>
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- -------------------------------------------------------
<S> <C>
**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.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
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.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Vantage Global Advisors, Inc.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- -------------------------------------------------------
<S> <C>
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.
</TABLE>
* 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)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Vantage Global Advisors, Inc.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- -------------------------------------------------------
<S> <C>
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
**Bruce D. Barton Director of Vantage Global Advisors, Inc.
President and Chief Executive Officer of Delaware Distributors, L.P. since
1996, 1818 Market Street, Philadelphia, PA
</TABLE>
* 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 REIT Series . Lincoln Investment Management Company, Inc. also serves as
sub-adviser to Delaware Pooled Trust, Inc. In addition, Lincoln Investment
Management Company, Inc. 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:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company, Inc.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- ----------------------------------------------------------------------
<S> <C>
*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, Lynch & Mayer,
Inc. 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 Lynch & Mayer, Inc.
and 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.
*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 Securities Fund, Inc.; and
Director and Vice President of Lincoln National Income Fund, Inc.
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company, Inc.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- ----------------------------------------------------------------------
<S> <C>
*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
*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.
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company, Inc.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- ----------------------------------------------------------------------
<S> <C>
*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.
*Gerald M. Weiss Vice President of Lincoln Investment Management, Inc.
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company, Inc.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- ----------------------------------------------------------------------
<S> <C>
**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
</TABLE>
* 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)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Lincoln Investment Management Company, Inc.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- ----------------------------------------------------------------------
<S> <C>
*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
</TABLE>
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information
(continued)
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 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 Investment Advisers Limited Partner None
Delaware Capital Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief Executive None
Officer
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/ Senior Vice President/
Secretary/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/ Senior Vice President/
Corporate Controller & Corporate Controller
Treasurer
</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>
Terrence P. Cunningham Senior Vice President/ None
Financial Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Dana B. Hall Senior Vice President None
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
Daniel J. Brooks Senior Vice
President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/ None
Western Division Sales
Manager
Henry W. Orvin Senior Vice President/ None
Eastern Division Sales
Manager
Michael P. Bishof Senior Vice President and Senior Vice
Treasurer/ Manager, President/Treasurer
Investment Accounting
</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>
Eric E. Miller Vice President/Assistant Vice President/
Secretary/Deputy General Assistant Secretary/
Counsel Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Registrations Registrations
Daniel H. Carlson Vice President/Strategic
Marketing None
Diane M. Anderson Vice President/Plan Record
Keeping and Administration None
Anthony J. Scalia Vice President/Defined
Contribution Sales, None
SW Territory
Courtney S. West Vice President/Defined
Contribution Sales, None
NE Territory
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
</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>
Scott Metzger Vice President/Business Vice President/Business
Development 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 Internal Sales None
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed None
Income Product
Management
Michael J. Woods Vice President/ UIT None
Product Management
Ellen M. Krott Vice President/Marketing 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>
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
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
</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>
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
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.
<PAGE>
PART C - Other Information
(continued)
(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 East 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 13th day of
March.
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 March 13, 1998
- -------------------------------
Wayne A. Stork
/s/David K. Downes Executive Vice President/Chief Operating March 13, 1998
- ------------------------------- Officer/Chief Financial Officer (Principal
David K. Downes Financial Officer and Principal Accounting
Officer)
/s/Walter P. Babich Director March 13, 1998
- -------------------------------
Walter P. Babich
/s/Anthony D. Knerr Director March 13, 1998
- -------------------------------
Anthony D. Knerr
/s/Ann R. Leven Director March 13, 1998
- -------------------------------
Ann R. Leven
/s/W. Thacher Longstreth Director March 13, 1998
- -------------------------------
W. Thacher Longstreth
/s/ Thomas F. Madison Director March 13, 1998
- -------------------------------
Thomas F. Madison
/s/ Jeffrey J. Nick Director March 13, 1998
- -------------------------------
Jeffrey J. Nick
/s/Charles E. Peck Director March 13, 1998
- -------------------------------
Charles E. Peck
*By /s/ Wayne A. Stork
------------------------------
Wayne A. Stork
as Attorney-in-Fact
for each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
EX-99.B1F Articles Supplementary (March 1998)
EX-99.B9EI Executed Amendment No. 7 to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B9EII Executed Amendment No. 8 to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B9EIII Form of Amendment No. 9 to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B10 Opinion of Counsel
EX-99.B19 Directors' Power of Attorney
<PAGE>
EX-99.B1F
DELAWARE GROUP PREMIUM FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Premium Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held on
February 19, 1998, adopted resolutions classifying and allocating unallocated
and unissued common stock of the Corporation as follows:
Fifty Million (50,000,000) shares of common stock with a par value of
One Cent ($.01) per share to a new series of shares designated as the REIT
Series.
SECOND: The shares of the REIT Series shall have the rights and
privileges, and shall be subject to the limitations and priorities, set forth in
the Charter of the Corporation.
THIRD: The shares of the REIT Series have been classified by the Board
of Directors pursuant to authority contained in the Articles of Incorporation of
the Corporation.
IN WITNESS WHEREOF, Delaware Group Premium Fund, Inc. has caused these
Articles Supplementary to be signed in its name and on its behalf this 3rd day
of March, 1998.
DELAWARE GROUP PREMIUM FUND, INC.
By:_____________________________________
George M. Chamberlain, Jr.,
Senior Vice President, Secretary and
General Counsel
Attest:
_______________________________
Michael D. Mabry
Assistant Vice President,
<PAGE>
Assistant Secretary and Senior Counsel
THE UNDERSIGNED, Senior Vice President, Secretary and General Counsel
of DELAWARE GROUP PREMIUM FUND, INC., who executed on behalf of said Corporation
the foregoing Articles Supplementary, of which this instrument is made a part,
hereby acknowledges, in the name of and on behalf of said Corporation, said
Articles Supplementary to be the corporate act of said Corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects, under the penalties of
perjury.
___________________________
George M. Chamberlain, Jr.
-2-
<PAGE>
EX-99.B9EI
AMENDMENT NO.7
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*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 August 19, 1996 ("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.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of October 14, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
- ---------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY 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 GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
- ---------------------------------------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9EII
AMENDMENT NO. 8
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*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 August 19, 1996 ("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.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of December 18, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
- ---------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
- ---------------------------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9EIII
AMENDMENT NO. 9
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*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 August 19, 1996 ("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.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of February ____, 1998
DELAWARE SERVICE COMPANY, INC.
By: __________________________________________________________________
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: ____________________________________________________________
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B10
Law Offices
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
March 10, 1998
Delaware Group Premium Fund, Inc.
Re: Legal Opinion-Securities Act of 1933
------------------------------------
Ladies and Gentlemen:
We have examined the Articles of Incorporation of Delaware
Group Premium Fund, Inc. (the "Fund"), a series corporation organized under
Maryland law, the By-Laws of the Fund, the resolutions adopted by the Fund's
Board of Directors organizing the business of the Fund, and its proposed form of
Share Certificates, all as amended to date, and the various pertinent corporate
proceedings we deem material. We have also examined the Notification of
Registration and the Registration Statements filed under the Investment Company
Act of 1940 (the "Investment Company Act") and the Securities Act of 1933 (the
"Securities Act"), all as amended to date, as well as other items we deem
material to this opinion.
The Fund is authorized by the Articles of Incorporation to
issue one billion (1,000,000,000) shares of common stock at a par value of $.01.
The Fund issues shares of the Decatur Total Return Series, Delaware Series,
Delchester Series, Capital Reserves Series, DelCap Series, International Equity
Series, Cash Reserve Series, Trend Series, Value Series, Global Bond Series,
Devon Series, Convertible Securities Series, Emerging Markets Series, Strategic
Income Series, Quantum Series, and REIT Series. The Articles of Incorporation
also empower the Board to designate any additional series or classes and
allocate shares to such series or classes.
The Fund has filed with the U.S. Securities and Exchange
Commission, a registration statement under the Securities Act, which
registration statement is deemed to register an indefinite number of shares of
the Fund pursuant to the provisions of Rule 24f-2 under the Investment Company
Act. You have further advised us that the Fund has filed, and each year
hereafter will timely file, a Notice pursuant to Rule 24f-2 perfecting the
registration of the shares sold by the Fund during each fiscal year during which
such registration of an indefinite number of shares remains in effect.
<PAGE>
Delaware Group Premium Fund, Inc.
March 10, 1998
Page 2
You have also informed us that the shares of the Fund have
been and will be sold in accordance with the Fund's usual method of distributing
its registered shares, under which prospectuses are made available for delivery
to offerees and purchasers of such shares in accordance with Section 5(b) of the
Securities Act.
Based upon the foregoing information and examination, so long
as the Fund remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Directors pursuant to the Articles of
Incorporation, and subject to compliance with Rule 24f-2, will be legally
outstanding, fully-paid, and non-assessable shares, and the holders of such
shares will have all the rights provided for with respect to such holding by the
Articles of Incorporation and the laws of the State of Maryland.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement of the Fund, along with any amendments thereto,
covering the registration of the shares of the Fund under the Securities Act and
the applications, registration statements or notice filings, and amendments
thereto, filed in accordance with the securities laws of the several states in
which shares of the Fund are offered, and we further consent to reference in the
registration statement of the Fund to the fact that this opinion concerning the
legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: Bruce G. Leto
----------------------------------
Bruce G. Leto, a partner
BGL/nlk
<PAGE>
EX-99.B19
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Group Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on Exhibit
A, Wayne A. Stork, Jeffrey J. Nick and Walter P. Babich and any one of them
acting singly, his true and lawful attorneys-in-fact, in his name, place, and
stead, to execute and cause to be filed with the Securities and Exchange
Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as either of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 18th day of December, 1997.
/s/ Walter P. Babich /s/ Thomas F. Madison
- ------------------------ -------------------------------
Walter P. Babich Thomas F. Madison
/s/Anthony D. Knerr /s/Jeffrey J. Nick
- ------------------------ -------------------------------
Anthony D. Knerr Jeffrey J. Nick
/s/Ann R. Leven /s/Charles E. Peck
- ------------------------ -------------------------------
Ann R. Leven Charles E. Peck
/s/W. Thacher Longstreth /s/Wayne A. Stork
W. Thacher Longstreth Wayne A. Stork
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
