<PAGE>
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. 25 [X]
----
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 [X]
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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
---------------
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 1, 1999
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1) on (date)
___ pursuant to paragraph (a)(1) 75 days after filing pursuant
___ to paragraph (a)(2)
_X_ on May 1, 1999 pursuant to paragraph (a)(2) of Rule 485
If appropriate:
___ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
Title of Securities Being Registered
------------------------------------
Decatur Total Return Series, Delchester Series, Capital Reserves Series,
Cash Reserve Series, DelCap Series,Delaware Series, International
Equity Series, Small Cap Value Series, Trend Series, Global Bond Series,
Strategic Income Series, Devon Series, Emerging Markets Series,
Convertible Securities Series, Social Awareness Series,
REIT Series, Aggressive Growth Series
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 25 to Registration File No. 33-14363 includes
the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectus
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET
---------------------
PART A
------
Item No. Description Location in Prospectus
- ------- -----------
1 Front and Back Cover Pages Same
2 Risk/Return Summary: Profiles
Investments, Risks and Performance
3 Risk/Return Summary: Profiles
Fee Table
4 Investment Objectives, Principal How we manage the
Investment Strategies, and Related Series; The risks of
Risks investing in the Series
5 Management's Discussion of N/A
Performance
6 Management, Organization, and Who manages the Series
Capital Structure
7 Shareholder Information Purchase and redemption
of shares; Valuation of
shares;
Dividends, distributions
and taxes
8 Distribution Arrangements Purchase and redemption
of shares
9 Financial Highlights Information Financial information
<PAGE>
CROSS-REFERENCE SHEET
---------------------
PART B
------
<TABLE>
<CAPTION>
<S> <C> <C>
Location in Statement of Additional
Item No. Description Information
- ------- ----------- -----------
10 Cover Page and Table of Contents Same
11 Fund History General Information
12 Description of the Fund and Its Investments and Investment Objectives and Policies
Risks
13 Management of the Fund Officers and Directors
14 Control Persons and Principal Holders of Securities Officers and Directors
15 Investment Advisory and Other Services Officers and Directors; Investment
Management Agreements and Sub-
Advisory Agreements; General
Information; Financial Statements
16 Brokerage Allocation and Other Practices Trading Practices and Brokerage
17 Capital Stock and Other Securities Capitalization and Noncumulative
Voting (under General Information)
18 Purchase, Redemption, and Pricing of Shares Offering Price
19 Taxation of the Fund Accounting and Tax Issues; Taxes
20 Underwriters Investment Management Agreements
and Sub-Advisory Agreements
21 Calculation of Performance Data Performance Information
22 Financial Statements Financial Statements
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
---------------------
PART C
------
Item No. Description Location in Part C
- -------- ----------- ------------------
23 Exhibits Item 23
24 Persons Controlled by or under Common Item 24
Control with Registrant
25 Indemnification Item 25
26 Business and Other Connections of the Item 26
Investment Adviser
27 Principal Underwriters Item 27
28 Location of Accounts and Records Item 28
29 Management Services Item 29
30 Undertakings Item 30
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
1818 Market Street, Philadelphia, PA 19103
Prospectus
May 1, 1999
This Prospectus offers 17 Portfolios. Each Portfolio (Series) is in effect a
separate fund issuing its own shares. The shares of the Series are sold only to
separate accounts of life insurance companies (life companies). The separate
accounts are used in conjunction with variable annuity contracts and variable
life insurance policies (variable contracts). The separate accounts invest in
shares of the various Series in accordance with allocation instructions received
from contract owners. The investment objectives and principal policies of the
Series are described below.
AS WITH ALL MUTUAL FUNDS, THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Aggressive Growth Series -- seeks long-term capital appreciation. The
Series attempts to achieve its investment objective by investing primarily in
equity securities of companies which the manager believes have the potential for
high earnings growth. This Series has the same objective and investment
discipline as Aggressive Growth Fund of Voyageur Mutual Funds III, Inc., a
separate fund in the Delaware Investments family.
Capital Reserves Series--seeks a high stable level of current income
while minimizing fluctuations in principal by investing in a diversified
portfolio of short- and intermediate-term securities.
Cash Reserve Series--a money market fund which seeks the highest level
of income consistent with preservation of capital and liquidity through
investments in short-term money market instruments. This Series has the same
objective and investment disciplines as Delaware Group Cash Reserve, Inc., a
separate fund in the Delaware Investments family. The shares of Cash Reserve
Series are neither insured nor guaranteed by the U.S. government and there is no
assurance that the Series will be able to maintain a stable net asset value of
$10.00 per share.
Convertible Securities Series--seeks a high level of total return on
its assets through a combination of capital appreciation and current income. The
Series intends to pursue its investment objective by investing primarily in
convertible securities. Under normal conditions, the Series intends to invest at
least 65% of its total assets in convertible securities, which may include
privately placed convertible securities. In pursuit of its investment objective,
the Series may invest the balance of its assets in, among other things,
preferred and common stock, U.S. government securities, non-convertible
fixed-income securities and money market securities.
Delaware Balanced Series (formerly Delaware Series)--seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. This Series has the same objective and investment disciplines as
Delaware Balanced Fund of Delaware Group Equity Funds I, Inc., a separate fund
in the Delaware Investments family, in that, as a "balanced" fund, the Series,
consistent with its objective, invests at least 25% of its assets in
fixed-income securities and the remainder primarily in equity securities.
<PAGE>
DelCap Series--seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. This Series has the same objective and investment
disciplines as DelCap Fund of Delaware Group Equity Funds IV, Inc., a separate
fund in the Delaware Investments family, in that it invests in common stocks and
other securities including but not limited to, convertible securities, warrants,
preferred stocks, bonds and foreign securities, consistent with the Series'
objective.
Delchester Series--seeks as high a current income as possible by
investing in rated and unrated corporate bonds (including high-yield bonds
commonly known as junk bonds), U.S. government securities and commercial paper.
This Series has the same objective and investment disciplines as Delchester Fund
of Delaware Group Income Funds, Inc., a separate fund in the Delaware
Investments family. An investment in this Series may involve greater risks than
an investment in a portfolio comprised primarily of investment grade bonds.
Devon Series--seeks current income and capital appreciation. The Series
will seek to achieve its objective by investing primarily in income-producing
common stocks, with a focus on common stocks that the investment manager
believes have the potential for above-average dividend increases over time.
Under normal circumstances, the Series will invest at least 65% of its total
assets in dividend paying common stocks. This Series has the same objective and
investment disciplines as Devon Fund of Delaware Group Equity Funds I, Inc., a
separate fund in the Delaware Investments family.
Emerging Markets Series--seeks to achieve long-term capital
appreciation. The Series seeks to achieve its objective by investing primarily
in equity securities of issuers located or operating in emerging countries. The
Series is an international fund. As such, under normal market conditions, at
least 65% of the Series' assets will be invested in equity securities of issuers
organized or having a majority of their assets or deriving a majority of their
operating income in at least three countries that are considered to be emerging
or developing. This Series has the same objective and investment disciplines as
Emerging Markets Series of Delaware Group Global & International Funds, Inc., a
separate fund in the Delaware Investments family.
Global Bond Series--seeks current income consistent with preservation
of principal by investing primarily in fixed-income securities that may also
provide the potential for capital appreciation. This Series is a global fund. As
such, at least 65% of the Series' assets will be invested in fixed-income
securities of issuers organized or having a majority of their assets in or
deriving a majority of their operating income in at least three different
countries, one of which may be the United States. This Series has the same
objective and investment disciplines as Global Bond Series of Delaware Group
Global & International Funds, Inc., a separate fund in the Delaware Investments
family.
Growth and Income Series (formerly Decatur Total Return Series)--seeks
the highest possible total rate of return by selecting issues that exhibit the
potential for capital appreciation while providing higher than average dividend
income. This Series has the same objective and investment disciplines as Growth
and Income Series of Delaware Group Equity Funds II, Inc., a separate fund in
the Delaware Investments family, in that it invests generally, but not
exclusively, in common stocks and income-producing securities convertible into
common stocks, consistent with the Series' objective.
International Equity Series--seeks long-term growth without undue risk
to principal by investing primarily in equity securities of foreign issuers
providing the potential for capital appreciation and income. This Series has the
same objective and investment disciplines as International Equity Series of
Delaware Group Global & International Funds, Inc., a separate fund in the
Delaware Investments family, in that it invests in a broad range of equity
securities of foreign issuers, including common stocks, preferred stocks,
convertible securities and warrants, consistent with the Series' objective.
REIT Series -- seeks 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 funds in the Delaware
Investments family, which also invest in securities of companies primarily
engaged in the real estate industry.
Small Cap Value Series--seeks capital appreciation by investing
primarily in small cap common stocks whose market value appears low relative to
their underlying value or future earnings and growth potential. Emphasis will
also be placed on securities of companies that may be temporarily out of favor
or whose value is not yet recognized by the market. This Series, formerly known
as Value Series, has the same objective and investment disciplines as Small Cap
Value Fund of Delaware Group Equity Funds V, Inc., a separate fund in the
Delaware Investments family.
<PAGE>
Social Awareness Series--seeks to achieve long-term capital
appreciation. The Series seeks to achieve its objective by investing primarily
in equity securities of medium to large-sized companies expected to grow over
time that meet the Series' "Social Criteria" strategy. This Series, formerly
known as Quantum Series, has the same objective and investment disciplines as
Social Awareness Fund of Delaware Group Equity Funds II, Inc., a separate fund
in the Delaware Investments family.
Strategic Income Series--seeks high current income and total return.
The Series seeks to achieve its objective by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities. In
addition, the Series may invest in U.S. equity securities. This Series has the
same objective and investment disciplines as Strategic Income Fund of Delaware
Group Income Funds, Inc., a separate fund in the Delaware Investments family.
Trend Series--seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. This Series has
the same objective and investment disciplines as Trend Fund of Delaware Group
Equity Funds III, Inc., a separate fund in the Delaware Investments family.
<PAGE>
TABLE OF CONTENTS
Page
Profiles
Aggressive Growth Series
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series
Delaware Balanced Series
DelCap Series
Delchester Series
Devon Series
Emerging Markets Series
Global Bond Series
Growth and Income Series
International Equity Series
REIT Series
Small Cap Value Series
Social Awareness Series
Strategic Income Series
Trend Series
How we manage the Series
The risks of investing in the Series
Aggressive Growth Series
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series
Delaware Balanced Series
DelCap Series
Delchester Series
Devon Series
Emerging Markets Series
Global Bond Series
Growth and Income Series
International Equity Series
REIT Series
Small Cap Value Series
Social Awareness Series
Strategic Income Series
Trend Series
Who manages the Series
Fund Administration (Who's who)
Purchase and Redemption of Shares
Valuation of Shares
Dividends, distributions and taxes
Financial information
<PAGE>
Profile: Aggressive Growth Series
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What are the Series' goals?
Aggressive Growth Series seeks long-term capital appreciation. Although the
Series will strive to meet its goals, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in common stocks of companies that we believe have the
potential for high earnings growth. We consider companies of any size, as long
as they are larger than $300 million in market capitalization. We look for
companies that are undervalued, but still have the potential for high earnings
growth.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected by declines in stock
prices. In addition, because Aggressive Growth Fund invests in companies of all
sizes, some of the companies it chooses may involve greater risk due to their
smaller size, narrow product lines and limited financial resources. For a more
complete discussion of risk, please turn to page "The risks of investing in the
Series."
An investment in the Series is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities across
a broad range of industry sectors and company sizes.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
<PAGE>
Profile: Capital Reserves Series
What are the Series' goals?
Capital Reserves Series seeks a high stable level of current income while
attempting to minimize fluctuations in principal and provide maximum liquidity.
Although the Series will strive to achieve its goal, there is no assurance that
it will.
What are the Series' main investment strategies?
Capital Reserves Series invests primarily in short- and intermediate-term
securities, including securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities, instruments secured by U.S. government
securities and debt securities issued by U.S. corporations.
Capital Reserves Series is not a money market fund. A money market fund is
designed for stability of principal; consequently, the level of income
fluctuates. The Series is designed for greater stability of income at a
relatively higher level; consequently, the principal value will fluctuate over
time. The Series will attempt to provide investors with yields higher than those
available in money market vehicles by extending the average maturity of the
bonds in its portfolio beyond what is typically associated with money market
funds.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected primarily by adverse
changes in interest rates or, in the case of corporate bonds, by poor
performance in specific industries or companies. For a more complete discussion
of risk, please turn to page __.
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors looking for relatively stable and high income flow.
o Investors looking for the security associated with a portfolio of high
quality fixed income securities.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to own an investment whose value may fluctuate,
sometimes significantly, over the short term.
<PAGE>
How has Capital Reserves Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Capital Reserves Series. We show how returns for Capital Reserves Series have
varied over the past ten calendar years, as well as average annual returns for
one, five and ten years -- all compared to the performance of the Lehman
Brothers Intermediate Government Corporate Index. The Lehman Brothers
Intermediate Government Corporate Index [description]. You should remember that
unlike the Series, the index is unmanaged and doesn't reflect the actual costs
of operating a mutual fund, such as the costs of buying, selling, and holding
securities. The Series' past performance does not necessarily indicate how it
will perform in the future. The returns reflect voluntary expense caps. The
returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Capital Reserves
Series)]
Year-by-year total return
Lehman Brothers
Intermediate Government
Capital Reserves Series Corporate Index
1989 00.00% 00.00%
1990 00.00% 00.00%
1991 00.00% 00.00%
1992 00.00% 00.00%
1993 00.00% 00.00%
1994 00.00% 00.00%
1995 00.00% 00.00%
1996 00.00% 00.00%
1997 00.00% 00.00%
1998 00.00% 00.00%
As of March 31, 1999, Capital Reserves Series had a year-to-date return of
0.00%. During the periods illustrated in this bar chart, Capital Reserves
Series' highest return was 0.00% for the quarter ended ___________, 19__ and its
lowest return was 0.00% for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Lehman Brothers
Intermediate Government
Capital Reserves Series Corporate Index
1 year 00.00% 00.00%
5 years 00.00% 00.00%
10 years 00.00% 00.00%
<PAGE>
Profile: Cash Reserve Series
What are the Series' goals?
Cash Reserve Series seeks to provide maximum current income, while preserving
principal and maintaining liquidity, by investing its assets in a diversified
portfolio of money market securities and managing the portfolio to maintain a
constant net asset value of $10 per share. Although the Series will strive to
achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies?
Cash Reserve Series invests primarily in short- term money market securities,
including securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities and short-term debt instruments of banks and corporations.
Cash Reserve Series is a money market fund. A money market fund is designed for
stability of principal; consequently, the level of income fluctuates.
We typically maintain an average maturity of 90 days or less. Also, we do not
purchase any instruments with an effective remaining maturity of more than 13
months. We intend to hold our investments until maturity, but we may sell them
prior to maturity in order to shorten or lengthen the average maturity of the
bonds in the portfolio, increase the yield, maintain the quality of the
portfolio or maintain a stable share value.
What are the main risks of investing in the Series?
Cash Reserve Series will be affected primarily by declines in interest rates
that would reduce the income provided by the Series. For a more complete
discussion of risk, please turn to "The risks of investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although the Series seeks to preserve the value of your
investment at $10 per share, it is possible to lose money by investing in the
Series.
Who should invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to own an investment whose value may fluctuate,
sometimes significantly, over the short term.
o Investors who are looking for a short-term, relatively safe investment to
complement more long-term investments in their portfolio.
Who should not invest in the Series
o Investors with long-term financial goals.
o Investors looking for relatively high income flow.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has Cash Reserve Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Cash Reserve Series. We show how returns for Cash Reserve Series have varied
over the past ten calendar years, as well as average annual returns for one,
five and ten years. The Series' past performance does not necessarily indicate
how it will perform in the future. The returns reflect voluntary expense caps.
The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Cash Reserve
Series)]
Year-by-year total return
Cash Reserve Series
1989 00.00%
1990 00.00%
1991 00.00%
1992 00.00%
1993 00.00%
1994 00.00%
1995 00.00%
1996 00.00%
1997 00.00%
1998 00.00%
As of March 31, 1999, Cash Reserve Series had a year-to-date return of 0.00%.
During the periods illustrated in this bar chart, Cash Reserve Series' highest
return was 0.00% for the quarter ended ___________, 19__ and its lowest return
was 0.00% for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Cash Reserve Series
1 year 00.00%
5 years 00.00%
10 years 00.00%
<PAGE>
Profile: Convertible Securities Series
What are the Series' goals?
Convertible Securities Series seeks a high level of total return on its assets
through a combination of current income and capital appreciation. Although the
Series will strive to achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in convertible securities. A convertible security is a bond,
debenture, note, preferred stock or other security which may be converted into a
prescribed amount of common stock of the same or a different issuer at a
specified price or using a specified pricing formula. A convertible security
entitles the holder to receive interest paid on convertible debt or the dividend
paid on a preferred stock until the convertible security matures, is redeemed or
is converted.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected primarily by declines in
convertible securities prices, which can be caused by a drop in the stock or
bond market, an adverse change in interest rates or poor performance in specific
industries or companies. For a more complete discussion of risk, please turn to
page 9.
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors looking for appreciation potential combined with the potential
for current income which could act as a cushion for the portfolio's
performance.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to own an investment whose value may fluctuate,
sometimes significantly, over the short term.
<PAGE>
How has Convertible Securities Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Convertible Securities Series. We show returns for Convertible Securities Series
for the past calendar year, as well as average annual returns for one year and
since inception -- all compared to the performance of the Merrill Lynch
Convertible Securities Index. The Merrill Lynch Convertible Securities Index
____. You should remember that unlike the Series, the index is unmanaged and
doesn't reflect the actual costs of operating a mutual fund, such as the costs
of buying, selling, and holding securities. The Series' past performance does
not necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (Convertible Securities
Series)]
Total return
Merrill Lynch
Convertible
Convertible Securities Series Securities Index
1998 00.00% 00.00%
As of March 31, 1999, Convertible Securities Series had a year-to-date return of
0.00%. During the period illustrated in this bar chart, Convertible Securities
Series' highest return was 0.00% for the quarter ended ___________, 19__ and its
lowest return was 0.00% for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Merrill Lynch
Convertible
Convertible Securities Securities Index
Series
1 year 00.00% 00.00%
Since Inception 00.00% 00.00%
(5/1/97)
<PAGE>
Profile: Delaware Balanced Series
What are the Series' goals?
Delaware Balanced Series seeks a balance of capital appreciation, income and
preservation of capital. Although the Series will strive to achieve its goal,
there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in common stocks of established companies we believe have
the potential for long-term capital appreciation. In addition, we invest at
least 25% of the Series' assets in various types of fixed-income securities,
including U.S. government securities and corporate bonds. Funds with this mix of
stocks and bonds are commonly known as balanced funds.
Delaware Balanced Series uses the same investment strategy as Delaware Balanced
Fund, a separate fund in the Delaware Investments Family of Funds.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected primarily by declines in
stock and bond prices, which can be caused by a drop in the stock or bond
market, an adverse change in interest rates or poor performance in specific
industries or companies. For a more complete discussion of risk, please turn to
page 9.
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors looking for stocks and bonds combined in a single investment.
o Investors seeking a measure of capital preservation.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to own an investment whose value may fluctuate,
sometimes significantly, over the short term.
<PAGE>
How has Delaware Balanced Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Delaware Balanced Series. We show how returns for Delaware Balanced Series have
varied over the past ten calendar years, as well as average annual returns for
one, five and ten years -- all compared to the performance of the S&P 500 Index
and the Lehman Brothers Aggregate Bond Index. The S&P 500 Index _____. The
Lehman Brothers Aggregate Bond Index ____. You should remember that unlike the
Series, the indexes are unmanaged and don't reflect the actual costs of
operating a mutual fund, such as the costs of buying, selling, and holding
securities. Neither index is a perfect comparison to Delaware Balanced Series
since the S&P 500 does not include fixed-income securities and the Lehman
Brothers Aggregate Bond Index does not include stocks. The Fund's past
performance does not necessarily indicate how it will perform in the future. The
returns reflect voluntary expense caps. The returns would be lower without the
voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Delaware Balanced
Series)
Year-by-year total return
Delaware Balanced Series S&P 500 Lehman Bros. Agg.
Bond Index
1989 00.00% 31.50% 14.53%
1990 00.00% -3.20% 8.96%
1991 00.00% 30.60% 16.00%
1992 00.00% 7.70% 7.40%
1993 00.00% 10.00% 9.75%
1994 00.00% 1.30% -2.92%
1995 00.00% 37.40% 18.47%
1996 00.00% 23.10% 3.63%
1997 00.00% 33.40% 9.65%
1998 00.00% 28.74% 8.69%
As of March 31, 1999, Delaware Balanced Series had a year-to-date return of
0.00%. During the period illustrated in this bar chart, Delaware Balanced
Series' highest return was 0.00% for the quarter ended ___________, 19__ and its
lowest return was 0.00% for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Delaware Balanced Series S&P 500 Lehman Bros. Aggregate
Bond Index
1 year 00.00% 28.74% 8.69%
5 years 00.00% 24.08% 7.27%
10 years 00.00% 19.20% 9.26%
<PAGE>
Profile: DelCap Series
- ----------------------
What are the Series' goals?
DelCap Series seeks long-term capital appreciation. Although the Series will
strive to meet its goals, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in stocks of medium-sized companies that are of superior
quality and which we believe will grow more rapidly than the average of stocks
listed in the S&P 500 stock Index.
DelCap Series uses the same investment strategy as DelCap Fund, a separate fund
in the Delaware Investments Family of Funds.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the DelCap Series' portfolio. This Series will be affected by declines in
stock prices. In addition, the companies that DelCap Series invests in may
involve greater risk due to their size, narrow product lines and limited
financial resources. For a more complete discussion of risk, please turn to "The
risks of investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
medium-sized companies.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
<PAGE>
How has DelCap Series performed?
This bar chart and table can help you evaluate the potential risks of investing
DelCap Series. We show how returns for DelCap Series have varied over the past
seven calendar years, as well as average annual returns for one and five years
and since inception-- all compared to the performance of the S&P 500 Index. The
S&P 500 Index ____. You should remember that unlike the Series, the index is
unmanaged and doesn't reflect the actual costs of operating a mutual fund, such
as the costs of buying, selling, and holding securities. The Series' past
performance does not necessarily indicate how it will perform in the future. The
returns reflect voluntary expense caps. The returns would be lower without the
voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (DelCap Series)]
Year-by-year total return
DelCap Series S&P 500 Index
1992 00.00% 7.70%
1993 00.00% 10.00%
1994 00.00% 1.30%
1995 00.00% 37.40%
1996 00.00% 23.10%
1997 00.00% 33.40%
1998 00.00% 28.74%
As of March 31, 1999, DelCap Series had a year-to-date return of 0.00%. During
the periods illustrated in this bar chart, DelCap Series' highest return was
0.00% for the quarter ended ___________, 19__ and its lowest return was 0.00%
for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Capital Reserves Series S&P 500 INDEX
1 year 00.00% 00.00%
5 years 00.00% 00.00%
Since Inception 00.00% 00.00%
(7/12/91)
<PAGE>
Profile: Delchester Series
What are the Series' goals?
Delchester Series seeks the highest current income, which Delaware Management
believes is consistent with prudent investment management. Although the Series
will strive to achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in fixed income securities having a liberal and consistent
yield and those tending to reduce the risk of market fluctuations. These
include:
o Corporate Bonds. We expect to invest the majority of the Series'
assets primarily in bonds rated BBB or lower by S&P. These are
commonly known as high-yield bonds or junk bonds and involve greater
risks than investment grade bonds. The Series will also invest in
unrated bonds. Unrated bonds may be more speculative in nature than
rated bonds;
o Government Securities. Securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities; and
o Commercial Paper. Commercial paper of companies rated A-1 or A-2 by
S&P or rated P-1 or P-2 by Moody's Investors Service, Inc.
Delchester Series uses the same investment strategy as Delchester Fund, a
separate fund in the Delaware Investments Family of Funds.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected primarily by declines
bond prices, which can be caused by an adverse change in interest rates, adverse
economic conditions or poor performance from specific industries or bond
issuers. For a more complete discussion of risk, please turn to "The risks of
investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors looking a fixed income investment that offers potential for very
high current income.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to own an investment whose value may fluctuate,
sometimes significantly, over the short term.
<PAGE>
How has Delchester Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Delchester Series. We show how returns for Delchester Series have varied over
the past ten calendar years, as well as average annual returns for one, five and
ten years -- all compared to the performance of the Salomon Smith Barney
High-Yield Bond Index. The Salomon Smith Barney High-Yield Bond Index ____. You
should remember that unlike the Series, the index is unmanaged and doesn't
reflect the actual costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. The Series' past performance does not
necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Delchester
Series)]
Year-by-year total return
Delchester Series Salomon Smith Barney High-Yield Bond Index
1989 00.00% 00.00%
1990 00.00% 00.00%
1991 00.00% 00.00%
1992 00.00% 00.00%
1993 00.00% 00.00%
1994 00.00% 00.00%
1995 00.00% 00.00%
1996 00.00% 00.00%
1997 00.00% 00.00%
1998 00.00% 00.00%
As of March 31, 1999, Delchester Series had a year-to-date return of 0.00%.
During the periods illustrated in this bar chart, Delchester Series' highest
return was 0.00% for the quarter ended ___________, 19__ and its lowest return
was 0.00% for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Delchester Series Salomon Smith Barney
High-Yield Bond Index
1 year 00.00% 00.00%
5 years 00.00% 00.00%
10 years 00.00% 00.00%
<PAGE>
Profile: Devon Series
What are the Series' goals?
Devon Series seeks current income and capital appreciation. Although the Series
will strive to achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in income-producing common stocks. We focus on common stocks
that we believe have the potential for above-average dividend increases over
time.
Devon Series uses the same investment strategy as Devon Fund, a separate fund in
the Delaware Investments Family of Funds.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio.
This Series will be particularly affected by changes in stock prices. Stock
prices may be negatively affected by declines in the stock market or poor
performance in specific industries or companies. For a more complete discussion
of risk, please turn to page x.
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors seeking long-term capital appreciation.
o Investors seeking an investment primarily in common stocks.
Who should not invest in the Series
o Investors seeking an investment primarily in fixed-income securities.
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
<PAGE>
How has Devon Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Devon Series. We show returns for Devon Series over the past calendar year, as
well as average annual returns for one year and since inception -- all compared
to the performance of the S&P 500 Index. The S&P 500 Index ____. You should
remember that unlike the Series, the index is unmanaged and doesn't reflect the
actual costs of operating a mutual fund, such as the costs of buying, selling,
and holding securities. The Series' past performance does not necessarily
indicate how it will perform in the future. The returns reflect voluntary
expense caps. The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (Devon Series)]
Total return
Devon Series S&P 500 Index
1998 00.00% 28.74%
As of March 31, 1999, Devon Series had a year-to-date return of 0.00%. During
the period illustrated in this bar chart, Devon Series' highest return was 0.00%
for the quarter ended ___________, 19__ and its lowest return was 0.00% for the
quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Devon Series S&P 500 Index
1 year 00.00% 00.00%
Since Inception 00.00% 00.00%
(5/1/97)
<PAGE>
Profile: Emerging Markets Series
What are the Series' goals?
The Emerging Markets Series seeks long-term capital appreciation. Although the
Series will strive to achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies? The Series invests primarily in
equity securities of issuers located or operating in emerging countries. The
Series is an international fund. Under normal market conditions, at least 65% of
the Series' total assets will be invested in equity securities of companies in
at least three different countries that are considered to be emerging or
developing. An issuer is considered to be from the country where it is located,
where the majority of its assets are or where it generates the majority of its
operating income.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
held in the Series' portfolio. This Series will be affected primarily by
declines in stock prices, which can be caused by a drop in foreign stock markets
or poor performance in specific industries or companies. Because the Series
invests primarily in international securities in emerging market countries as
well as in established countries, it will be affected by international
investment risks related to changes in currency valuations, political
instability, economic instability, or inadequate regulatory standards. The
Series may invest up to 35% of its net assets in high yield, high risk foreign
fixed-income securities, which are subject to substantial risks, particularly
during periods of economic downturns or rising interest rates. The Series is
considered "non-diversified" under federal laws and regulations that regulate
mutual funds. Thus, adverse effects on the Series' investments may affect a
larger portion of its overall assets and subject the Series to greater risks.
For a more complete discussion of risk, please turn to the section "The risks of
investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals (at least three years).
o Investors looking for a portfolio of securities of emerging markets
which may offer high return potential but can be substantially more
risky than investments in either the U.S. or established foreign
countries.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors who do not understand the significant risks associated with
investing in emerging markets.
<PAGE>
How has Emerging Markets Series performed?
This bar chart and table can help you evaluate the potential risks of investing
in Emerging Markets Series. We show returns for Emerging Markets Series for the
past calendar year, as well as average annual returns for one year and since
inception -- all compared to the performance of the Morgan Stanley Emerging
Markets Free Index. The Morgan Stanley Emerging Markets Free Index _____. You
should remember that unlike the Series, the index is unmanaged and doesn't
reflect the actual costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. The Series' past performance does not
necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (Emerging Markets Series)]
Total return (Emerging Markets Series)
Emerging Markets Series Morgan Stanley Emerging Markets Free Index.
1998 00.00% 00.00%
As of March 31, 1999, Emerging Markets Series had a year-to-date return of
0.00%. During the period illustrated in this bar chart, Emerging Markets Series
highest return was 0.00% for the quarter ended ______________, 19___ and its
lowest return was 0.00% for the quarter ended _____________, 19___.
Average annual returns for periods ending 12/31/98
Emerging Markets Series Morgan Stanley
Emerging Markets Free
Index.
1 year 00.00% 00.00%
Since inception
(5/1/97) 00.00% 00.00%
<PAGE>
Profile: Global Bond Series
What are the Series' goals?
Global Bond Series seeks current income consistent with preservation of
principal. Although the Series will strive to achieve its goal, there is no
assurance that it will.
What are the Series' main investment strategies?
The Global Bond Series invests primarily in fixed-income securities that may
also provide the potential for capital appreciation. The Series is a global
fund. Therefore, at least 65% of the Series' total assets will be invested in
fixed-income securities of issuers from at least three different countries, one
of which may be the United States. An issuer is considered to be from the
country where it is located, where the majority of its assets are or where it
generates the majority of its operating income.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
held in the Series' portfolio. This Series will be affected primarily by
declines in bond prices that can be caused by a drop in the bond market or an
adverse change in interest rates. Because the Series invests in international
securities in both established and developing countries, it will be affected by
international investment risks related to changes in currency valuations,
political instability, economic instability, or inadequate regulatory standards.
The Series may invest in high yield, high risk foreign fixed-income securities,
which are subject to substantial risks, particularly during periods of economic
downturns or rising interest rates. Additionally, the Series is considered
"non-diversified" under federal laws that regulate mutual funds. Thus, adverse
effects on the Series' investments may affect a larger portion of its overall
assets and subject the Series to greater risks. For a more complete discussion
of risk, please turn to the section "The risks of investing in the series?"
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals (at least three years).
o Investors looking for a portfolio that includes both U.S. and foreign
fixed-income securities.
o Investors seeking a measure of capital appreciation.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to accept risks of investing in foreign
fixed-income securities.
<PAGE>
How has Global Bond Series performed?
This bar chart and table can help you evaluate the potential risks of investing
in Global Bond Series. We show how returns varied for Global Bond Series for the
past two calendar years, as well as average annual returns for one year and
since inception -- all compared to the performance of the Salomon Brothers World
Government Bond Index. The Salomon Brothers World Government Bond Index _____.
You should remember that unlike the Series, the index is unmanaged and doesn't
reflect the actual costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. The Series' past performance does not
necessarily indicate how it will perform in the future. The returns reflect
voluntary expense caps. The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Global Bond
Series)]
Year-by-year total return (Global Bond Series)
Global Bond Series Salomon Brothers World Government Bond Index
1997 00.00% 00.00%
1998 00.00% 00.00%
As of March 31, 1999, Global Bond Series had a year-to-date return of 0.00%.
During the periods illustrated in this bar chart, Global Bond Series' highest
return was 0.00% for the quarter ended _____________, 19___ and its lowest
return was 0.00% for the quarter ended _________________, 19___.
Average annual returns for periods ending 12/31/98
Salomon Brothers World
Government Bond Index
Global Bond Series
1 year 00.00% 00.00%
Since inception
(5/2/96) 00.00% 00.00%
<PAGE>
Profile: Growth and Income Series
What are the Series' goals?
The Growth and Income Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Although the Series will strive
to meet its goals, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in dividend-paying stocks of large, well-established
companies. Typically, we consider buying a stock when its dividend yield is
higher than the average of the unmanaged S&P 500 Index. The manager then
considers the financial strength of the company, the nature of its management
and any developments affecting the security, the company or its industry. If the
yield on a stock already in the portfolio falls below the average of the S&P
500, we generally sell that stock.
Growth and Income Series uses the same investment strategy as Growth and Income
Fund, a separate fund in the Delaware Investments Family.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected by declines in stock
prices, which could be caused by a drop in the stock market or poor performance
from particular companies or sectors. For a more complete discussion of risk,
please turn to page ___.
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors seeking long-term capital appreciation.
o Investors seeking an investment primarily in common stocks.
o Investors seeking moderate quarterly income with the opportunity for
inflation protection.
Who should not invest in the Series
o Investors seeking an investment primarily in fixed-income securities.
o Investors with short-term financial goals.
o Investors who are unwilling to accept that the value of their
investment may fluctuate, sometimes significantly over the short term.
<PAGE>
How has Growth and Income Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Growth and Income Series. We show how returns for Growth and Income Series have
varied over the past ten calendar years, as well as average annual returns for
one, five and ten years-- all compared to the performance of the S&P 500 Index.
The S&P 500 ____. You should remember that unlike the Series, the index is
unmanaged and doesn't reflect the actual costs of operating a mutual fund, such
as the costs of buying, selling, and holding securities. The Series' past
performance does not necessarily indicate how it will perform in the future. The
returns reflect voluntary expense caps. The returns would be lower without the
voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Growth and Income
Series)]
Year-by-year total return
Growth and Income Series S&P 500 Index
1989 00.00% 31.50%
1990 00.00% -3.20%
1991 00.00% 30.60%
1992 00.00% 7.70%
1993 00.00% 10.00%
1994 00.00% 1.30%
1995 00.00% 37.40%
1996 00.00% 23.10%
1997 00.00% 33.40%
1998 00.00% 28.74%
As of March 31, 1999, Growth and Income Series had a year-to-date return of
0.00%. During the periods illustrated in this bar chart, Growth and Income
Series' highest return was 0.00% for the quarter ended ______________, 19___ and
its lowest was 0.00% for the quarter ended ______________, 19___.
Average annual return for periods ending 12/31/98
Growth and Income Series S&P 500 Index
1 year 00.00% 00.00%
5 years 00.00% 00.00%
10 years 00.00% 00.00%
<PAGE>
Profile: International Equity Series
What are the Series' goals?
The International Equity Series seeks long-term growth without undue risk to
principal. Although the Series will strive to achieve its goal, there is no
assurance that it will.
What are the Series' main investment strategies?
The Series invests primarily in equity securities that provide the potential for
capital appreciation and income. The Series is an international fund. As such,
at least 65% of the Series' total assets will be invested in equity securities
of companies from at least three foreign countries. A company is considered to
be from the country where it is located, where the majority of its assets are or
where it generates the majority of its operating income.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected primarily by declines in
stock prices, which can be caused by a drop in foreign stock markets or poor
performance in specific industries or companies. Because the Series invests in
international securities in both established and developing countries, it will
be affected by international investment risks related to changes in currency
valuations, political instability, economic instability, or inadequate
regulatory standards. For a more complete discussion of risk, please see the
section "The risks of investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals (at least three years).
o Investors looking for a portfolio of international equity securities.
o Investors seeking a measure of capital appreciation and income.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to accept the risks of investing in
foreign equity and fixed-income securities.
o Investors looking for an investment that provides a high level of
income.
<PAGE>
How has International Equity Series performed?
This bar chart and table can help you evaluate the potential risks of investing
International Equity Series. We show how returns for International Equity Series
have varied over the past six calendar years, as well as average annual returns
for one and five years and since inception-- all compared to the performance of
the Morgan Stanley EAFE Index. The Morgan Stanley EAFE Index ____. You should
remember that unlike the Series, the index is unmanaged and doesn't reflect the
actual costs of operating a mutual fund, such as the costs of buying, selling,
and holding securities. The Series' past performance does not necessarily
indicate how it will perform in the future. The returns reflect voluntary
expense caps. The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (International
Equity Series)]
Year-by-year total return
International Equity Series Morgan Stanley EAFE Index
1993 00.00% 00.00%
1994 00.00% 00.00%
1995 00.00% 00.00%
1996 00.00% 00.00%
1997 00.00% 00.00%
1998 00.00% 00.00%
As of March 31, 1999, International Equity Series had a year-to-date return of
0.00%. During the periods illustrated in this bar chart, International Equity
Series' highest return was 0.00% for the quarter ended ______________, 19___ and
its lowest return was 0.00% for the quarter ended __________, 19__.
Average annual returns for period ending 12/31/98
International Equity Morgan Stanley EAFE
Series Index
1 year 00.00% 00.00%
5 years 00.00% 00.00%
Since inception
(10/29/92) 00.00% 00.00%
<PAGE>
Profile: REIT Series
What are the Series' Goals?
The REIT Series seeks maximum long-term total return, with capital
appreciation as a secondary objective. Although the Series will strive
to achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies?
The REIT Series invests in securities of companies principally engaged
in the real estate industry. Under normal circumstances, we will invest
at least 65% of the Series' total assets in equity securities of real
estate investment trusts, commonly known as REITs. The REIT Series is
considered "non-diversified" under the federal laws and regulations
that regulate mutual funds. That means that with respect to 50% of its
assets, the Series may invest more than 5% of net assets in a single
security. Thus, adverse effects on an investment held by the Series may
affect a larger portion of overall assets and subject the Series to
greater risks.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that
you may lose part or all of the money you invest. The value of your
investment in the REIT Series will increase and decrease according to
changes in the value of the securities held in the portfolio. The
Series' value and yields will fluctuate in response to movements in
stock prices.
Because we concentrate our investments in the real estate industry, the
Series may be subject to certain risks associated with direct ownership
of real estate and with the real estate industry in general. See "The
Risks of Investing in the Series" for further information about these
and other risks.
An investment in the Series is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
(FDIC) or any other government agency.
You should keep in mind that an investment in the Series is not a
complete investment program; it should be considered just one part of
your total financial plan. Be sure to discuss this Series with your
financial adviser to determine whether it is an appropriate investment
for you.
Who should invest in the Series?
o Investors seeking a high level of total return.
o Investors willing to invest in equity securities of companies
principally engaged in the real estate industry.
o Investors looking to diversify their equity holdings by adding
exposure to the real estate markets.
Who should not invest in the Series?
o Investors seeking current income.
o Investors unwilling to accept the risks of investing in the real
estate industry as well as in a non-diversified fund.
o Investors who are unwilling to accept that the value of their
investment may fluctuate, sometimes significantly, over the short
term.
<PAGE>
Profile: Small Cap Value Series
What are the Series' goals?
Small Cap Value Series seeks capital appreciation. Although the Series will
strive to meet its goals, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in stocks of small companies whose stock prices appear low
relative to their underlying value or future potential. Among other factors, we
consider the financial strength of a company, its management, the prospects for
its industry and any anticipated changes within the company, which might suggest
a more favorable outlook going forward.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected by declines in stock
prices. In addition, the companies that Small Cap Value Series invests in may
involve greater risk due to their size, narrow product lines and limited
financial resources. For a more complete discussion of risk, please turn to
page x.
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation
opportunities of small companies.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly over the short term.
<PAGE>
How has Small Cap Value Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Small Cap Value Series. We show how returns for Small Cap Value Series have
varied over the past five calendar years, as well as average annual returns for
one and five years and since inception-- all compared to the performance of the
Russell 2000 Index. The Russell 2000 Index ____. You should remember that unlike
the Series, the index is unmanaged and doesn't reflect the actual costs of
operating a mutual fund, such as the costs of buying, selling, and holding
securities. The Series' past performance does not necessarily indicate how it
will perform in the future. The returns reflect voluntary expense caps. The
returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(International Equity Series)]
Year-by-year total return
Small Cap Value Series Russell 2000 Index
1994 00.00% 00.00%
1995 00.00% 00.00%
1996 00.00% 00.00%
1997 00.00% 00.00%
1998 00.00% 00.00%
As of March 31, 1999, Small Cap Value Series had a year-to-date return of 0.00%.
During the periods illustrated in this bar chart, Small Cap Value Series'
highest return was 0.00% for the quarter ended ______________, 19___ and its
lowest return was 0.00% for the quarter ended __________, 19__.
Average annual returns for period ending 12/31/98
Small Cap Value Series Russell 2000 Index
1 year 00.00% 00.00%
5 years 00.00% 00.00%
Since inception
(12/27/93) 00.00% 00.00%
<PAGE>
Profile: Social Awareness Series
What is the Series' goal?
Social Awareness Series seeks long-term capital appreciation. Although the
Series will strive to achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in stocks of medium to large-sized companies that meet
certain socially responsible criteria and which we expect to grow over time. Our
socially responsible criteria exclude companies that:
o engage in activities likely to result in damage to the natural
environment
o produce nuclear power, design or construct nuclear power plants or
manufacture equipment for the production of nuclear power
o manufacture or contract for military weapons
o are in the liquor, tobacco or gambling industries
o conduct animal testing for cosmetic or personal care products.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of an investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected by declines in stock
prices, which can be caused by a drop in the stock market or poor performance in
specific industries or companies. Because the Series avoids certain companies
not considered socially responsible, it could miss out on strong performance
from those companies. For a more complete discussion of risk, please see the
section "The risks of investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors looking for capital growth potential.
o Investors who would like an investment that incorporates social
responsibility into its security selection process.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors whose primary goal is to receive current income.
<PAGE>
How has Social Awareness Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Social Awareness Series. We show returns for Social Awareness Series over the
past calendar year, as well as average annual returns for one year and since
inception -- all compared to the performance of the S&P 500 Index. The S&P 500
Index ____. You should remember that unlike the Series, the index is unmanaged
and doesn't reflect the actual costs of operating a mutual fund, such as the
costs of buying, selling, and holding securities. The Series' past performance
does not necessarily indicate how it will perform in the future. The returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (Social Awareness Series)]
Total return
Social Awareness Series S&P 500 Index
1998 00.00% 28.74%
As of March 31, 1999, Social Awareness Series had a year-to-date return of
0.00%. During the period illustrated in this bar chart, Social Awareness Series'
highest return was 0.00% for the quarter ended ___________, 19__ and its lowest
return was 0.00% for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Social Awareness Series S&P 500 Index
1 year 00.00% 00.00%
Since Inception 00.00% 00.00%
(5/1/97)
<PAGE>
Profile: Strategic Income Series
What are the Series' goals?
Strategic Income Series seeks high current income and total return. Although
the Series will strive to achieve its goal, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in bonds allocated among three sectors of the fixed income
market. These include:
o a High-Yield Sector, consisting of high-yielding, higher risk,
lower-rated or unrated fixed-income securities (commonly known as
"junk bonds") issued by U.S. companies;
o an Investment Grade Sector, consisting of investment grade debt
obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, or by U.S. companies; and
o an International Sector, consisting of obligations of foreign
governments, their agencies and instrumentalities, and other
fixed-income securities of issuers in foreign countries and
denominated in foreign currencies. An issuer is considered to be
from the country where it is located, where the majority of its
assets are or where it generates the majority of its operating
income.
We determine the amount of the Series' assets that will be allocated to each of
the three based on our analysis of economic and market conditions and our
assessment of the returns and potential for appreciation from each sector. We
will periodically reallocate the Series' assets.
Strategic Income Series uses the same investment strategy as Strategic Income
Fund, a separate fund in the Delaware Investments Family of Funds.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected primarily by declines
bond prices, which can be caused by an adverse change in interest rates, adverse
economic conditions or poor performance from specific industries or bond
issuers. The Series is also subject to the special risks associated with
high-yield bond investing and with foreign investing. For a more complete
discussion of risk, please turn to "The risks of investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors looking for a fixed income investment that offers
potential for high current income and total return.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors who are unwilling to own an investment whose value may
fluctuate, sometimes significantly, over the short term.
<PAGE>
How has Strategic Income Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Strategic Income Series. We show returns for Strategic Income Series over the
past calendar year, as well as average annual returns for one year and since
inception -- all compared to the performance of the Lehman Brothers Aggregate
Bond Index. The Lehman Brothers Aggregate Bond Index ____. You should remember
that unlike the Series, the index is unmanaged and doesn't reflect the actual
costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. The Series' past performance does not necessarily indicate
how it will perform in the future. The returns reflect voluntary expense caps.
The returns would be lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (Strategic Income Series)]
Total return
Strategic Income Series Lehman Brothers Aggregate Bond Index
1998 00.00% 28.74%
As of March 31, 1999, Strategic Income Series had a year-to-date return of
0.00%. During the period illustrated in this bar chart, Strategic Income Series'
highest return was 0.00% for the quarter ended ___________, 19__ and its lowest
return was 0.00% for the quarter ended ____________, 19__.
Average annual returns for periods ending 12/31/98
Strategic Income Series S&P 500 Index
1 year 00.00% 00.00%
Since Inception 00.00% 00.00%
(5/1/97)
<PAGE>
Profile: Trend Series
What are the Series' goals?
Trend Series seeks long-term capital appreciation. Although the Series will
strive to meet its goals, there is no assurance that it will.
What are the Series' main investment strategies?
We invest primarily in stocks of small, growth-oriented companies that we
believe are responsive to changes within the marketplace and which we believe
have the fundamental characteristics to support continued growth.
Trend Series uses the same investment strategy as Trend Fund, as separate fund
in the Delaware Investments Family of Funds.
What are the main risks of investing in the Series?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Series
will increase and decrease according to changes in the value of the securities
in the Series' portfolio. This Series will be affected by declines in stock
prices. In addition, the companies that Trend Series invests in may involve
greater risk due to their size, narrow product lines and limited financial
resources. For a more complete discussion of risk, please turn to page "The
risks of investing in the Series."
An investment in the Series is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Series is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Series with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Series
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation
opportunities of small companies.
Who should not invest in the Series
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may
fluctuate, sometimes significantly over the short term.
<PAGE>
How has Trend Series performed?
This bar chart and table can help you evaluate the potential risks of investing
Trend Series. We show how returns for Trend Series have varied over the past
five calendar years, as well as average annual returns for one and five years
and since inception-- all compared to the performance of the Russell 2000 Growth
Index. The Russell 2000 Growth Index ____. You should remember that unlike the
Series, the index is unmanaged and doesn't reflect the actual costs of operating
a mutual fund, such as the costs of buying, selling, and holding securities. The
Series' past performance does not necessarily indicate how it will perform in
the future. The returns reflect voluntary expense caps. The returns would be
lower without the voluntary caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (Trend Series)]
Year-by-year total return
Trend Series Russell 2000 Growth Index
1994 00.00% 00.00%
1995 00.00% 00.00%
1996 00.00% 00.00%
1997 00.00% 00.00%
1998 00.00% 00.00%
As of March 31, 1999, Trend Series had a year-to-date return of 0.00%. During
the periods illustrated in this bar chart, Trend Series' highest return was
0.00% for the quarter ended ______________, 19___ and its lowest return was
0.00% for the quarter ended __________, 19__.
Average annual returns for period ending 12/31/98
Trend Series Russell 2000 Growth Index
1 year 00.00% 00.00%
5 years 00.00% 00.00%
Since inception
(12/27/93) 00.00% 00.00%
<PAGE>
How we manage the Series
How we manage Aggressive Growth Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Aggressive Growth Series. Following is a description of how the
portfolio manager pursues the Series' investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify companies that offer the potential for long-term price
appreciation because they are likely to experience high earnings growth. The
companies we choose for the portfolio will typically exhibit one or more of the
following characteristics:
o A history of high growth in earnings-per-share
o Projections for high future growth or acceleration in
earnings-per-share
o A price-to-earnings ratio that is low relative to other stocks
o Discounted cash flows that are high relative to other stocks.
Once we identify stocks that have these characteristics, we further evaluate
the company, looking at
o capability of the management team,
o strength of the company's position within its industry,
o whether its internal structure can support continued growth,
o how high is the company's return on equity,
o how much of the company's profits are reinvested into the company
to fuel additional growth, and
o how stringent are the company's financial and accounting policies.
All of these give us insight into the outlook for the company, helping us to
identify companies poised for high earnings growth. We believe that this high
earnings growth, if it occurs, would result in price appreciation for the
company's stock.
Because some of the smaller companies we select may still be in their early
developmental stages and therefore involve greater risks, we maintain a
well-diversified portfolio, typically holding xx to xx different stocks,
representing a wide array of industries. We generally balance our holdings of
small companies with investments in medium-size and large companies.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Aggressive Growth Series
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent Generally, we invest 90% of net assets in common
shares of ownership in a corporation. stock.
Stockholders participate in the corporation's
profits and losses, proportionate to the
number of shares they own.
- -------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement Typically, we use repurchase agreements as a short-term
between a buyer and seller of securities in investment for a Series'cash position. In order to enter into
which the seller agrees to buy the securities these repurchase agreements, the Series must have collateral
back within a specified time at the same price of at least 102% of the repurchase price.
the buyer paid for them, plus an amount
equal to an agreed upon interest rate.
Repurchase agreements are often viewed as
equivalent to cash.
- -------------------------------------------------------------------------------------------------------------------------------
Restricted Securities: Privately placed We may invest in privately placed securities that are eligible for
securities whose resale is restricted under resale only among certain institutional buyers without
securities law. registration. These are commonly known as Rule 144A
Securities. Restricted securities that are determined to be
illiquid may not exceed the Series' 10% limit on illiquid
securities, which is described below.
- -------------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do not We may invest up to 10% of net assets in illiquid securities,
have a ready market, and cannot be easily including repurchase agreements with maturities of over seven days.
sold, if at all, at a reasonable price.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Aggressive Growth Series may also invest in other securities including preferred
stocks, convertible securities, warrants, rights, and debt securities of
government or corporate issuers. Aggressive Growth Series may invest a portion
of its net assets in foreign securities; however, the manager has no present
intention of doing so. Please see the Statement of Additional Information for
additional descriptions and risk information on these securities as well as
those listed in the table above. You can find additional information about the
investments in the Series' portfolio in the annual or semi-annual shareholder
report.
Lending securities
Aggressive Growth Series may lend up to 25% of its assets to qualified dealers
and investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Aggressive Growth Series may buy or sell securities on a when-issued or delayed
delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
<PAGE>
Borrowing from Banks
Aggressive Growth Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. It will not borrow money in
excess of one-third of the value of its net assets.
Portfolio turnover
We anticipate that Aggressive Growth Series' annual portfolio turnover may be
greater than 100%. A turnover rate of 100% would occur if a Series sold and
replaced securities valued at 100% of its net assets within one year. High
turnover can result in increased transaction costs and the liability for the
Series.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Series you should
carefully evaluate the risks. Because of the nature of the Aggressive Growth
Series, you should consider your investment to be a long-term investment that
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in Aggressive Growth
Series. Please see the Statement of Additional Information for further
discussion of these risks and the other risks not discussed here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Aggressive Growth Series
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a We maintain a long-term investment approach and focus on stocks we believe
majority of the securities in a certain can appreciate over an extended time frame regardless of interim market
market -- like the stock or bond market fluctuations. We do not try to predict overall stock market movements and
- -- will decline in value because of though we may hold securities for any amount of time, we typically do not trade
factors such as economic conditions, for short-term purposes.
future expectations or investor
confidence. We may hold a substantial part of Aggressive Growth Series' assets in cash or
cash equivalents as a temporary, defensive strategy.
- -----------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk We limit the amount of Aggressive Growth Series' assets invested in any one
that the value of securities in a industry and in any individual security. We also follow a rigorous selection
particular industry or the value of an process before choosing securities and continuously monitor them while they
individual stock or bond will decline remain in the portfolio.
because of changing expectations for
the performance of that industry or for
the individual company issuing the
stock
- -----------------------------------------------------------------------------------------------------------------------------------
Company size risk is the risk that Aggressive Growth Series seeks out opportunities among companies of all
prices of small and medium-size sizes. Because its portfolio does not concentrate specifically on small or
companies may be more volatile than medium size companies, this risk may be balanced by our holdings of large
larger companies because of limited companies.
financial resources or dependence on
narrow product lines.
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that We analyze each company's financial situation and its cash flow to determine
securities will decrease in value if the company's ability to finance future expansion and operations. The
interest rates rise. The risk is generally potential affect that rising interest rates might have on a stock is taken into
associated with bonds; however, consideration before the stock is purchased.
because small and medium-size
companies often borrow money to
finance their operations, they may be
adversely affected by rising interest
rates.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of Aggressive Growth Series' portfolio
securities may be adversely affected in foreign securities. When we do purchase foreign securities, they are often
by political instability, changes in denominated in U.S. dollars.
currency exchange rates, foreign
economic conditions or inadequate
regulatory and accounting standards.
- -----------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or
can only be sold at a price significantly
lower than their broadly recognized
value.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Capital Reserves Series
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we think are the best investments for a particular Series.
Following are descriptions of how the portfolio managers pursue the Series'
investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Capital Reserves Series
Capital Reserves Series is a type of current income fund that invests in high
quality fixed income securities. The Series will invest in a variety of high
quality fixed income securities which provide high income potential.
We will strive to reduce the effects of interest rate volatility on principal by
maintaining an intermediate average maturity for the Series. The average
weighted maturity of the Series' portfolio will normally range from five to
seven years. It will not exceed ten years. We will decide where to position the
portfolio within this permissible maturity range based on our perception of the
direction of interest rates and the risks in the fixed-income markets. If, in
our judgment, interest rates are relatively high and borrowing requirements in
the economy are weakening, we will generally extend the average weighted
maturity of the Series. Conversely, if we believe interest rates are relatively
low and borrowing requirements appear to be strengthening, we may shorten the
average weighted maturity. We have the ability to purchase individual securities
with a remaining maturity of up to 15 years.
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Capital Reserves Series
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Direct U.S. Treasury Obligations include Treasury We may invest without limit in U.S. Treasury securities, though they
bills, notes and bonds of varying maturities. U.S. are typically not our largest holding because they generally do not
Treasury securities are backed by the "full faith offer as high a level of current income as other fixed income
and credit" of the United States. securities.
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities There is no limit on government-related mortgage-backed securities
that represent pools of mortgages, with investors or on fully collateralized privately issued mortgage-backed
receiving principal and interest payments as the securities.
underlying mortgage loans are paid back. Many are
issued and guaranteed against default by the U.S. We may invest up to 20% of net assets in mortgage-backed securities issued
government or its agencies or instrumentalities, by private companies whether or not the securities are 100%
such as the Federal Home Loan Mortgage Corporation, collateralized. However, these securities must be rated at the time of
Fannie Mae and the Government National Mortgage purchase in one of the four highest categories by nationally recognized
Association. Others are issued by private financial statistical rating organization such as S&P or Moody's. They must also
institutions, with some fully collateralized by represent interests in whole-loan mortgages, multi-family mortgages,
certificates issued or guaranteed by the U.S. commercial mortgages and other mortgage collateral supported by a first
government or its agencies or instrumentalities. mortgage lien on real estate. The privately issued securities we invest
in are either CMOs or REMICs (see below).
- ---------------------------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations (CMOs): See mortgage-backed securities above.
Privately issued mortgage-backed bonds whose
underlying value is the mortgages that are grouped
into different pools according to their maturity.
- ---------------------------------------------------------------------------------------------------------------------------------
Real estate mortgage investment conduits (REMICs): See mortgage-backed securities above.
Privately issued mortgage-backed bonds whose
underlying value is a fixed pool of mortgages
secured by an interest in real property. Like CMOs,
REMICs offer different pools.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage the Series (continued)
Securities we typically invest in (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Capital Reserves Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Asset-backed securities: Bonds or notes backed by We invest only in asset-backed securities rated in one of the four
accounts receivables including home equity, highest categories by an NRSRO.
automobile or credit loans.
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate bonds: Debt obligations issued by a We focus bonds with investment grade ratings, that is bonds rated BBB or
corporation. better by S&P or Baa or better by Moody's. We may invest in bonds that are
unrated, if we believe the quality of the securities is comparable to the
ratings above.
- ----------------------------------------------------------------------------------------------------------------------------------
Certificates of deposit and obligations of both U.S. We may invest in certificates of deposit from banks that have assets of
and foreign banks: Debt instrument issued by a bank, at least one billion dollars
that pay interest
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate Commercial Paper short-term debt We may invest in commercial paper that is rated P-1 or P-2 by Moody's
obligations with maturities ranging from 2 to 270 and/or A-1 or A-2 by S&P.
days, issued by companies.
- ----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment
such as the Series, and seller of securities in which for the Series' cash position. In order to enter into these repurchase
the seller agrees to buy the securities back within a agreements, the Series must have collateral of at least 102% of the
specified time at the same price the buyer paid for repurchase price.
them, plus an amount equal to an agreed upon interest
rate. Repurchase agreements are often viewed as
equivalent to cash.
- ----------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed We may invest up to 10% of net assets in illiquid securities, which for
securities whose resale is restricted under this Series includes restricted securities such as privately placed
securities law. securities that are eligible for resale only among certain institutional
buyers without registration. These are commonly known as "Rule 144A
Securities."
- ----------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 10% of total assets in illiquid securities.
ready market, and cannot be easily sold, if at all,
at approximately the price that the Series has valued
them.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please see the Statement of Additional Information for additional descriptions
on these securities as well as those listed in the table above.
Lending securities
Capital Reserves Series may lend up to 25% of its assets to qualified brokers,
dealers and investors for their use in security transactions.
<PAGE>
Purchasing securities on a when-issued or delayed delivery basis
Capital Reserves Series may buy or sell securities on a when-issued or delayed
delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that Capital Reserves Series' annual portfolio turnover will be
greater than 100%. A turnover rate of 100% would occur if a Series sold and
replaced securities valued at 100% of its net assets within one year. High
turnover can result in increased transaction costs and tax liability for the
Series.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in Capital Reserves Series typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Capital Reserves Series
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on fixed
the securities in a certain market--like the income securities that we believe can continue to make interest
stock or bond market--will decline in value and principal payments over an extended time frame regardless of
because of factors such as economic interim market fluctuations. We do not try to predict overall bond
conditions, future expectations or investor market movements and do not trade for short-term purposes.
confidence.
- ---------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the We diversify the Series' portfolio. We also follow a rigorous
value of securities in a particular industry or the selection process before choosing securities for the portfolio.
value of an individual stock or bond will decline
because of changing expectations for the
performance of that industry or for the
individual company issuing the stock or bond.
- ---------------------------------------------------------------------------------------------------------------------------------
Interest risk is the risk that securities, We do not try to increase return by predicting and aggressively
particularly bond with longer maturities, will capitalizing or interest rate moves.
decrease in value if interest rates rise.
- ---------------------------------------------------------------------------------------------------------------------------------
Credit Risk The possibility that a bond's We may hold securities rated in the fourth category of investment
issuer (or an entity that insures the bond) will grade; however, we carefully evaluate their creditworthiness
be unable to make timely payments of interest before purchasing the security.
and principal.
If the rating of a corporate debt security held by the Series falls
Debt securities rated in the fourth category of below the fourth rating grade or if we determine that an unrated
investment grade (e.g., BBB by S&P or Baa by security is no longer of comparable quality, we will dispose of the
Moody's) may have speculative characteristics. security as soon as practical, unless we think that would be
Changes in economic conditions or other detrimental in light of market conditions.
circumstances are more likely to affect issuers
ability to make principal and interest payments.
- ---------------------------------------------------------------------------------------------------------------------------------
Prepayment Risk is the risk that homeowners We take into consideration the likelihood of prepayment when we
will prepay mortgages during periods of low select mortgages. We may look for mortgage securities that have
interest rates, forcing an investor to characteristics that make them less likely to be prepaid, such as
reinvest their money at interest rates that low outstanding loan balance or below-market interest rates.
might be lower than those on the prepaid
mortgage.
- ---------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, if at all, at
approximately the price that a Series values
them.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Cash Reserve Series
The securities we typically invest in
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Cash Reserve Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Direct U.S. Treasury Obligations include Treasury We may invest without limit in U.S. Treasury securities. We would
bills, notes and bonds of varying maturities. U.S. typically invest in Treasury bills or longer term Treasury securities
Treasury securities are backed by the "full faith whose remaining effective maturity is less than 13 months.
and credit" of the United States.
- ----------------------------------------------------------------------------------------------------------------------------------
Certificates of deposit and obligations of both U.S. We may invest in certificates of deposit from banks that have assets of
and foreign banks: Debt instruments issued by a bank at least one billion dollars.
that pay interest.
Investments in foreign banks and overseas branches of U.S. banks may be
subject to less stringent regulations and different risks than U.S.
domestic banks.
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate Commercial Paper short-term debt We may invest in commercial paper that is rated P-1 or P-2 by Moody's
obligations with maturities ranging from 2 to and/or A-1 or A-2 by S&P. The Series will not invest more than 5% of its
270 days, issued by companies. total assets in securities rated in the second highest category by a
ratings organization.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please see the Statement of Additional Information for additional descriptions
on these securities as well as those listed in the table above.
Purchasing securities on a when-issued or delayed delivery basis
Cash Reserve Series may buy or sell securities on a when-issued or delayed
delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Borrowing from Banks
Cash Reserve Series may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Series will not borrow money in
excess of one-third of the value of its net assets.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. The following are the chief risks you assume when
investing in the Cash Reserve Series. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Cash Reserve Series
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities, Because Cash Reserve Series invests in short-term securities, the
particularly bonds with longer maturities, will value of its investments is generally not affected by interest rate risk.
decrease in value if interest rates rise. However, a decline in interest rates would adversely affect the level
of income provided by the Series.
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Risk The possibility that a bond's Cash Reserve Series holds only high quality short-term securities.
issuer (or an entity that insures the bond) will Therefore it is generally not subject to significant credit risk.
be unable to make timely payments of interest
and principal. We limit our investments to those which the Board of Directors has
determined to involve minimal credit risks and to be of high quality
and which will otherwise meet the maturity, quality and diversification
conditions with which taxable money market funds must comply.
If there were a national credit crisis or an issuer where to become
insolvent, principal values could be adversely affected.
- -----------------------------------------------------------------------------------------------------------------------------------
Inflation Risk is the risk that the return from Cash Reserve Series is designed for short-term investment goals
your investments will be less than the increase and therefore may not outpace inflation over longer time periods.
in the cost of living due to inflation, thus For this reason, Cash Reserve is not recommended as a primary
preventing you from reaching your financial investment for people with long-term goals.
goals.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Convertible Securities Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Convertible Securities Series. Following are descriptions of
how the portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Convertible Securities Series
Convertible Securities Series is a type of total return fund that invests in
convertible securities to pursue a two-pronged investment objective: capital
appreciation and current income.
We invest primarily in convertible securities. Our strategy is based on the
belief that characteristics of these securities make them particularly
appropriate investments in seeking both capital appreciation and current income.
These characteristics include:
o the potential for capital appreciation as the value of the underlying common
stock increases,
o the relatively high yield received from interest or dividend payments on
convertible securities as compared to common stock dividends; and,
o reduced price decline risk relative to the underlying common stock due to the
income features of a convertible security.
A convertible security's price depends on both its "investment value" (its value
with the conversion privilege), and its "conversion value" (its market value if
it were exchanged for the underlying security according to its conversion
privilege).
When a convertible security's investment value is greater than its conversion
value, its price will primarily reflect its investment value. In this scenario,
price will probably be most affected by interest rate changes, increasing when
interest rates fall and decreasing when interest rates rise, similar to a
fixed-income security. Additionally, the credit standing of the issuer and other
factors may also have an effect on the convertible security's value.
Conversely, when the conversion value approaches or exceeds the investment
value, the price of the convertible security will rise above its investment
value. The higher the convertible security's price relative to its investment
value, the more direct the relationship between the changes in its price and
changes in the price of the underlying equity security.
A convertible security's price will typically provide a premium over the
conversion value. This represents the additional price investors are willing to
pay for a security that offers income, ranks ahead of common stock in a
company's capital structure and also has the possibility of capital appreciation
due to the conversion privilege.
Because a convertible security has fixed interest or dividend payments, when the
underlying stock declines, the convertible security's price is increasingly
determined by its yield. For this reason, the convertible security may not
decline as much as the underlying common stock. The extent of the price decline
will also depend on the amount of the premium over its conversion value.
We may also invest in preferred and common stock, warrants, U.S.
government securities, non-convertible fixed income securities and money market
securities. Securities or assets obtained upon the conversion of convertible
securities may be retained, subject to the Series' investment objective. There
are no size limits on corporations in whose securities the Series may invest.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well. Fixed-income securities offer the potential for greater
income payments than stocks, and also may provide capital appreciation.
Convertible securities often blend the potential benefits of stocks and fixed
income securities.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Convertible Securities Series
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Convertible securities: Usually preferred stocks or Under normal conditions, the Series intends to invest at least
corporate bonds that can be exchanged for a set 65% of its total assets in convertible securities,
number of shares of common stock at a which may includeprivately placed convertible securities.
predetermined price. These securities offer higher
appreciation potential than nonconvertible bonds and We will invest in convertible securities without regard to
greater income potential than nonconvertible preferred rating categories. To the extent that securities we hold are not
stocks. investment grade or are not rated, there may be a greater risk
as to the timely payment of interest and principal.
Convertible securities rank ahead of common stock
in a corporation's capital structure and therefore If a convertible security held by the Series is called for
entail less risk than the corporation's common stock. redemption, the Series will be required to redeem the
However, If a convertible securities typically rank security, convert it into the underlying common
behind non-convertible securities of the same issuer. stock or sell it to a third party.
Convertible securities may be rated below investment
grade, that is, not rated within the four highest
categories by S&P and Moody's. Debt securities rated
below investment grade are often referred to as
"high-yield bonds" or "junk bonds," although these terms
are not generally used in reference to convertible
debt securities.
A convertible security may be subject to redemption
at the option of the issuer at a price established
in the instrument under which the convertible security
was issued.
- -------------------------------------------------------------------------------------------------------------------------------
Zero Coupon Bonds and Pay in Kind Bonds: Zero coupon Convertible Securities Series may invest in zero coupon bonds and
securities are debt obligations which do not entitle the payment in kind bonds, though this is not expected to be a
holder to any periodic payments of interest prior to significant component of its strategy. The market prices of these
maturity or a specified date when the securities begin bonds are generally more volatile than the market prices of
paying current interest. Therefore, they are issued and securities that pay interest periodically and are likely to react
traded at a discount from their face amounts or par value. changes in interest rates to a greater degree than interest-paying
Payment-in-kind bonds pay interest or dividends in the form bonds having similar maturities and credit quality. They may have
of additional bonds or preferred stock. certain tax consequences which, under certain conditions, could be
adverse to the Series.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Convertible Securities Series
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Private Placements: For various reasons, an issuer What portion of the Series' portfolio is invested in
may prefer or be required as a practical matter to convertible securities purchased in private placements depends
obtain private financing. Adverse conditions in the upon the relative attractiveness of those securities compared
public securities markets may preclude a public to convertible securities, which are publicly offered.
offering of an issuer's securities. An issuer is Ordinarily, the Series expects that 50% of its portfolio may be
often willing to provide more attractive features in invested in convertible securities purchased in private
securities issued privately, because it has avoided placements, but the percentage may be substantially greater or
the expense and delay involved in a public offering. less than 50%, depending upon prevailing market conditions.
Private placements of debt securities have
frequently resulted in higher yields and restrictive We anticipate that substantially all of the private placements
covenants that provide greater protection for the we purchases will be subject to Rule 144A under the 1933 Act
purchaser, such as longer call or refunding and therefore, may be traded freely among qualified
protection than would typically be available with institutional buyers. Subject to procedures approved by the
publicly offered securities of the same type. Fund's Board of Directors, we may treat Rule 144A securities
Securities acquired through private placements may as liquid and therefore not subject to the 15% limitation on
also have special features not usually illiquid securities described below. The private placements
characteristic of similar securities offered to the we purchase will typically include registration rights for the
public, such as contingent interest or warrants for convertible security and the underlying common stock. This
the purchase of the issuer's stock. requires the underlying common stock to be registered with the SEC,
generally filed within one year of the private placement, consequently
allowing us to trade the underlying common stock upon conversion.
Such trading may be subject to certain contractual or legal
restrictions.
- -------------------------------------------------------------------------------------------------------------------------------
Equity Linked Securities: Convertible securities We may invest in equity linked securities when we believe they offer
that offer enhanced yield features, such as PRIDES suitable income and capital appreciation potential in keeping with the
(Preferred Redeemable Increased Dividend Equity Series' investment objective.
Securities) and DECS (Dividend Enhanced Convertible
Securities). These securities typically have the We may also invest in other types of convertible securities similar to
following features: (a) the issuer's common stock those described here.
will be received in the event the convertible
preferred stock is converted; (b) they do not have a An investment in an equity-linked security may involve additional
capital appreciation limit; (c) they seek to provide risks. Unlike conventional convertible securities, equity-linked
the investor with high current income with some securities do not usually have a fixed maturity (par) value.
prospect of future capital appreciation; (d) they Rather, equity-linked securities generally provide only for a
are typically issued with three to four year mandatory conversion into cash or common stock. As a result,
maturities; (e) they typically have some built-in the Series risks loss of principal if the cash received or
call protection for the first two to three years; the price of the underlying common stock at the time of conversion
(f) investors have the right to convert them into is less than the price paid for the equity-linked security.
shares of common stock at a preset conversion Equity-linked securities may be more or less liquid than
formula or hold them until maturity; and (g) upon conventional convertible securities or non-convertible debt
maturity they will automatically convert into either securities. We primarily intend to acquire liquid
cash or a specified number of shares of common equity-linked securities since any purchases of illiquid
stock. equity-linked securities would be subject to the Series'
15% limit on illiquid securities described below.
Preferred Equity Redemption Cumulative Stock
("PERCS") is a preferred stock convertible into
common stock features a mandatory conversion date
(typically three years) as well as a capital
appreciation limit usually expressed in terms of a
stated price.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Convertible Securities Series
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment
such as the Series, and a seller of securities in for a Series's cash position. In order to enter into these
which the seller agrees to buy the securities back repurchase agreements, the Series must have collateral of
within a specified time at the same price the buyer at least 102% of the repurchase price.
paid for them, plus an amount equal to an agreed
upon interest rate. Repurchase agreements are often
viewed as equivalent to cash.
- -------------------------------------------------------------------------------------------------------------------------------
Foreign Securities, Eurodollar Convertible The Series may invest in securities of foreign issuers,
Securities and American Depositary Receipts including issuers located in emerging markets. Such foreign
Securities of foreign entities issued directly or, securities may be traded on a foreign exchange, or they may be
in the case of American Depositary Receipts, through in the form of depositary receipts or notes, such as American
a U.S. bank. ADRs are issued by a U.S. bank and Depositary Receipts (ADRs), American Depositary Notes (ADNs),
represent the bank's holding of a stated number of European Depositary Receipts (EDRs), European Depositary
shares of a foreign corporation. An ADR entitles the Notes (EDNs), Global Depositary Receipts (GDRs) or Global
holder to all dividends and capital gains earned by Depositary Notes (GDNs). The Series may also invest in
the underlying foreign shares. ADRs are bought and Eurodollar securities
sold the same as U.S. securities. Eurodollar
convertible securities are fixed income securities
of a U.S. issuer which are convertible into equity
securities of that issuer. These Eurodollar
securities are payable in U.S. dollars outside of
the United States.
- -------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 15% of total assets in illiquid securities.
market, and cannot be easily sold, if at all, at
approximately the price that the Series has valued them.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please see the Statement of Additional Information for additional descriptions
on these securities as well as those listed in the table above.
Lending securities
Convertible Securities Series may lend up to 25% of its assets to qualified
brokers, dealers and investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Convertible Securities Series may buy or sell securities on a when-issued or
delayed delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that Convertible Securities Series' annual portfolio turnover will
be less than 100%. A turnover rate of 100% would occur if a Series sold and
replaced securities valued at 100% of its net assets within one year.
Borrowing from Banks
Convertible Securities Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. A Series will not borrow
money in excess of one-third of the value of its net assets.
Short Sales Against the Box. The Series may engage in short sales "against the
box." While a short sale is made by selling a security the Series does not own,
a short sale is "against the box" if the Series contemporaneously owns or has
the right to obtain securities identical to those sold short, at no added cost.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in Convertible Securities Series
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in Delaware. Please see
the Statement of Additional Information for further discussion of these risks
and the other risks not discussed here.
<TABLE>
<CAPTION>
- --------------------------------------------------------- ------------------------------------------------------------
Risks How we strive to manage them
Convertible Securities Series
- --------------------------------------------------------- ------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on
securities in a certain market--like the stock or bond securities we believe can continue to pay income and
market--will decline in value because of factors such as appreciate over an extended time frame regardless of interim
economic conditions, future expectations or investor market fluctuations. We do not try to predict overall stock
confidence. period of time, market movements and though we may hold securities for any
we do not typically trade for short-term purposes.
We may hold a substantial part of Convertible Securities
Series' assets in cash or cash equivalents as a temporary
defensive strategy.
- --------------------------------------------------------- ------------------------------------------------------------
Industry and security risk is the risk that the value of We limit the amount of Convertible Securities Series'
securities in a particular industry or the value of an assets invested in any one industry and in any individual
individual stock or bond will decline because of changing security. We also follow a rigorous selection process
expectations for the performance of that industry or for before choosing securities for the portfolio.
the individual company issuing the security.
- --------------------------------------------------------- ------------------------------------------------------------
Credit Risk
The possibility that a security's issuer (or an entity This risk may be reduced because of the ability to convert
that insures the security) will be unable to make these securities into Common Stock.
timely payments of interest, dividends and principal.
Investing in securities rated below investment grade
entails greater risk of principal loss than associated
with investment grade bonds. It is likely that
protracted periods of economic uncertainty would cause
increased volatility in the market prices of
non-investment grade securities and corresponding
volatility in the Series' net asset value.
- --------------------------------------------------------- ------------------------------------------------------------
Interest rate risk is the risk that securities, We will monitor interest rate trends and their
particularly bonds with longer maturities, will potential impact on the series. Though convertible
decrease in value if interest rates rise. securities may be sensitive to interest rate movements,
an individual security's link to the underlying common
stock may reduce that sensitivity.
- --------------------------------------------------------- ------------------------------------------------------------
Foreign risk is the risk that foreign securities may be Most of the foreign securities that we invest in are
adversely affected by political instability, changes in denominated in U.S. dollars.
currency exchange rates, foreign economic conditions or
inadequate regulatory and accounting standards.
- --------------------------------------------------------- ------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, if at all, at approximately the
price that a Series values them.
- --------------------------------------------------------- ------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Delaware Balanced Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for a particular Series. Following are descriptions of how the
portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Delaware Balanced Series
Delaware Balanced Series is a type of total return fund that invests in both
stocks and bonds to pursue a three-pronged investment objective: capital
appreciation, current income and preservation of principal. We blend several
investment strategies to manage this Series.
We seek capital appreciation by investing primarily in the common stocks of
established companies that we believe have long-term capital growth potential.
We focus on dividend-paying, undervalued stocks.
To seek current income and help preserve capital, we generally invest at least
25% of the Series' net assets in various types of fixed-income securities,
including U.S. government and government agency securities and corporate bonds.
We generally invest in bonds that have bond ratings in the top four grades
according to a nationally recognized statistical rating organization (NRSRO) at
the time we buy them. We buy unrated bonds only if we determine them to be
equivalent to one of the top four grades. Each bond in the portfolio will have a
maturity between five and 30 years, and the average maturity of the portfolio
will typically be between five and ten years.
We conduct ongoing analysis of the different markets to determine the
appropriate mix of stocks and bonds for the current economic and investment
environment.
In selecting stocks for Delaware Balanced Series, we consider factors such as
how much the stock's dividend has grown in the past, the frequency of the
stock's prior dividend increases, the company's potential for strong positive
cash flow, and the price/earnings ratio of the stock compared to other stocks in
the market. We avoid stocks that we think are overvalued. We seek stocks that we
believe have the potential for above-average dividend growth.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well. Fixed-income securities offer the potential for greater
income payments than stocks, and also may provide capital appreciation.
<TABLE>
<CAPTION>
- ----------------------------------------------------- ---------------------------------------------------------------------
Securities How we use them
Delaware Balanced Series
- ----------------------------------------------------- ---------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, we invest up to 75% of net assets in dividend-paying
ownership in a corporation. Stockholders stocks.
participate in the corporation's profits and
losses, proportionate to the number of shares they
own.
- ----------------------------------------------------- ---------------------------------------------------------------------
Convertible securities: Usually preferred stocks or The Series may invest in convertible securities; however, we will
corporate bonds that can be exchanged for a set not invest more than 5% of net assets in convertible securities
number of shares of common stock at a predetermined that are rated below investment grade by an NRSRO or in
price. These securities offer higher appreciation securities that are unrated but deemed equivalent to
potential than nonconvertible bonds and greater non-investment grade.
income potential than nonconvertible preferred
stocks.
- ----------------------------------------------------- ---------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities There is no limit on government-related mortgage-backed securities or
that represent pools of mortgages, with investors fully collateralized privately issued mortgage-backed securities.
on receiving principal and interest payments as the
underlying mortgage loans are paid back. Many are We may invest up to 20% of net assets in mortgage-backed securities
issued and guaranteed against default by the U.S. issued by private companies whether or not the securities are 100%
government or its agencies or instrumentalities, collateralized. However, these securities must be rated at the time of
such as the Federal Home Loan Mortgage Corporation, purchase in one of the four highest categories by an NRSRO. The
Fannie Mae and the Government National Mortgage privately issued securities we invest in are either CMOs or REMICs
Association. Others are issued by private financial (see below).
institutions, with some fully collateralized by
certificates issued or guaranteed by the government
or its agencies or instrumentalities.
- ----------------------------------------------------- -----------------------------------------------------------------------
Collateralized mortgage obligations (CMOs): See mortgage-backed securities above.
Privately issued mortgage-backed bonds whose
underlying value is the mortgages that are grouped
into different pools according to their maturity.
- ----------------------------------------------------- -----------------------------------------------------------------------
Real estate mortgage investment conduits (REMICs): See mortgage-backed securities above.
Privately issued mortgage-backed bonds whose
underlying value is a fixed pool of mortgages
secured by an interest in real property. Like CMOs,
REMICs offer different pools.
- ----------------------------------------------------- -----------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Securities we typically invest in (continued)
- ----------------------------------------------------- -----------------------------------------------------------------------
Securities How we use them
Delaware Balanced Series
- ----------------------------------------------------- -----------------------------------------------------------------------
<S> <C>
Asset-backed securities: Bonds or notes backed by We invest only in asset-backed securities rated in one of the four
accounts receivables including home equity, highest categories by an NRSRO.
automobile or credit loans.
- ----------------------------------------------------- -----------------------------------------------------------------------
Corporate bonds: Debt obligations issued by a We focus on bonds rated in one of the four highest categories by an
corporation. NRSRO (or deemed equivalent), with maturities between five and 30
years.
- ----------------------------------------------------- -----------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for
buyer, such as the Series, and a seller of the Series' cash position. In order to enter into these repurchase
securities in which the seller agrees to buy the agreements, the Series must have collateral of at least 102% of the
securities back within a specified time at the same repurchase price. (Neither Series may have more than 10% of its total
price the buyer paid for them, plus an amount equal assets agreements with maturities of over seven days.)
to an agreed in repurchase upon interest rate.
Repurchase agreements are often viewed as
equivalent to cash.
- ----------------------------------------------------- -----------------------------------------------------------------------
American Depositary Receipts (ADRs): Certificates We may invest without limitation in ADRs.
issued by a U.S. bank that represent the bank's
holding of a stated number of shares of a foreign
corporation that the bank holds in its vault. An
ADR entitles the holder to all dividends and
capital gains earned by the underlying foreign
shares. An ADR is bought and sold the same as U.S.
securities.
- ----------------------------------------------------- -----------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest without limitation in privately placed securities that
whose resale is restricted under securities law. are eligible for resale only among certain institutional buyers
without registration. These are commonly known as "Rule 144A
Securities." Other restricted securities must be limited to 5% of
total Series assets.
- ----------------------------------------------------- -----------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 10% of total assets in illiquid securities.
ready market, and cannot be easily sold, if at all,
at approximately the price that the Series has
valued them.
- ----------------------------------------------------- -----------------------------------------------------------------------
</TABLE>
The Series may also invest in other securities including real estate investment
trusts, rights and warrants to purchase common stock, futures contracts,
options, U.S. Treasury securities, Yankee and Euro bonds. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
Lending securities
Delaware Balanced Series may lend up to 25% of its assets to qualified brokers,
dealers and investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Delaware Balanced Series may buy or sell securities on a when-issued or delayed
delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that Delaware Balanced Series' annual portfolio turnover will be
less than 100%. A turnover rate of 100% would occur if the Series sold and
replaced securities valued at 100% of its net assets within one year.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in Delaware Balanced Series
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in Delaware. Please see
the Statement of Additional Information for further discussion of these risks
and the other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------------------------------------------------------------------
Risks How we strive to manage them
Delaware Balanced Series
- ------------------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on stocks we
the securities in a certain market--like the stock believe can appreciate over an extended time frame regardless of
or bond market--will decline in value because of interim market fluctuations. We do not try to predict overall stock
factors such as economic conditions, future market movements and do not trade for short-term purposes.
expectations or investor confidence.
We may hold a substantial part of Delaware Balanced Series' assets in
cash or cash equivalents as a temporary defensive strategy.
We diversify the Series' assets among two major categories of
investments--stocks and bonds--which tend to increase and decline in
value in different economic or investment conditions.
- ------------------------------------------------------- ------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of Delaware Balanced Series' assets invested in
value of securities in a particular industry or the any one industry and in any individual security. We also follow a
value of an individual stock or bond will decline rigorous selection process before choosing securities for the
because of changing expectations for the portfolio.
performance of that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------- ------------------------------------------------------------------------
Interest rate risk is the risk that securities, Within Delaware Balanced Series' fixed-income component, we do
particularly bonds with longer maturities, will not try to increase return by predicting and aggressively
decrease in value if interest rates rise. capitalizing on interest rate moves. Instead, we aim to keep the
interest rate risk similar to the Lehman Brothers Aggregate Bond
Index.
- ------------------------------------------------------- ------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We typically invest only a small portion of the Series' portfolio in
may be adversely affected by political instability, foreign securities. When we do purchase foreign securities, they are
changes in currency exchange rates, foreign often denominated in U.S. We also tend to avoid markets where we
economic dollars. conditions or inadequate believe accounting principles or the regulatory structure are
regulatory and accounting standards. underdeveloped.
- ------------------------------------------------------- ------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, if at all, at approximately
the price that the Series values them.
- ------------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Del Cap Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for DelCap Series. Following is a description of how the portfolio
manager pursues the Series' investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify mid-size companies that we believe will grow faster than
the average of stocks in the S&P 500 Index. We look for companies with
characteristics that will support such earnings growth. Factors in our decision
include:
o the financial strength of the company,
o management expertise,
o the growth potential of the company within its industry; and,
o the growth potential of the industry itself.
Our focus will be on companies that have established themselves within their
industry while maintaining growth potential.
DelCap Series invests primarily in medium-sized companies. Although these
companies do not involve as great a risk as small companies, they are still
somewhat riskier than large companies. Medium-sized companies may still exhibit
some characteristics typically associated with small companies such as limited
product lines and limited access to financial resources. In order to manage this
risk, we maintain a well-diversified portfolio, typically holding xx to xx
different stocks, representing a wide array of industries.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------------------------------------------------------------------
Securities How we use them
DelCap Series
- ------------------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, we invest 90% to 100% of net assets in common stock of
ownership in a corporation. Stockholders medium- size, growth-oriented companies
participate in the corporation's profits and
losses, proportionate to the number of shares they
own.
- ------------------------------------------------------- ------------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for
buyer, such as the Series, and a seller of a Series' cash position. In order to enter into these repurchase
securities in which the seller agrees to buy the agreements, the Series must have collateral of at least 102% of the
securities back within a specified time at the same repurchase price.
price the buyer paid for them, plus an amount equal
to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.
- ------------------------------------------------------- ------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest up to 10% of net assets in illiquid securities, which in
whose resale is restricted under securities law. the case of this Series includes restricted securities such as
privately placed securities eligible for resale only among certain
institutional buyers without registration. These are commonly known as
Rule 144A Securities.
- ------------------------------------------------------- ------------------------------------------------------------------------
Illiquid Securities: Securities that do not have a We may invest up to 10% of net assets in illiquid securities, including
ready market, and cannot be easily sold, if at all, repurchase agreements with maturities of over seven days.
at a reasonable price.
- ------------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
DelCap Series may also invest in other securities including convertible
securities, warrants, preferred stocks, and bonds. DelCap Series may invest in
foreign securities; however, the manager has no present intention of doing so.
Please see the Statement of Additional Information for additional descriptions
and risk information on these securities as well as those listed in the table
above. You can find additional information about the investments in the Series'
portfolio in the annual or semi-annual shareholder report.
Lending securities
DelCap Series may lend up to 25% of its assets to qualified dealers and
investors for their use in security transactions.
Borrowing from Banks
DelCap Series may borrow money as a temporary measure for extraordinary purposes
or to facilitate redemptions. A Series will not borrow money in excess of
one-third of the value of its net assets.
Purchasing securities on a when-issued or delayed delivery basis
DelCap Series may buy or sell securities on a when-issued or delayed delivery
basis; that is, paying for securities before delivery or taking delivery at a
later date.
Portfolio turnover
We anticipate that DelCap Series' annual portfolio turnover may be greater than
100%. A turnover rate of 100% would occur if a Series sold and replaced
securities valued at 100% of its net assets within one year. High turnover can
result in increased transaction costs and tax liability for the Series.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Series you should
carefully evaluate the risks. Because of the nature of the DelCap Series, you
should consider your investment to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in DelCap Series. Please see the Statement
of Additional Information for further discussion of these risks and the other
risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------------------------------------------------------------------
Risks How we strive to manage them
DelCap Series
- ------------------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on stocks we
the securities in a certain market -- like the believe can appreciate over an extended time frame regardless of
stock or bond market -- will decline in value interim market fluctuations. We do not try to predict overall stock
because of factors such as economic conditions, market movements and though we may hold securities for any amount of
future expectations or time, we typically do not trade for short-term purposes.
We may hold a substantial part of DelCap Series' assets in cash or
cash equivalents investor confidence. as a temporary, defensive
strategy.
- ------------------------------------------------------- ------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of DelCap Series' assets invested in any one
value of securities in a particular industry or the industry and in any individual security. We also follow a rigorous
value of an individual stock or bond will decline selection process before choosing securities and continuously monitor
because of changing expectations for the them while they remain in the portfolio.
performance of that industry or for the individual
company issuing the stock.
- ------------------------------------------------------- ------------------------------------------------------------------------
Company size risk is the risk that prices of small DelCap Series invests primarily in medium-size companies which tend to
or medium size companies may be more volatile than have somewhat broader product lines and financial resources than small
larger companies because of limited financial companies, but are still riskier than large companies. DelCap
resources or dependence on narrow product lines. maintains a well-diversified portfolio, selects stocks carefully and
monitors them continuously in an effort to manage this risk.
- ------------------------------------------------------- ------------------------------------------------------------------------
Interest rate risk is the risk that securities will We analyze each company's financial situation and its cash flow to
decrease in value if interest rates rise. The risk determine the company's ability to finance future expansion and
is generally associated with bonds; however, operations. The potential affect that rising interest rates might have
because small and medium-size companies often on a stock is taken into consideration before the stock is purchased.
borrow money to finance their operations, they may
be adversely affected by rising interest rates.
- ------------------------------------------------------- ------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We typically invest only a small portion of DelCap Series' portfolio
may be adversely affected by political instability, in foreign securities. When we do purchase foreign securities, they
changes in currency exchange rates, foreign are often denominated in U.S. dollars.
economic conditions or inadequate regulatory and
accounting standards.
- ------------------------------------------------------- ------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, or can only be sold at a
price significantly lower than their broadly
recognized value.
- ------------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Delchester Series
Our investment strategies
We evaluate the creditworthiness of individual bond issuers and analyze economic
and market conditions, seeking to identify bonds that we think are the best
investments for the Delchester Series. Following are descriptions of how the
portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Delchester Series
Delchester Series is a type of fixed income fund that invests in high yield
corporate bonds to pursue its investment objective of providing the highest
current income.
We expect to invest the majority of the Series' assets in bonds rated BBB or
lower by S&P, with emphasis on bonds rated Bb and B, the two relatively higher
credit tiers among non-investment grade bonds. High-yield bonds are issued by
corporations that have poor credit quality and may have difficulty repaying
principal and interest. We carefully evaluate an individual company's financial
situation, its management, the prospects for its industry and the technical
factors related to its bond offering. Our goal is to identify those companies
that we believe will be able to repay their debt obligations in spite of poor
ratings.
In addition, we maintain a very diversified portfolio with assets spread among a
variety of different industry sectors and different bond issuers. In this way,
we strive to minimize the impact that any poorly performing individual bond
would have on the overall performance of our portfolio.
Though high-yield bonds involve the risk that the issuing company may be unable
to pay interest or repay principal, they can offer high income potential which
we believe will help the Series achieve its investment objective.
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.
Securities we typically invest in
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------------------------------------------------------------------
Securities How we use them
Delchester Series
- ------------------------------------------------------- ------------------------------------------------------------------------
<S> <C>
High-Yield Corporate Bonds: Debt obligations issued Delchester Series may invest without limit in high-yield corporate
by a corporation and rated lower than investment bonds. Emphasis is typically on those rated BB or B by an NRSRO.
grade by a nationally recognized statistical
ratings organization (NRSRO) such as S&P or Moody's
or, if unrated, that we believe are of comparable
quality. These securities are considered to be of
poor standing and predominately speculative.
- ------------------------------------------------------- ------------------------------------------------------------------------
U.S. Government Securities Direct U.S. obligations The Series may invest without limit in U.S. government securities;
including bills, notes, bonds and other debt however, they will typically be a small percentage of the portfolio
securities issued by the U.S. Treasury or because they generally do not offer as high a level of current income
securities of U.S. government agencies or as high yield corporate bonds.
instrumentalities which are backed by the full
faith and credit of the United States.
- ------------------------------------------------------- ------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer Typically, we use repurchase agreements as a short-term investment for
and seller of securities in which the seller agrees Series' cash position. In order to enter into these repurchase
to buy the a securities back within a specified agreements, the Series must have collateral of at least 102% of the
time at the same price buyer paid for them, plus an the repurchase price.
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as
equivalent to cash.
- ------------------------------------------------------- ------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest up to 10% of net assets in illiquid securities, which
whose resale is restricted under securities law. for this Series includes restricted securities such as privately
placed securities that are eligible for resale only among certain
institutional buyers without registration. These are commonly known as
"Rule 144A Securities."
- ------------------------------------------------------- ------------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 10% of total assets in illiquid securities,
ready market, and cannot be easily sold, if at all, including repurchase agreements with maturities of over seven days.
at approximately the price that the Series has
valued them.
- ------------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
The Series may also invest in other income-producing securities, including
common stocks and preferred stocks, some of which may have convertible features
or attached warrants. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the table
above.
Lending securities
Delchester Series may lend up to 25% of its assets to qualified brokers, dealers
and investors for their use in security transactions.
Borrowing from Banks
Delchester Series may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Series will not borrow money in
excess of one-third of the value of its net assets.
Purchasing securities on a when-issued or delayed delivery basis
Delchester Series may buy or sell securities on a when-issued or delayed
delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that Delchester Series' annual portfolio turnover will be less
than 100%. A turnover rate of 100% would occur if the Series sold and replaced
securities valued at 100% of its net assets within one year.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in Delchester Series typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------------------------------------------------------------------
Risks How we strive to manage them
Delchester Series
- ------------------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on bonds that we
the securities in a certain market--like the stock believe will continue to pay interest regardless of interim market
or bond market--will decline in value because of fluctuations. We do not try to predict overall bond market or interest
factors such as economic conditions, future rate movements and do not trade for short-term purposes.
expectations or investor confidence.
We may hold a substantial part of Delchester Series' assets in cash or
cash equivalents as a temporary defensive strategy.
- ------------------------------------------------------- ------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of Delchester Series' assets invested in any one
value of securities in a particular industry or the industry and in any individual security. We also follow a rigorous
value of an individual stock or bond will decline selection process before choosing securities for the portfolio.
because of changing expectations for the
performance of that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------- ------------------------------------------------------------------------
Interest rate risk is the risk that securities will Delchester Series is subject to interest rate risk. We cannot
decrease in value if interest rates rise. The risk eliminate that risk, but we do strive to manage it by monitoring
is greater for bonds with longer maturities than economic conditions.
for those with shorter maturities.
- ------------------------------------------------------- ------------------------------------------------------------------------
Credit Risk
The possibility that a bond's issuer will be unable Our careful, credit-oriented bond selection and our commitment to hold
to make timely payments of interest and principal. a diversified selection of high-yield bonds are designed to manage
this risk.
Investing in so-called "junk" or "high-yield" bonds
entails the risk of principal loss, which may be
greater than the risk involved in investment grade
bonds. High-yield bonds are sometimes issued by
companies whose earnings at the time of issuance
are less than the projected debt service on the
junk bonds.
- ------------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------------------------------------------------------------------
Risks How we strive to manage them
Delchester Series
- ------------------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Recession Risk Although the market for high-yield It is likely that protracted periods of economic uncertainty
bonds existed through periods of economic downturns, would cause increased volatility in the market prices of
the high-yield market grew rapidly during the long high-yield bonds, an increase in the number of high-yield bond
economic expansion which took place in the United defaults and corresponding volatility in the Series' net asset
States during the 1980s. During that economic value. In the past, uncertainty and volatility in the
expansion, the use of high-yield debt securities to high-yield market have resulted in volatility in the Series'
finance highly leveraged corporate acquisitions and net asset value.
restructurings increased dramatically. As a result,
the high-yield market grew substantially. Although In striving to manage this risk, we allocate assets across a
experts disagree on the impact recessionary periods wide range of industry sectors. We may emphasize industries
have had and will have on the high-yield market, some that have been less susceptible to economic cycles in the
analysts believe a protracted economic downturn would past, particularly if we believe that the economy may be
severely disrupt the market for high-yield bonds, entering into a period of slower growth.
adversely affect the value of outstanding bonds and
adversely affect the ability of high-yield issuers to
repay principal and interest.
- ------------------------------------------------------- ------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We typically invest only a small portion, if any, of the Series'
may be adversely affected by political instability, portfolio in foreign securities.
changes in currency exchange rates, foreign
economic conditions or inadequate regulatory and
accounting standards.
- ------------------------------------------------------- ------------------------------------------------------------------------
Liquidity risk is the possibility that securities A less liquid secondary market may have an adverse effect on the
cannot be readily sold, if at all, at approximately Series' ability to dispose of particular issues, when necessary, to
the price that a Series values them. meet the Series' liquidity needs or in response to a specific economic
event, such as the deterioration in the creditworthiness of the
The secondary market for high-yield securities is issuer. In striving to manage this risk, we evaluate the size of a
currently dominated by institutional investors, bond issuance as a way to anticipate its likely liquidity level.
including mutual funds and certain financial
institutions. There is generally no established
retail secondary market for high-yield securities. We may invest only 10% of net assets in illiquid securities, including
As a result, the secondary market for high-yield Rule 144A
securities. securities is more limited and less
liquid than other secondary securities markets. The
high-yield secondary market is particularly
susceptible to liquidity problems when the
institutions which dominate it temporarily cease
buying bonds for regulatory, financial or other
reasons, such as the savings and loan crisis.
The secondary market for high-yield securities is
also generally considered to be more likely to be
disrupted by adverse publicity and investor
perceptions than the more established secondary
securities markets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------------------------------------------------------------------
Risks How we strive to manage them
Delchester Series
- ------------------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Valuation Risk
A less liquid secondary market as described above The Series' privately placed high-yield securities are particularly
makes it more difficult for the Series to obtain susceptible to the liquidity and valuation risks outlined here. We
precise valuations of the high-yield securities in will strive to manage this risk by carefully evaluating individual
its portfolio. During periods of reduced liquidity, bonds and by limiting the amount of the portfolio that can be
judgment plays a greater role in valuing high-yield allocated to privately placed high-yield securities.
securities.
- ------------------------------------------------------- ------------------------------------------------------------------------
Redemptions If, as a result of volatility in the We strive to maintain a cash balance sufficient to meet any
high-yield market or other factors, more shares of redemptions. We may also borrow money, if necessary, to meet
the Series are redeemed than are purchased for an redemptions.
extended period of time, the Series may be required
to sell securities without regard to the investment
merits such actions. If the Series sells a
substantial number of securities to generate proceeds
for redemptions, the asset base of the Series will
decrease and the Series' expense ratio may increase.
- ------------------------------------------------------- ------------------------------------------------------------------------
Legislative and Regulatory Risk We monitor the status of regulatory and legislative proposals to
The United States Congress has from time to time evaluate any possible effects they might have on the Series'
taken or considered a variety of legislative actions portfolio.
that could adversely affect the high-yield bond
market. For example, Congressional legislation has,
with some exceptions, generally prohibited
federally-insured savings and loan institutions from
investing in high-yield securities. Regulatory
actions have also affected the high-yield market. For
example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds
primarily as a result of actions taken by the
National Association of Insurance Commissioners.
Similar actions in the future could reduce liquidity
for high-yield issues, reduce the number of new
high-yield securities being issued and could make it
more difficult for the Series to attain its
investment objective.
- ------------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Devon Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for a particular Series. Following are descriptions of how the
portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Devon Series
Devon Series is a total return fund that invests the majority of its assets in
stocks. This Series has a dual objective of capital appreciation and current
income, but since it invests primarily in stocks, its shareholders should be
comfortable accepting some fluctuation of principal.
We invest primarily in common stocks that we believe have the potential for
above-average dividend increases over time. Generally, at least 65% of the
Series' assets will be invested in dividend-paying stocks.
In selecting stocks for Devon Series, we consider factors such as how much the
stock's dividend has grown in the past, the frequency of the stock's prior
dividend increases, the company's potential for strong positive cash flow, and
the price/earnings ratio of the stock compared to other stocks in the market. We
avoid stocks that we think are overvalued.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
-----------------------------------------------------------------------------------------------------------------------------
Devon Series
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent Generally, 90% to 100% of the Series' assets will be invested in
shares of ownership in a corporation. common stocks. Under normal market conditions we will invest at
Stockholders participate in the corporation's least 65% of total assets in dividend-paying stocks.
profits and losses, proportionate to the number
of shares they own.
-----------------------------------------------------------------------------------------------------------------------------
Convertible securities: Usually preferred stocks or Devon Series may invest in convertible securities; however, we
corporate bonds that can be exchanged for a set will not invest more than 5% of net assets in convertible
number of shares of common stock at a predetermined securities that are rated below investment grade by an NRSRO or
price. These securities offer higher appreciation in securities that are unrated but deemed equivalent to
potential than nonconvertible bonds and greater non-investment grade.
income potential than nonconvertible preferred
stocks.
- -----------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment
buyer, such as the Series, and a seller of for the Series' cash position. In order to enter into these
securities in which the seller agrees to buy the repurchase agreements, the Series must have collateral of at least
securities back within a specified time at the same 102% of the repurchase price.
price the buyer paid for them, plus an amount equal
to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.
- -----------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts (ADRs): Certificates We may invest without limitation in ADRs.
issued by a U.S. bank that represent the bank's
holdings of a stated number of shares of a foreign
corporation. An ADR entitles the holder to all
dividends and capital gains earned by the
underlying foreign shares. An ADR is bought and
sold the same as U.S. securities.
- -----------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest without limitation in privately placed securities that
whose resale is restricted under securities law. are eligible for resale only among certain institutional buyers
without registration. These are commonly known as "Rule 144A
Securities." Other restricted securities must be limited to 5% of
total Series assets.
- -----------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 10% of total assets in illiquid securities,
ready market, and cannot be easily sold, if at all, including repurchase agreements with maturities of over seven days.
at approximately the price that the Series has
valued them.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Devon Series may also invest in other securities including real estate
investment trusts, rights and warrants to purchase common stock, futures
contracts and options. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the table
above.
Lending securities
Devon Series may lend up to 25% of its assets to qualified brokers, dealers and
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Devon Series may buy or sell securities on a when-issued or delayed delivery
basis; that is, paying for securities before delivery or taking delivery at a
later date.
Portfolio turnover
We anticipate that Devon Series' annual portfolio turnover will be less than
100%. A turnover rate of 100% would occur if the Series sold and replaced
securities valued at 100% of its net assets within one year.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in Devon Series typically provides
the best results when held for a number of years. The following are the chief
risks you assume when investing in Devon Series. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -----------------------------------------------------------------------------------------------------------------------------
Devon Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on
the securities in a certain market--like the stocks we believe can appreciate over an extended time
stock or bond market--will decline in value because of frame regardless of interim market fluctuations. We do not
factors such as economic conditions, future try to predict overall stock market movements and do not
expectations or investor confidence. trade for short-term purposes.
We may hold a substantial part of Devon Series' assets in
cash or cash equivalents as a temporary defensive strategy.
- -----------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the value We limit the amount of Devon Series' assets invested in any one
of securities in a particular industry or the industry and in any individual security. We also follow a
value of an individual stock or bond will decline because rigorous selection process before choosing securities for the
of changing expectations for the performance of that portfolio.
industry or for the individual company issuing the
stock or bond.
- -----------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We typically invest only a small portion of Devon Series'
may be adversely affected by political instability, portfolio in foreign securities. When we do purchase foreign
changes in currency exchange rates, foreign economic securities, they are often denominated in U.S. dollars. We also
conditions or inadequate regulatory and accounting tend to avoid markets where we believe accounting principles or
standards. the regulatory structure are underdeveloped.
- -----------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, if at all, at
approximately the price that the Series
values them.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Emerging Markets Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for the Emerging Markets Series. Following are descriptions of how
the portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Emerging Markets Series
Emerging Markets Series seeks long-term capital. Under normal circumstances, at
least 65% of the Series' total assets will be invested in equity securities of
from at least three different countries that are considered to be emerging or
developing. The Series may invest in a broad range of equity securities,
including common stocks, preferred stocks, convertible securities and warrants.
We consider an "emerging country" to be any country that is generally
recognized to be an emerging or developing country by the international
financial community, including the World Bank and the International Finance
Corporation, or any country that is classified by the United Nations as
developing. In addition, any country that is included in the IFC Free Index or
MSCI Emerging Market Free Index is considered to be an "emerging country." As of
the date of this Prospectus, more than 130 countries met our definition of an
emerging country. Approximately 40 of them currently have stock markets. This
group of developing or emerging countries includes almost every nation in the
world except the United States, Canada, Japan, Australia, New Zealand and most
nations located in Western and Northern Europe.
Currently, investing in many emerging countries is not feasible, or may involve
significant political risks. We focus our investments in emerging countries
where we consider the economies to be developing strongly and where the markets
are becoming more sophisticated. We believe that investment opportunities may
result from an evolving long-term international trend favoring more
market-oriented economies, a trend that may particularly benefit certain
countries having developing markets. Local or international political, economic
or financial developments could support this trend and benefit the capital
markets in such countries.
In deciding where to invest we place particular emphasis on factors such as
economic conditions (including growth trends, inflation rates and trade
balances), regulatory and currency controls, accounting standards and political
and social conditions. The Series may invest in Argentina, Botswana, Brazil,
Chile, China, Colombia, Czech Republic, Estonia, Ghana, Greece, Hong Kong,
Hungary, India, Indonesia, Ivory Coast, Jamaica, Jordan, Kenya, Korea, Latvia,
Lithuania, Malaysia, Mauritius, Mexico, Morocco, Nigeria, Pakistan, Peru, the
Philippines, Poland, Portugal, Russia, Slovenia, South Africa, Sri Lanka,
Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. This is a representative list;
we may invest in other countries, particularly as markets in other emerging
countries develop.
Please see "The securities we typically invest in" and "The risks of investing
in the Series" for additional investment strategies and risks.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well. Fixed-income securities offer the potential for greater
income payments than stocks, and also may provide capital appreciation. The
following chart provides a brief description of the securities that the Series
may invest in. Please see the Statement of Additional Information for additional
descriptions of these as well as other investments.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Emerging Markets Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common Stocks of Emerging Market Companies: The majority of Emerging Markets Series' assets will be invested in
Securities that represent shares of ownership in a common stock of emerging market companies.
corporation. Stockholders participate in the
corporation's profits and losses, proportionate to To be considered an emerging country equity security by us, the
the number of shares they own. security must be issued by a company that exhibits one or more of the
following characteristics: (1) its principal securities trading
market is an emerging country; (2) though traded on a securities
market that is not an emerging market, the company, alone or on a
consolidated basis, derives 50% or more of its annual revenues from
either goods produced, sales made or services performed in emerging
countries; or (3) the company is organized under the laws of, and has
a principal office in, an emerging country. We make our
determinations on the basis of publicly available information and by
questioning the company.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Emerging Markets Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Emerging Markets Fixed Income Securities: The Series may invest up to 35% of its net assets in emerging market
fixed-income securities issued by companies in fixed income securities. All of these may be high yield, high risk
emerging countries or foreign governments, their fixed-income securities rated lower than BBB by S&P and Baa by Moody's
agencies, instrumentalities or political or, if unrated, are considered by us to be of equivalent quality.
subdivisions.
Medium- and low-grade bonds held by the Series may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs,
mergers, acquisitions, debt recapitalizations or similar events. Also,
these bonds are often issued by smaller, less creditworthy companies or
firms with high debt levels, which are generally less able to make
scheduled payments of interest and principal than more financially
stable firms. Certain lower-rated debt securities issued by foreign
governments may reflect reduced ability to make timely and ultimate
payments on external debt obligations. The risks posed by bonds issued
under such circumstances are substantial.
- -----------------------------------------------------------------------------------------------------------------------------
Zero Coupon Bonds: Zero coupon securities are debt Emerging Markets Series may invest in zero coupon bonds. The market
obligations which do not entitle the holder to any prices of zero coupon bonds are generally more volatile than the
periodic payments of interest prior to maturity or a market prices of securities that pay interest periodically and are
specified date when the securities begin paying likely to respond to changes in interest rates to a greater degree
current interest, and therefore are issued and than do non-zero coupon securities having similar maturities and
traded at a discount from their face amounts or par credit quality.
value.
- -----------------------------------------------------------------------------------------------------------------------------
Brady Bonds: These are debt securities issued under The Emerging Markets Series may invest in Brady Bonds. We believe that
the framework of the Brady Plan, an initiative the economic reforms undertaken by countries in connection with the
announced by the U.S. Treasury Secretary, Nicholas issuance of Brady Bonds makes the debt of countries that have issued
F. Brady in 1989, as a mechanism for debtor nations or have announced plans to issue Brady Bonds an attractive
to restructure their outstanding external opportunity for investment.
indebtedness (generally, commercial bank debt).
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Emerging Markets Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
High Quality U.S. and Foreign Debt: For temporary defensive purposes, we may invest all or a substantial
o high quality debt instruments of foreign portion of the Series' assets in high quality fixed income securities.
governments, their agencies, instrumentalities or
political subdivisions For example, the Series may invest in U.S. fixed-income markets when
o securities issued by the U.S. government, its the Manager believes that the global equity markets are excessively
agencies or instrumentalities or volatile or overvalued so that the Series' objective cannot be achieved
o foreign or U.S. corporate bonds. in such markets. Under these circumstances, such corporate debt
obligations would be rated AA or better by S&P, or Aa or better by
Moody's, or if unrated, determined by the Manager to be of comparable
quality. The Series may also invest in the securities listed above
pending investment of proceeds from new sales of Series shares and to
maintain sufficient cash to meet redemption requests
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Currency, Foreign Currency Contracts or The Series may invest in securities issued in any currency and may
Forward Contracts: A forward contract involves an hold foreign currency. Securities of issuers within a given country
obligation to purchase or sell a specific currency may be denominated in the currency of another country or in
at a future date at a price set at the time of multinational currency units such as the European Currency Unit
the contract. Forward contracts are used to "lock-in" ("ECU").
the price of a security it has agreed to purchase
or sell, in terms of U.S. dollars or other currencies.
We may invest in securities of foreign issuers and may hold foreign
currency. In addition, the Series may enter into contracts to purchase
or sell foreign currencies at a future date. Although the Series values
its assets daily in terms of U.S. dollars, we do not convert our
holdings of foreign currencies into U.S. dollars on a daily basis. We
may, however, from time to time, purchase or sell foreign currencies
and/or engage in forward foreign currency transactions in order to
expedite settlement of portfolio transactions and to minimize currency
value fluctuations. We may conduct foreign currency transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market or through 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. By entering into these transactions, the Series
attempts to protect against a possible loss resulting from an adverse
change in currency exchange rates during the period between when a
security is purchased or sold and the date on which payment is made or
received.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Emerging Markets Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
American Depositary Receipts (ADRs): Certificates The Series may invest in sponsored and unsponsored ADR's that are
issued by a U.S. bank that represent the bank's actively traded in the United States.
holdings of a stated number of shares of a foreign
corporation. An ADR entitles the holder to all
dividends and capital gains earned by the
underlying foreign shares. An ADR is bought and
sold the same as U.S. securities.
- -----------------------------------------------------------------------------------------------------------------------------
European Depositary Receipts (EDRs) and Global In conjunction with their investments in foreign securities, the
Depositary Receipts (GDRs): EDRs and GDRs are Series may invest in sponsored and unsponsored EDRs and GDRs.
receipts issued by non-U.S. banks or trust companies
and foreign branches of U.S. banks that evidence
ownership of the underlying foreign or U.S.
securities. Sponsored EDRs or GDRs are issued
jointly by the issuer of the underlying security and
a Depositary, and unsponsored EDRs or GDRs are
issued without the participation of the issuer of
the deposited security.
- -----------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment
buyer, such as the Series, and a seller of for the Series' cash position. In order to enter into these
securities in which the seller agrees to buy the repurchase agreements, the Series must have collateral of at least
securities back within a specified time at the same 102% of the repurchase price.
price the buyer paid for them, plus an amount equal
to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.
- -----------------------------------------------------------------------------------------------------------------------------
Restricted Securities: Privately placed securities Emerging Markets Series may invest without limitation in privately
whose resale is restricted under securities law. placed securities that are eligible for resale only among certain
institutional buyers without registration. These are commonly
known as "Rule 144A Securities."
- -----------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do not have a We may invest up to 15% of total assets in illiquid securities,
ready market, and cannot be easily sold, if at all, including repurchase agreements with maturities of over seven days.
at approximately the price that the Series has
valued them.
- -----------------------------------------------------------------------------------------------------------------------------
Investment Company Securities In some countries, We may invest in such close-end investment companies if we believe
investments by a mutual fund may only be made the country offers good investment opportunities for the Series. We
through investments in closed-end investment may invest in either closed-end or open-end investment companies
companies that in turn invest in the securities of consistent with the 1940 Act requirements. These investments involve
such countries. an indirect payment of a portion of the expenses, including advisory
fees, of such other investment companies.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Series may also invest in futures contracts, and options. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
Portfolio turnover
The Series anticipates that its annual portfolio turnover will be less than
100%. A turnover rate of 100% would occur if the Series sold and replaced
securities valued at 100% of its net assets within one year.
Borrowing from Banks
Emerging Market Series may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Series will not borrow money in
excess of one-third of the value of its net assets.
Securities Lending Emerging Market Series may loan up to 25% of its assets to
qualified broker/dealers or institutional investors for their use relating to
short-sales or other securities transactions. These transactions will generate
additional income for the Series.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Series you should
carefully evaluate the risks. An investment in the Series typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Series. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Emerging Markets Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market Risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on stocks we
securities in a certain market--like the stock or bond believe can appreciate over an extended time frame regardless of
market--will decline in value because of factors such interim market fluctuations. We do not try to predict overall stock
as economic conditions, future expectations or market movements and do not trade for short-term purposes.
investor confidence.
We may hold a substantial part of the Series' assets in cash or cash
equivalents as a temporary defensive strategy.
- -----------------------------------------------------------------------------------------------------------------------------
Industry Risk is the risk that the value of We limit the amount of the Series' assets invested in any one
securities in a particular industry will decline industry and in any individual security. We also follow a rigorous
because of changing expectations for the selection process before choosing securities for the portfolio.
performance of that industry.
- -----------------------------------------------------------------------------------------------------------------------------
Interest Rate Risk is the risk that securities, In an attempt to protect Emerging Markets Series' investments from
particularly bonds with longer maturities, will interest rate fluctuations, the Series may engage in interest rate
decrease in value if interest rates rise. swaps. Interest rate swaps involve the exchange by the Series with
another party of their respective rights to receive interest. The
Series intends to use interest rate swaps as a hedge and not as a
speculative investment. The use of interest rate swaps involves
investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Manager is
incorrect in its forecast of market values, interest rates and other
applicable factors, the investment performance of the Series will be
less favorable than it would have been if this investment technique
were never used.
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Risk is the risk that foreign securities may We carefully evaluate the overall situations in the countries where
be adversely affected by political instability, we invest in an attempt to reduce these risks. We also tend to
changes in currency exchange rates, foreign economic avoid markets where we believe accounting principles or the
conditions or inadequate regulatory and accounting regulatory structure are too underdeveloped.
standards.
- -----------------------------------------------------------------------------------------------------------------------------
Currency Risk is the risk that the value of the The Series may try to hedge its currency risk by purchasing foreign
Series' investments may be negatively affected by currency exchange contracts. By agreeing to purchase or sell
changes in foreign currency exchange rates. Adverse foreign securities at a pre-set price on a future date, the Series
changes in exchange rates may reduce or eliminate strive to protect the value of the stock they own from future
any gains produced by investments that are changes in currency rates. The Series will use forward currency
denominated in foreign currencies and may increase exchange contracts only for defensive measures, not to enhance
any losses. portfolio returns. However, there is no assurance that a strategy
such as this will be successful.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Emerging Markets Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Political Risk is the risk that countries or the We carefully evaluate the political situations in the countries
entire region where we invest may experience where we invest and take into account any potential risks before we
political instability, which may cause greater select securities for the portfolio. However, there is no way to
fluctuation in the value of our investments due to eliminate political risk when investing internationally.
changes in currency exchange rates, governmental
seizures or nationalization of assets.
- -----------------------------------------------------------------------------------------------------------------------------
Emerging Markets Risk is the possibility that the The Emerging Markets Series carefully selects securities within
risks associated with international investing will be emerging markets and strives to consider all relevant risks
greater in emerging markets than in more developed associated with an individual company. We cannot eliminate emerging
foreign markets because, among other things, emerging market risk and consequently encourage shareholders to invest in
markets may have less stable political and economic these Series only if they have a long-term time horizon, over which
environments. the potential of individual securities is more likely to be
realized.
- -----------------------------------------------------------------------------------------------------------------------------
Inefficient Market Risk is the risk that foreign The Series will attempt to reduce these risks through investing in
markets may be less liquid, have greater price a number of different countries, credit analysis and attention to
volatility, less regulation and higher transaction trends in the economy, industries and financial markets.
costs than U.S. markets.
- -----------------------------------------------------------------------------------------------------------------------------
Information Risk is the possibility that foreign The Series conducts a great deal of fundamental research on the
companies are subject to different accounting, companies that it invests in rather than relying solely on
auditing and financial reporting standards than U.S. information available through financial reporting. We believe this
companies. There may be less information available will help us to better uncover any potential weaknesses in
about foreign issuers than domestic issuers. individual companies.
Furthermore, regulatory oversight of foreign issuers
may be less stringent or less consistently applied
than in the United States.
- -----------------------------------------------------------------------------------------------------------------------------
Non-Diversified Funds are believed to be subject to While the Emerging Markets Series intends to seek to qualify as a
greater risks because adverse effects on their "diversified" investment company under a provision of Subchapter M
security holdings may affect a larger portion of of the Code, the Series will not be diversified under the 1940 Act.
their overall assets. Thus, 50% of the Series' total net assets will be divided among
cash, cash items, U.S. government securities, and other securities,
with no more than 5% of the Series' total net assets invested with
one issuer. However this will not satisfy the 1940 Act definition
of diversification that 75% of the Series' assets be limited to not
more than 5% per issuer. In practice, however, the Series does not
intend to be heavily invested in any single particular issuer.
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Government Securities Risks involve the The Emerging Markets Series attempts to reduce the risks associated
ability of a foreign government or government related with investing in foreign governments by setting rating standards
issuer to make timely and ultimate payments on its and by limiting the portion of portfolio assets that may be
external debt obligations. This ability to make invested in such securities.
payments will 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.
- -----------------------------------------------------------------------------------------------------------------------------
High Yield, High Risk Foreign Fixed-Income The Emerging Markets Series may invest up to 35% of its net assets
Securities are those securities rated lower than BBB in these securities.
by S&P and Baa by Moody's. Securities of this type
are considered to be of poor standing and The economy and interest rates may affect these high yield, high
predominantly speculative as to the ability to repay risk securities differently than other securities. Prices on these
interest and principal bonds have been less sensitive to interest rate changes than higher
rated investments, but more sensitive to adverse economic changes or
individual corporate developments. Also, during an economic downturn
or a substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect
their ability to make principal and interest payments, to meet
projected business goals and to obtain additional financing. These
bonds may also be more affected when recognized rating agencies
change their rating of the security. Consequently, these changes will
affect the Series' investment value.
We believe that in the past, the high yields from these bonds have more
than compensated for their higher default rates. There is no assurance,
however, that yields will continue to offset default rates on these
bonds in the future. We intend to maintain an adequately diversified
portfolio of these bonds. While diversification can help to reduce the
effect of an individual default on the Series, there is no guarantee
that diversification will protect the Series from widespread bond
defaults brought about by a sustained economic downturn.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Global Bond Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Global Bond Series. Following are descriptions of how the
portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Global Bond Series
The Global Bond Series seeks current income consistent with the preservation of
investors' principal. The Global Bond Series invests primarily in fixed-income
securities that may also provide the potential for capital appreciation. Under
normal circumstances, at least 65% of the Series' total assets will be invested
in the fixed-income securities of issuers from at least three different
countries, one of which may be the United States.
The fixed income securities in which Global Bond Series may invest include
o foreign and U.S. government securities
o debt obligations of foreign and U.S. companies which are generally rated A
or better by Standard & Poor's Ratings Group ("S&P") and Baa by Moody's
Investors Services, Inc. ("Moody's"), or if unrated, are deemed to be of
comparable quality by the portfolio manager.
o securities of issuers in emerging markets countries, including Brady Bonds,
which tend to be of lower quality and more speculative than securities of
developed country issuers. Such securities may be rated lower than BBB by
S&P or Baa by Moody's, or if unrated, are considered by the Manager to be
of equivalent quality. (See the section "The risks of investing in the
Series."
o Zero-coupon bonds denominated in any currency
For increased safety, the Series currently anticipates that a large percentage
of its assets will be invested in securities of supranational entities and in
U.S. and foreign government securities.
Generally, the value of fixed-income securities rises when interest rates
decline and declines when interest rates rise. The value of your investment in
the Series will be affected by changes in interest rates. We anticipate that the
average weighted maturity of the portfolio will be in the five-to-ten year
range. If we anticipate a declining interest rate environment; however, the
average weighted maturity may be extended past ten years or if we anticipate a
rising rate environment, the average weighted maturity may be shortened to less
than five years.
While the Series may purchase securities of issuers in any foreign country,
developed and emerging, we currently anticipate investing in Canada, Germany,
the United Kingdom, France, the Netherlands, Belgium, Spain, Switzerland, Japan,
Australia, Hong Kong and Singapore, as well as Indonesia, Korea, the
Philippines, Taiwan, Thailand and South Africa. This is a representative list,
so we may also invest in other countries.
<PAGE>
High Yield, High Risk Securities -- Emerging Markets Series may invest up to 35%
of its net assets, in high yield, high risk foreign fixed-income securities,
including so-called Brady Bonds. We believe that in the past, the high yields
from these bonds have more than compensated for their higher default rates.
There is no assurance, however, that yields will continue to offset default
rates on these bonds in the future. We intend to maintain an adequately
diversified portfolio of these bonds. While diversification can help to reduce
the effect of an individual default on the Series, there is not guarantee that
diversification will protect the Series from widespread bond defaults brought
about by a sustained economic downturn.
Medium- and low-grade bonds held by the Series may be issued as a consequence
of corporate restructurings, such as leveraged buy-outs, mergers, acquisitions,
debt recapitalizations or similar events. Also, these bonds are often issued by
smaller, less creditworthy companies or by firms with a high level of debt,
which are generally less able to make scheduled payments of interest and
principal than more financially stable firms. The risks posed by bonds issued
under such circumstances are substantial.
The economy and interest rates may affect these high yield, high risk
securities differently than other securities. Prices on these bonds have been
less sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or a substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to make principal and interest payments, to meet
projected business goals and to obtain additional financing. These bonds may
also be more affected when recognized rating agencies change their rating of the
security. Consequently, these changes will affect the Series' investment value.
Please see "The securities we typically invest in" and "The risks of investing
in the Series" for additional investment strategies and risks.
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation. The following chart provides
a brief description of the securities that the Series may invest in. Please see
the Statement of Additional Information for additional descriptions of these as
well as other investments.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Global Bond Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign Government Securities: Fixed Income With respect to foreign government securities, the Series will
Securities issued by non-U.S. governments, their generally invest only in those rated AAA or AA by S&P or Aaa or Aa by
agencies or instrumentalities or political Moody's or, if unrated, considered to be of comparable quality by the
sub-divisions Series' portfolio manager. However, a portion of the Series' assets
may also be invested in such foreign governmental securities issued
by emerging or developing countries, which may be lower rated,
including securities rated below investment grade.
- -----------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities: debt obligations issued The Series may invest only in direct U.S. obligations including
by the United States government, its agencies or bills, notes, bonds and other debt securities issued by the U.S.
instrumentalities Treasury or securities of U.S. government agencies or
instrumentalities which are backed by the full faith and credit of
the United States.
- -----------------------------------------------------------------------------------------------------------------------------
U.S. and Foreign Corporate Bonds: Debt obligations The Global Bond Series will invest in bonds generally rated A or
issued by a corporation. better by S&P and Baa by Moody's .
- -----------------------------------------------------------------------------------------------------------------------------
Supranational entities: debt securities of The Series expects to invest a large percentage of its assets in
supranational entities denominated in any currency. supranational agencies, which are typically of high grade quality.
A supranational entity is an entity established or
financially supported by the national governments
of one or more countries. The International Bank
for Reconstruction and Development (more commonly
known as the World Bank) would be one example of a
supranational entity.
- -----------------------------------------------------------------------------------------------------------------------------
Zero Coupon Bonds: Zero coupon securities are debt Global Bond Series may invest in zero coupon bonds. The market
obligations which do not entitle the holder to any prices of zero coupon bonds are generally more volatile than the
periodic payments of interest prior to maturity or a market prices of securities that pay interest periodically and are
specified date when the securities begin paying likely to respond to changes in interest rates to a greater degree
current interest, and therefore, are issued and than do non-zero coupon securities having similar maturities and
traded at a discount from their face amounts or par credit quality.
value.
- -----------------------------------------------------------------------------------------------------------------------------
Investment Company Securities In some countries, We may invest in either closed-end or open-end investment companies
investments by a mutual fund may only be made consistent with the 1940 Act requirements. These investments involve
through investments in closed-end investment an indirect payment of a portion of the expenses, including advisory
companies that in turn invest in the securities of fees, of such other investment companies.
such countries.
- -----------------------------------------------------------------------------------------------------------------------------
High Yield, High Risk Fixed Income Securities: Medium- and low-grade bonds held by the Series may be issued as a
Securities that are rated lower than BBB by S&P and consequence of corporate restructurings, such as leveraged buy-outs,
Baa by Moody's or, if unrated, are considered by us mergers, acquisitions, debt recapitalizations or similar events. Also,
to be of equivalent quality. these bonds are often issued by smaller, less creditworthy companies
or firms with high debt levels, which are generally less able to make
scheduled payments of interest and principal than more financially
stable firms. Certain lower-rated debt securities issued by foreign
governments may reflect reduced ability to make timely and ultimate
payments on external debt obligations. The risk posed by bonds
issued under such circumstances are substantial.
- -----------------------------------------------------------------------------------------------------------------------------
Brady Bonds: These are debt securities issued under The Global Bond Series may invest in Brady Bonds consistent with its
the framework of the Brady Plan, an initiative investment objective. We believe that the economic reforms undertaken
announced by the U.S. Treasury Secretary, Nicholas by countries in connection with the issuance of Brady Bonds makes the
F. Brady in 1989, as a mechanism for debtor nations debt of countries that have issued or have announced plans to issue
to restructure their outstanding external Brady Bonds an attractive opportunity for investment.
indebtedness (generally, commercial bank debt).
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Global Bond Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign Currency, Foreign Currency Contracts or We may invest in securities issued in any currency and may hold
Forward Contracts A forward contract involves an foreign currency. Securities of issuers within a given country may be
obligation to purchase or sell a specific currency denominated in the currency of another country or in multinational
at a future date at a price set at the time of the currency units such as the European Currency Unit ("ECU").
contract. Forward contracts are used to "lock-in" the
price of a security it has agreed to purchase or We may invest in securities of foreign issuers and may hold foreign
sell, in terms of U.S. dollars or other currencies. currency. In addition, the Series may enter into contracts to purchase
or sell foreign currencies at a future date. Although the Series values
its assets daily in terms of U.S. dollars, we do not convert our
holdings of foreign currencies into U.S. dollars on a daily basis. We
may, however, from time to time, purchase or sell foreign currencies
and/or engage in forward foreign currency transactions in order to
expedite settlement of portfolio transactions and to minimize currency
value fluctuations. We may conduct foreign currency transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market or through 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. By entering into these transactions, the Series
attempts to protect against a possible loss resulting from an adverse
change in currency exchange rates during the period between when a
security is purchased or sold and the date on which payment is made or
received.
- -----------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment
buyer, such as the Series, and a seller of for the Series' cash position. In order to enter into these
securities in which the seller agrees to buy the repurchase agreements, the Series must have collateral of at least
securities back within a specified time at the same 102% of the repurchase price.
price the buyer paid for them, plus an amount equal
to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.
- -----------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts (ADRs): Certificates We may invest in sponsored and unsponsored ADR's that are actively
issued by a U.S. bank that represent the bank's traded in the United States.
holdings of a stated number of shares of a foreign
corporation. An ADR entitles the holder to all
dividends and capital gains earned by the
underlying foreign shares. An ADR is bought and
sold the same as U.S. securities.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Global Bond Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
European Depositary Receipts (EDRs) and Global In conjunction with their investments in foreign securities, the
Depositary Receipts (GDRs): EDRs and GDRs are Series may invest in sponsored and unsponsored EDRs and GDRs.
receipts issued by non-U.S. banks or trust companies
and foreign branches of U.S. banks that evidence
ownership of the underlying foreign or U.S.
securities. Sponsored EDRs or GDRs are issued
jointly by the issuer of the underlying security and
a Depositary, and unsponsored EDRs or GDRs are
issued without the participation of the issuer of
the deposited security.
- -----------------------------------------------------------------------------------------------------------------------------
Restricted Securities: Privately placed securities The Global Bond Series may invest without limitation in privately
whose resale is restricted under securities law. placed securities that are eligible for resale only among certain
institutional buyers without registration. These are commonly known
as "Rule 144A Securities."
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Series may also invest in futures contracts and options. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
Portfolio turnover
The Series anticipates that its annual portfolio turnover will be less than
100%. A turnover rate of 100% would occur if the Series sold and replaced
securities valued at 100% of its net assets within one year.
Borrowing from Banks
Global Bond Series may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Series will not borrow money in
excess of one-third of the value of its net assets.
Securities Lending
Global Bond 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
securities transactions. These transactions will generate additional income for
the Series.
<PAGE>
The risks of investing in Global Bond Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Series you should
carefully evaluate the risks. An investment in the Series typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Series. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Global Bond Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market Risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on securities
securities in a certain market--like the stock or bond that we believe can perform well over an extended time frame
market--will decline in value because of factors such regardless of interim market fluctuations. We do not try to predict
as economic conditions, future expectations or overall market movements and do not trade for short-term purposes.
investor confidence.
We may hold a substantial part of the Series' assets in cash or cash
equivalents as a temporary defensive strategy.
- -----------------------------------------------------------------------------------------------------------------------------
Industry Risk is the risk that the value of We limit the amount of Global Bond Series' assets invested in any one
securities in a particular industry will decline industry. We also follow a rigorous selection process before choosing
because of changing expectations for the securities for the portfolio.
performance of that industry.
- -----------------------------------------------------------------------------------------------------------------------------
Interest Rate Risk is the risk that securities, We will maintain an intermediate average maturity, usually between
particularly bonds with longer maturities, will five and 10 years.
decrease in value if interest rates rise.
In an attempt to protect Global Bond Series' investments from
interest rate fluctuations, the Series may engage in interest rate
swaps. Interest rate swaps occur when the Series exchanges its rights
to receive interest on a bond for the rights of another party. The
Series intends to use interest rate swaps as a hedge and not as a
speculative investment. The use of interest rate swaps involves
investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If we use this strategy
and are incorrect in our forecast of market values, interest rates
and other applicable factors, the investment performance of the
Series will be less favorable than if this investment strategy were
never used.
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Risk is the risk that foreign securities may We carefully evaluate the overall situations in the countries where
be adversely affected by political instability, we invest in an attempt to reduce these risks. We also tend to
changes in currency exchange rates, foreign economic avoid markets where we believe accounting principles or the
conditions or inadequate regulatory and accounting regulatory structure are too underdeveloped.
standards.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Global Bond Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Currency Risk is the risk that the value of an Global Bond Series may try to hedge its currency risk by purchasing
investment may be negatively affected by changes in foreign currency exchange contracts. By agreeing to purchase or
foreign currency exchange rates. Adverse changes in sell foreign securities at a pre-set price on a future date, the
exchange rates may reduce or eliminate any gains Series strive to protect the value of the stock they own from future
produced by investments that are denominated in changes in currency rates. The Series will use forward currency
foreign currencies and may increase any losses. exchange contracts only for defensive measures, not to enhance
portfolio returns. However, there is no assurance that a strategy
such as this will be successful.
- -----------------------------------------------------------------------------------------------------------------------------
Political Risk is the risk that countries or the We carefully evaluate the political situations in the countries
entire region where we invest may experience where we invest and take into account any potential risks before we
political instability, which may cause greater select securities for the portfolio. However, there is no way to
fluctuation in the value of our investments due to eliminate political risk when investing internationally.
changes in currency exchange rates, governmental
seizures or nationalization of assets.
- -----------------------------------------------------------------------------------------------------------------------------
Emerging Markets Risk is the possibility that the Global Bond Series carefully selects securities within emerging
risks associated with international investing will be markets and strives to consider all relevant risks associated with
greater in emerging markets than in more developed an individual company. We cannot eliminate emerging market risk and
foreign markets because, among other things, emerging consequently encourage shareholders to invest in these Series only
markets may have less stable political and economic if they have a long-term time horizon, over which the potential of
environments. individual securities is more likely to be realized.
- -----------------------------------------------------------------------------------------------------------------------------
Inefficient Market Risk is the risk that foreign The Series will attempt to reduce these risks through investing in a
markets may be less liquid, have greater price number of different countries, credit analysis and attention to
volatility, less regulation and higher transaction trends in the economy, industries and financial markets.
costs than U.S. markets.
- -----------------------------------------------------------------------------------------------------------------------------
Information Risk is the possibility that foreign We conduct a great deal of fundamental research on the bond issuers
companies are subject to different accounting, rather than relying solely on information available through
auditing and financial reporting standards than U.S. financial reporting. We believe this will help us to better uncover
companies. There may be less information available any potential weaknesses.
about foreign issuers than domestic issuers.
Furthermore, regulatory oversight of foreign issuers
may be less stringent or less consistently applied
than in the United States.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Global Bond Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Non-Diversified Funds are believed to be subject to The Global Bond Series will not be a diversified fund according to
greater risks because adverse effects on their the 1940 Act. In a diversified fund, 75% of the portfolio must be
security holdings may affect a larger portion of diversified, meaning the fund or series cannot invest more than 5%
their overall assets. of net assets in an individual security. When a fund is
non-diversified, it does not have to limit the percentage of assets
invested in individual securities. However, the Global Bond Series
does intend to satisfy the Internal Revenue Code's diversification
requirement, which says that for 50% of the Series' assets, no more
than 5% of net assets can be invested in any one individual security.
The bottom line for shareholders is that 50% of the Global Bond
Series must be spread among various securities, with no more than 5%
of net assets invested in any single security. The other 50% can be
more concentrated with greater than 5% invested in individual
securities. In practice, however, the Series does not intent to be
heavely invested in any single particular issuer.
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Government Securities Risks involve the The Global Bond Series attempts to reduce the risks associated with
ability of a foreign government or government related investing in foreign governments by carefully monitoring the
issuer to make timely and ultimate payments on its countries in which it invests.
external debt obligations. This ability to make
payments will 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.
- -----------------------------------------------------------------------------------------------------------------------------
High Yield, High Risk Foreign Fixed-Income The Global Bond Series may invest in these securities. The economy
Securities are those securities rated lower than BBB and interest rates may affect these high yield, high risk securities
by S&P and Baa by Moody's. Securities of this type differently than other securities. Prices on these bonds have been
are considered to be of poor standing and less sensitive to interest rate changes than higher rated
predominantly speculative as to the ability to repay investments, but more sensitive to adverse economic changes or
interest and principal. individual corporate developments. Also, during an economic downturn
or a substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect
their ability to make principal and interest payments, to meet
projected business goals and to obtain additional financing. These
bonds may also be more affected when recognized rating agencies
change their rating of the security. Consequently, these changes will
affect the Series' investment value. We believe that in the past, the
high yields from these bonds have more than compensated for their
higher default rates. There is no assurance, however, that yields
will continue to offset default rates on these bonds in the future.
We intend to maintain an adequately diversified portfolio of these
bonds. While diversification can help to reduce the effect of an
individual default on the Series, there is no guarantee that
diversification will protect the Series from widespread bond defaults
brought about by a sustained economic downturn.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Growth and Income Series
Our investment strategies
We first identify companies that have above-average dividend yields compared to
the unmanaged S&P 500 Index, a commonly used measure of U.S. stocks. We then
research individual companies and analyze economic and market conditions,
seeking to identify the securities that we think are the best investments for
each Fund. Following are descriptions of how the portfolio manager pursues the
Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Growth and Income Series
The Growth and Income Series seeks the highest possible total rate of return.
The Growth and Income Series invests primarily in the common stocks of
established companies that we believe have long-term total return potential.
These stocks offer both current income through dividends and capital growth
potential through possible increases in stock prices. A focus on stocks with
high dividend yields, such as the one we use, is generally considered to be a
value-oriented investment approach.
The securities we typically invest in Stocks offer investors the potential for
capital appreciation, and may pay dividends as well. High-yield bonds offer the
potential for greater income payments than stocks, and also may provide capital
appreciation.
<TABLE>
<CAPTION>
- ----------------------------------------------------- -----------------------------------------------------------------------
Securities How we use them
Growth and Income Series
- ----------------------------------------------------- -----------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, 90% to 100% of the Series' net assets will be invested
ownership in a corporation. Stockholders in dividend-paying common stocks.
participate in the corporation's profits and
losses, proportionate to the number of shares they
own.
- ----------------------------------------------------- -----------------------------------------------------------------------
American Depositary Receipts: Certificates issued by We may invest without limitation in ADRs. We use them when we
a U.S. bank which represent the bank's holdings of a believe they offer better total return opportunities than U.S.
stated number of shares of a foreign corporation. An securities.
ADR entitles the holder to all dividends and capital
gains earned by the underlying foreign shares, and
an ADR is bought and sold the same as U.S.
securities.
- ----------------------------------------------------- -----------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment
such as the Series, and a seller of securities in for the Series' cash position. In order to enter into these
which the seller agrees to buy the securities back repurchase agreements, the Series' must have collateral of at least
within a specified time at the same price the buyer 102% of the repurchase price.
paid for them, plus an amount equal to an agreed
upon interest rate. Repurchase agreements are often
viewed as equivalent to cash.
- ----------------------------------------------------- -----------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest up to 10% of total assets in privately placed
whose resale is restricted under securities law. securities, including those that are eligible for resale among
certain institutional buyers, known as Rule 144A securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
Illiquid Securities: Securities that do not have a We may invest up to 10% of the Series' total assets in illiquid
ready market, and cannot be easily sold, if at all, securities.
at approximately the price that the Fund has valued
them.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
<PAGE>
The Series is permitted to invest in all available types of equity securities
including preferred stock, rights and warrants and convertible securities. It
may also invest in fixed-income securities and enter into futures and options
transactions for defensive purposes. It may invest in global and European
depositary receipts and directly in foreign securities; however, the manager has
no present intention of doing so. Growth and Income Series reserves the right to
hold a substantial part of its assets in cash or cash equivalents as a
temporary, defensive strategy. You can find additional information about the
investments in the Series' portfolio in the annual or semi-annual shareholder
report.
Lending securities
The Series may lend up to 25% of its assets to qualified brokers, dealers and
institutional investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis The Series may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date.
Portfolio turnover
We anticipate that annual portfolio turnover for the Series will be less than
100%. A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
Borrowing from banks
Growth and Income Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions.
<PAGE>
The risks of investing in Growth and Income Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest, you should carefully
evaluate the risks. Because of the nature of the Growth and Income Series, you
should consider your investment to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Growth and Income Series. Please see
the Statement of Additional Information for further discussion of these risks
and the other risks not discussed here.
<TABLE>
<CAPTION>
- -------------------------------------------- ---------------------------------------------------------------------------------
Risks How we strive to manage them
Growth and Income Series
- -------------------------------------------- ---------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a We maintain a long-term investment approach and focus on stocks we
majority of the securities in a certain believe can appreciate over an extended time frame regardless of interim market
market -- like the stock or bond market -- fluctuations. We do not try to predict overall stock market movements and do
will decline in value because of factors not trade for short-term purposes.
such as economic conditions, future
expectations or investor confidence.
- -------------------------------------------- ---------------------------------------------------------------------------------
Industry and security risk is the risk We limit the amount of the Fund's assets invested in any one industry and in
that the value of securities in a any individual security. We also follow a rigorous selection process designed
particular industry or the value of an to identify under-valued securities before choosing securities for the
individual stock or bond will decline portfolio.
because of changing expectations for the
performance of that industry or for the
individual company issuing the stock or
bond.
- -------------------------------------------- ---------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of each Fund's portfolio in foreign
securities may be adversely affected by corporations through American Depositary Receipts. We do not invest directly
political instability, changes in currency in foreign securities. When we do purchase ADRs, they are generally
exchange rates, foreign economic denominated in U.S. dollars and traded on a U.S. exchange.
conditions or inadequate regulatory and
accounting standards.
- -------------------------------------------- ---------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can
only be sold at a price lower than the
price that the Fund has valued them.
- -------------------------------------------- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage International Equity Series
Our investment strategies
We research individual companies and countries and analyze economic and market
conditions, seeking to identify the securities or market sectors that we think
are the best investments for International Equity Series. Following are
descriptions of how the portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
International Equity Series
International Equity Series seeks long-term growth without undue risk to
principal. The Series invests primarily in securities that provide the potential
for capital appreciation and income. The Series is an international fund. Under
normal circumstances, at least 65% of the Series' total assets will be invested
in the securities of issuers from at least three different countries outside of
the United States. We may invest in a broad range of equity securities including
common stocks, preferred stocks, convertible securities and warrants. We may
also invest in sponsored or unsponsored Depositary Receipts.
We use a dividend discount analysis to evaluate opportunities in various
countries. This means we look at future anticipated dividends and try to
determine what the value of those dividends would be if they were being paid
today. This helps us compare the current value of different investments, even in
different countries.
We also use what is called a purchasing power parity approach to help us
determine what currencies and what markets are overvalued or undervalued
relative to the U.S. dollar. We first identify the amount of goods and services
that a dollar will buy in the United States. We then compare see how much of a
foreign currency is required to buy that same amount of goods and services in
another country. We believe that eventually all currencies should trade at
levels that would make it possible for the dollar to buy the same amount of
goods and services overseas as in the United States. When the dollar buys less,
we consider the foreign currency to be overvalued. When the dollar buys more, we
consider the currency to be undervalued.
We may purchase securities in any foreign country, developed or emerging;
however we currently anticipate investing in Canada, Germany, the United
Kingdom, France, the Netherlands, Belgium, Spain, Switzerland, Japan, Australia,
Hong Kong and Singapore. This is a representative list; the Series may invest in
countries not listed here.
<PAGE>
The securities we typically invest in Stocks offer investors the potential for
capital appreciation, and may pay dividends as well. Fixed-income securities
offer the potential for greater income payments than stocks, and also may
provide capital appreciation. The following chart provides a brief description
of the securities that the Series may invest in. Please see the Statement of
Additional Information for additional descriptions of these as well as other
investments.
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
International Equity Series
- ------------------------------------------------------ -----------------------------------------------------------------------
<S> <C>
Common Stocks: Securities that represent shares of We generally invest 90 to 100% of the Series' assets in common stock
ownership in a corporation. Stockholders of companies located in foreign countries.
participate in the corporation's profits and losses,
proportionate to the number of shares they own.
- ------------------------------------------------------ -----------------------------------------------------------------------
Fixed Income Securities For temporary defensive purposes, we may invest all or a substantial
portion of the Series' assets in fixed income securities including
high quality debt instruments of foreign governments, their agencies,
instrumentalities or political subdivisions; securities issued by the
U.S. government, its agencies or instrumentalities; or foreign or
U.S. corporate bonds. For example, the Series may invest in U.S.
fixed-income markets when the Manager believes that the global equity
markets are excessively volatile or overvalued so that the Series'
objective cannot be achieved in such markets. Any corporate debt
obligations will be rated AA or better by S&P, or Aa or better by
Moody's, or if unrated, will be determined to be of comparable
quality by the Manager. The Series may hold any of the securities
listed above while preparing to invest proceeds from new sales of
Series shares and to maintain sufficient cash to meet redemption
requests.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
International Equity Series
- ------------------------------------------------------ -----------------------------------------------------------------------
<S> <C>
Foreign Currency Contracts or Forward Contracts: A The Series may invest in securities issued in any currency and may
forward contract involves an obligation to purchase hold foreign currency. Securities of issuers within a given country
or sell a specific currency at a future date at a may be denominated in the currency of another country or in
price set at the time of the contract. Forward multinational currency units such as the European Currency Unit
contracts are used to "lock-in" the price of a ("ECU").
security it has agreed to purchase or sell, in terms
of U.S. dollars or other currencies. We may invest in securities of foreign issuers and may hold foreign
currency. In addition, the Series may enter into contracts to purchase
or sell foreign currencies at a future date. Although the Series
values its assets daily in terms of U.S. dollars, we do not convert
our holdings of foreign currencies into U.S. dollars on a daily basis.
We may, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of portfolio transactions and to minimize
currency value fluctuations. We may conduct foreign currency
transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market or through 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. By entering into these
transactions, the Series attempts to protect against a possible loss
resulting from an adverse change in currency exchange rates during the
period between when a security is purchased or sold and the date on
which payment is made or received.
- ------------------------------------------------------ -----------------------------------------------------------------------
American Depositary Receipts (ADRs): Certificates The Series may invest in sponsored and unsponsored ADR's that are
issued by a U.S. bank that represent the bank's actively traded in the United States.
holding of a stated number of shares of a foreign
corporation. An ADR entitles the holder to all
dividends and capital gains earned by the
underlying foreign shares. An ADR is bought and
sold the same as U.S. securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
European Depositary Receipts (EDRs) and Global In conjunction with their investments in foreign securities, the
Depositary Receipts (GDRs): EDRs and GDRs are Series may invest in sponsored and unsponsored EDRs and GDRs.
receipts issued by non-U.S. banks or trust companies
and foreign branches of U.S. banks that evidence
ownership of the underlying foreign or U.S.
securities. Sponsored EDRs or GDRs are issued
jointly by the issuer of the underlying security and
a Depositary, and unsponsored EDRs or GDRs are
issued without the participation of the issuer of
the deposited security.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------
Securities How we use them
International Equity Series
- ------------------------------------------------------ -----------------------------------------------------------------------
<S> <C>
Investment Company Securities In some countries, We may invest in such close-end investment companies if we believe the
investments by a mutual fund may only be made country offers good investment opportunities for the Series. We may
through investments in closed-end investment invest in either closed-end or open-end investment companies
companies that in turn invest in the securities of consistent with the 1940 Act requirements. These investments involve
such countries. an indirect payment of a portion of the expenses, including advisory
fees, of such other investment companies.
- ------------------------------------------------------ -----------------------------------------------------------------------
Repurchase Agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for
buyer, such as the Series, and a seller of the Series' cash position. In order to enter into these repurchase
securities in which the seller agrees to buy the agreements, the Series must have collateral of at least 102% of the
securities back within a specified time at the same repurchase price.
price the buyer paid for them, plus an amount equal
to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.
- ------------------------------------------------------ -----------------------------------------------------------------------
Restricted Securities: Privately placed securities International Equity Series may invest without limitation in
whose resale is restricted under securities law. privately placed securities that are eligible for resale only among
certain institutional buyers without registration. These are
commonly known as "Rule 144A Securities."
- ------------------------------------------------------ -----------------------------------------------------------------------
Illiquid Securities; Securities that do not have a We may invest up to 10% of the Series' total assets in illiquid
ready market, and cannot be easily sold, if at all, securities.
at approximately the price that the Fund has valued
them.
- ------------------------------------------------------ -----------------------------------------------------------------------
</TABLE>
The Series may also invest in futures contracts, and options. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.
Portfolio turnover
We anticipate that International Equity Series' annual portfolio turnover will
be less than 100%. A turnover rate of 100% would occur if the Series sold and
replaced securities valued at 100% of its net assets within one year.
Borrowing from Banks
International Equity Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Series will not borrow
money in excess of one-third of the value of its net assets.
Securities Lending
International Equity 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 securities transactions. These transactions will generate additional
income for the Series.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Series you should
carefully evaluate the risks. An investment in the Series typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Series. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------
Risks How we strive to manage them
International Equity Series
- ------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Market Risk is the risk that all or a majority of We maintain a long-term investment approach and focus on stocks we
the securities in a certain market--like the stock believe can appreciate over an extended time frame regardless of
or bond market--will decline in value because of interim market fluctuations. We do not try to predict overall stock
factors such as economic conditions, future market movements and do not trade for short-term purposes.
expectations or investor confidence.
We may hold a substantial part of each Series' assets in cash or cash
equivalents as a temporary defensive strategy.
- ------------------------------------------------------- ----------------------------------------------------------------------
Industry and Security Risk is the risk that the We limit the amount of each Series' assets invested in any one
value of securities in a particular industry or the industry and in any individual security. We also follow a rigorous
value of an individual stock or bond will decline selection process before choosing securities for the portfolio.
because of changing expectations for the performance
of that industry or for the individual company
issuing the stock or bond.
- ------------------------------------------------------- ----------------------------------------------------------------------
Foreign Risk is the risk that foreign securities may We carefully evaluate the overall situations in the countries where we
be adversely affected by political instability, invest in an attempt to reduce these risks. We also tend to avoid
changes in currency exchange rates, foreign economic markets where we believe accounting principles or the regulatory
conditions or inadequate regulatory and accounting structure are underdeveloped.
standards.
- ------------------------------------------------------ ----------------------------------------------------------------------
Currency Risk is the risk that the value of a We may try to hedge our currency risk by purchasing foreign currency
Series' investments may be negatively affected by exchange contracts. By agreeing to purchase or sell foreign securities
changes in foreign currency exchange rates. Adverse at a pre-set price on a future date, we strive to protect the value of
changes in exchange rates may reduce or eliminate the stock in the portfolio from future changes in currency rates. We
any gains produced by investments that are will use forward currency exchange contracts only for defensive
denominated in foreign currencies and may increase measures, not to enhance portfolio returns. However, there is no
any losses. assurance that a strategy such as this will be successful.
- ------------------------------------------------------ ----------------------------------------------------------------------
Political Risk is the risk that countries or the We carefully evaluate the political situations in the countries
entire region where we invest may experience where we invest and take into account any potential risks before we
political instability, which may cause greater select securities for the portfolio. However, there is no way to
fluctuation in the value of our investments due to eliminate political risk when investing internationally.
changes in currency exchange rates, governmental
seizures or nationalization of assets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------
Risks How we strive to manage them
International Equity Series
- ------------------------------------------------------- ----------------------------------------------------------------------
<S> <C>
Emerging Markets Risk is the possibility that the International Equity Series does not invest a significant portion of
risks associated with international investing will its assets in emerging markets, so this is not a major risk for the
be greater in emerging markets than in more Series. However, if we were to invest in any emerging market, we would
developed foreign markets because, among other carefully select securities and consider all relevant risks associated
things, emerging markets may have less stable with an individual company.
political and economic environments.
- ------------------------------------------------------- ----------------------------------------------------------------------
Inefficient Market Risk is the risk that foreign We will attempt to reduce these risks through portfolio
markets may be less liquid, have greater price diversification, credit analysis and attention to trends in the
volatility, less regulation and higher transaction economy, industries and financial markets.
costs than U.S. markets.
- ------------------------------------------------------- ----------------------------------------------------------------------
Information Risk is the possibility that foreign We conduct a great deal of fundamental research on the companies that
companies are subject to different accounting, we invest in rather than relying solely on information available
auditing and financial reporting standards than U.S. through financial reporting. We believe this will help us to better
companies. There may be less information available uncover any potential weaknesses in individual companies.
about foreign issuers than domestic issuers.
Furthermore, regulatory oversight of foreign issuers
may be less stringent or less consistently applied
than in the United States.
- ------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage REIT Series
Our investment strategies
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
The REIT Series strives to achieve maximum long-term total return. Capital
appreciation is a secondary objective. The Series invests 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 may also
invest in equity securities of real estate industry operating companies known as
REOCs.
The Series may also purchase preferred stock, convertible securities and
mortgage-backed securities.
While we do not intend to invest the Series' assets directly in real estate,
under certain circumstances it could own real estate directly as a result of a
default on securities in the portfolio. 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, futures, options and related activities will not be used
for speculative purposes but rather to quickly put money into the stock market
at times when the Series' assets are not fully invested in equity securities.
Positions in options or futures will generally be eliminated when the Series is
able to invest in appropriate securities.
We do not normally intend to acquire securities for the purpose of short-term
trading; however, we may take advantage of short-term opportunities that are
consistent with the Series' investment objectives.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- --------------------------------------------------- -----------------------------------------------------------------------
Securities How we use them
REIT Series
- --------------------------------------------------- -----------------------------------------------------------------------
<S> <C>
Real Estate Investment Trusts: A company, usually The Fund may invest without limitation in shares of REITs.
traded publicly, that manages a portfolio of real
estate to earn profits for shareholders.
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, derive
income primarily from the collection of rents and
can 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. 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.
- --------------------------------------------------- -----------------------------------------------------------------------
Real Estate Industry Operating Companies: a We may invest witout limit in REOCs.
company that derives at least 50% of its gross
revenues or net profits from
(1) 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.
- --------------------------------------------------- -----------------------------------------------------------------------
Foreign Securities and American The Series' investments in equity securities of REITs and REOCs may
Depositary Receipts: include, from time to time, sponsored or unsponsored American
Securities of foreign entities issued directly or, Depositary Receipts actively traded in the United States. Equity
in the case of American Depositary Receipts, securities for this purpose include common stocks, securities
through a U.S. bank. ADRs are issued by a U.S. bank convertible into common stocks and securities having common stock
and represent the bank's holding of a stated number characteristics, such as rights and warrants to purchase common
of shares of a foreign corporation. An ADR entitles stocks.
the holder to all dividends and capital gains
earned by the underlying foreign shares. ADRs are We may invest up to 10% of the Series' assets in foreign securities
bought and sold the same as U.S. securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------- -----------------------------------------------------------------------
Securities How we use them
REIT Series
- --------------------------------------------------- -----------------------------------------------------------------------
<S> <C>
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for
buyer, such as the Series, and a seller of the Series' cash position. In order to enter into these repurchase
securities in which the seller agrees to buy the agreements, the Series must have collateral of at least 102% of the
securities back within a specified time at the repurchase price. Except when the manager believes a temporary
same price the buyer paid for them, plus an defensive approach is appropriate, the Fund will not hold more than 5%
amount equal to an agreed upon interest rate. of its total assets in cash or such short-term investments. All
Repurchase agreements are often viewed as short-term investments will be of the highest quality as determined by
equivalent to cash. a nationally-recognized statistical rating organization (e.g. AAA by
Standard & Poor's Ratings Group or Aaa by Moody's Investors Service)
or be of comparable quality as determined by the manager.
- --------------------------------------------------- -----------------------------------------------------------------------
Restricted securities: Privately placed We may invest without limitation in privately placed securities that
securities whose resale is restricted under are eligible for resale only among certain institutional buyers
securities law. without registration. These are commonly known as Rule 144A
Securities. Other restricted securities must be limited to 15% of
total Series assets.
- --------------------------------------------------- -----------------------------------------------------------------------
Illiquid Securities: Securities that do not have We may invest up to 15% of net assets in illiquid securities.
a ready market, and cannot be easily sold, if at
all, at a reasonable price.
- --------------------------------------------------- -----------------------------------------------------------------------
</TABLE>
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Series you should
carefully evaluate the risks. Because of the nature of the REIT Series, you
should consider your investment to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in REIT Series. Please see the Statement
of Additional Information for further discussion of these risks and other risks
not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Risks How we strive to manage them
REIT Series
- ------------------------------------------------- ----------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of
the stock or bond market -- will decline in interim market fluctuations. We do not try to predict overall stock
value because of factors such as economic market movements and do not trade for short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of the Series' assets in cash or cash
equivalents as a temporary, defensive strategy.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Industry and security risk is the risk that the In the REIT Series we concentrate on the real estate industry. As a
value of securities in a particular industry or consequence, the share price of the Series may fluctuate in response
the value of an individual stock or bond will to factors affecting that industry, and may fluctuate more widely than
decline because of changing expectations for the a Portfolio that invests in a broader range of industries. The Series
performance of that industry or for the may be more susceptible to any single economic, political or
individual company issuing the stock or bond. regulatory occurrence affecting the real estate industry.
In addition, because the Series is non-diversified, it may invest
a greater proportion of its assets in the securities of a single
industry than diversified Series. See "Non-Diversified Risk"
below.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Interest rate risk is the risk that securities The REIT Series is subject to interest rate risk. As interest rates
will decrease in value if interest rates rise. decline, the value of the Series' investments in real estate
investment trusts that hold fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of the Series'
investments in real estate investment trusts holding fixed rate
obligations can be expected to decline. However, lower interest rates
tend to increase the level of re-financing which can hurt the returns
of REITs that hold fixed rate obligations.
- ------------------------------------------------- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Risks How we strive to manage them
REIT Series
- ------------------------------------------------- ----------------------------------------------------------------------------------
<S> <C>
Real Estate Industry Risk includes among others: Since the Series invests principally in REITs it is subject to risks
possible declines in the value of real estate; associated with the real estate industry. Investors should carefully
risks related to general and local economic consider these risks before investing in the Series.
conditions; possible lack of availability of
mortgage funds; overbuilding; extended vacancies
of properties; increases in competition; and
changes in interest rates. 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 Internal Revenue Code or to
maintain exemptions from the Investment
Company Act of 1940.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Non-Diversified Risk affects portfolios with a Though the REIT Series will hold a number of different securities,
greater percentage of assets invested in fewer technically, it is considered a non-diversified fund according to the
securities. Adverse effects on individual definition in the 1940 Act. In a diversified fund, 75% of the
holdings may have a greater impact on portfolio must be diversified, meaning the fund or series cannot
performance. invest more than 5% of net assets in an individual security. When a
fund is non-diversified, it does not have to limit the percentage of
assets invested in individual securities. However, the REIT Series
does intent to satisfy the Internal Revenue Code's diversification
requirement, which says that for 50% of the Series' assets, no more
than 5% of net assets can be invested in any one individual security.
The bottom line for shareholders is that 50% of the REIT Series must
be spread among various securities, with no more than 5% of net assets
invested in any single security. The other 50% can be more
concentrated with greater than 5% invested in individual securities.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We may invest up to 10% of the REIT Series' total assets in foreign
may be adversely affected by political securities; however we typically invest only a small portion of assets
instability, changes in currency exchange rates, in foreign securities.
foreign economic conditions or inadequate
regulatory and accounting standards. If the Fund holds international securities, currency considerations
may present risks. The Series may try to reduce this risk by investing
in forward foreign currency exchange contracts to neutralize currency
risks associated with the purchase of individual securities
denominated in a particular currency. See Futures and Options Risks
below.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can only
be sold at a price lower than the price that the
Fund has valued them.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Risks How we strive to manage them
REIT Series
- ------------------------------------------------- ----------------------------------------------------------------------------------
<S> <C>
Futures and Options Risk. Futures contracts, The REIT Series may use futures contracts and options on futures
options on futures contracts, forward contracts, contracts, as well as options on securities for defensive purposes and
and certain other options involve risks. For not for speculation. The Fund will enter into futures contracts and
example, there may be no correlation between options only as long as no more than 5% of the Series' assets are
price changes of an option or futures contract required as futures contract margin deposits and premiums on options.
and the assets being hedged. This could render Obligations under such futures contracts and options on those futures
the hedging strategy unsuccessful and could contracts may not exceed 20% of the Series' total assets.
result in losses. Options and futures contracts
on foreign currencies, and forward contracts,
entail particular risks related to conditions
affecting the underlying currency.
- ------------------------------------------------- ----------------------------------------------------------------------------------
</TABLE>
Lending securities
REIT Series may lend up to 25% of its assets to qualified dealers and investors
for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
REIT Series may buy or sell securities on a when-issued or delayed delivery
basis; that is, paying for securities before delivery or taking delivery at a
later date.
Portfolio Turnover rates reflect the amount of securities that are replaced from
the beginning of the year to the end of the year by the Series. The degree of
portfolio activity may affect brokerage costs and other transaction costs of the
Series. We anticipate that the annual turnover rate of the REIT Series will
generally not exceed 100%.
<PAGE>
How we manage Small-Cap Value Series
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Small-Cap Value Series. Following is a description of how the
portfolio manager pursues the Series' investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify small-companies that offer above-average opportunities for
long-term price appreciation because their current stock price does not
accurately reflect the companies' underlying value or future earning potential.
Under normal conditions, at least 65% of the Series' net assets will be invested
in the common stock of small cap companies, those having a market capitalization
generally less than $1.5 billion. Our focus will be on value stocks, defined as
stocks whose price is historically low based on a given financial measure such
as profits, book value or cashflow.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will carefully evaluate the financial strength of the company, the nature of
its management, any developments affecting the company or its industry,
anticipated new products or services, possible management changes, projected
takeovers or technological breakthroughs. Using this extensive analysis, our
goal is to pinpoint the companies within the universe of undervalued stocks,
whose true value is likely to be recognized and rewarded with a rising stock
price in the future.
Because there is added risk when investing in smaller companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding xx to xx different stocks, representing a wide
array of industries.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------------------------------------------------------------------------
Securities How we use them
Small Cap Value Series
- --------------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares Generally, we invest 90% to 100% of net assets in common stock of
of ownership in a corporation. Stockholders small companies that we believe are selling for less than their true
participate in the corporation's profits and value. Under normal conditions, we will hold at least 65% of the
losses, proportionate to the number of shares Series' net assets in these stocks.
they own.
- --------------------------------------------------- --------------------------------------------------------------------------------
Real Estate Investment Trusts: A company, The Series is permitted to invest in REITs and would typically do so
usually traded publicly, that manages a when this sector or specific companies within the sector appeared to
portfolio of real estate to earn profits for offer opportunities for price appreciation.
shareholders.
- --------------------------------------------------- --------------------------------------------------------------------------------
Foreign Securities and American Depositary Although Small Cap Value Series may invest up to 25% of its net assets
Receipts Securities of foreign entities issued in foreign securities or depository receipts, the manager has no
directly or, in the case of American Depositary present intention of doing so. We may hold ADRs when we believe they
Receipts, through a U.S. bank. ADRs are issued offer greater value and greater appreciation potential than U.S.
by a U.S. bank and represent a stated number of securities.
shares of a foreign corporation that the bank
holds in its vault. An ADR entitles the holder
to all dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- --------------------------------------------------- --------------------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for
buyer, such as the Series, and a seller of a Fund's cash position. In order to enter into these repurchase
securities in which the seller agrees to buy agreements, the Series must have collateral of at least 102% of the
the securities back within a specified time at repurchase price.
the same price the buyer paid for them, plus an
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as
equivalent to cash.
- --------------------------------------------------- --------------------------------------------------------------------------------
Restricted securities: Privately placed We may invest without limitation in privately placed securities that
securities whose resale is restricted under are eligible for resale only among certain institutional buyers
securities law. without registration. These are commonly known as Rule 144A
Securities. Other restricted securities must be limited to 10% of
total fund assets.
- --------------------------------------------------- --------------------------------------------------------------------------------
Illiquid Securities: Securities that do not have We may invest up to 10% of net assets in illiquid securities, including
a ready market, and cannot be easily sold, if at repurchase agreements with maturities of over seven days.
all, at a reasonable price.
- --------------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
Small Cap Value Series may also invest in other securities including convertible
securities, warrants, preferred stocks, and bonds. Please see the Statement of
Additional Information for additional descriptions and risk information on these
securities as well as those listed in the table above. You can find additional
information about the investments in the Fund's portfolio in the annual or
semi-annual shareholder report.
Lending securities
Small Cap Value Series may lend up to 25% of its assets to qualified dealers and
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis Small Cap Value
Series may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date.
Portfolio turnover
We anticipate that Small Cap Value Series' annual portfolio turnover will be
less than 100%. A turnover rate of 100% would occur if the Series sold and
replaced securities valued at 100% of its net assets within one year.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Series you should
carefully evaluate the risks. Because of the nature of the Series, you should
consider an investment in either one to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Small Cap Value Series. Please see the
Statement of Additional Information for further discussion of these risks and
the other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Risks How we strive to manage them
Small Cap Value Series
- ------------------------------------------------- ----------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of
the stock or bond market -- will decline in interim market fluctuations. We do not try to predict overall stock
value because of factors such as economic market movements and do not trade for short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of Small Cap Value Series' assets in
cash or cash equivalents as a temporary, defensive strategy.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of Small Cap Value Series' assets invested in any
value of securities in a particular industry or one industry and in any individual security. We also follow a rigorous
the value of an individual stock or bond will selection process before choosing securities and continuously monitor
decline because of changing expectations for the them while they remain in the portfolio.
performance of that industry or for the
individual company issuing the stock.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Small company risk is the risk that prices of Small Cap Value Series maintains a well-diversified portfolio, selects
smaller companies may be more volatile than stocks carefully and monitors them continuously. And, because we focus
larger companies because of limited financial on stocks that are already selling at relatively low prices, we
resources or dependence on narrow product lines. believe we may experience less price volatility than small-cap funds
that do not use a value-oriented strategy.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cashflow to
will decrease in value if interest rates rise. determine the company's ability to finance future expansion and
The risk is generally associated with bonds; operations. The potential affect that rising interest rates might have
however, because smaller companies often borrow on a stock is taken into consideration before the stock is purchased.
money to finance their operations, they may be
adversely affected by rising interest rates.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We typically invest only a small portion of Small Cap Value Series'
may be adversely affected by political portfolio in foreign securities. When we do purchase foreign
instability, changes in currency exchange rates, securities, they are often denominated in U.S. dollars. To the extent
foreign economic conditions or inadequate we invest in foreign securities, we invest primarily in issuers of
regulatory and accounting standards. developed countries, which are less likely to encounter these foreign
risks than issuers in developing countries. The Series may use hedging
techniques to help offset potential foreign currency losses.
- ------------------------------------------------- ----------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can only
be sold at a price significantly lower than
their broadly recognized value.
- ------------------------------------------------- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Social Awareness Series
- -------------------------------------
Our investment strategies
We use a computer-driven selection process designed to identify stocks of
companies that are likely to grow faster than the average of the companies in
the S&P 500. Aided by this technology, we evaluate and rank hundreds of stocks
daily, using a variety of factors such as dividend yield, earnings growth and
price to earnings ratios. Decisions to buy and sell stocks are determined by
this objective evaluation process.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Social Awareness Series is a socially responsible fund that invests primarily in
stocks that meet certain socially responsible criteria. It strives to provide
long-term capital appreciation to its shareholders.
We invest primarily in the common stocks of medium and large-sized companies
(generally $1.0 billion or more in market capitalization at the time of
purchase) that have met the established socially responsible criteria. We use
the Social Investment Database published by Kinder, Lyndberg, Domini & Company,
Inc. to determine which companies to exclude from our selection process. The
approved stocks are then evaluated using the computer selection process
described above.
Our goal is to seek stocks of companies that have the potential to grow
significantly faster than the average of the companies in the S&P 500. We
believe this growth, if achieved, will result in a rising share price that will
provide long-term appreciation to investors.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation and may pay
dividends as well.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Social Awareness Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares Generally, we invest 90% to 100% of net assets in common stock
of ownership in a corporation. Stockholders of medium-to large-size companies.
participate in the corporation's profits and
losses, proportionate to the number of shares
they own.
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment
buyer, such as the Series and a seller of for the Series' cash position. In order to enter into these
securities in which the seller agrees to buy the repurchase agreements, the Series must have collateral of at least
securities back within a specified time at the 102% of the repurchase price.
same price the buyer paid for them, plus an
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as
equivalent to cash.
- ---------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed We may invest up to 10% of the Series' net assets in privately
securities whose resale is restricted under placed securities, including those that are eligible for resale
securities law. among certain institutional buyers, known as Rule 144A
securities.
- ---------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do not have We may invest up to 10% of the Series' net assets in illiquid
a ready market, and cannot be easily sold, if at securities, including repurchase agreements with maturities of
all, at approximately the price that the Series over seven days.
has valued them.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Social Awareness Series is permitted to invest in all available types of equity
securities, including preferred stock, warrants and convertible securities. The
Series may also invest in foreign securities directly (although we have no
present intention to do so) or through depositary receipts. It may hold cash;
short-term debt securities and money market instruments and engage in futures
and options transactions for defensive purposes. Please see the Statement of
Additional Information for additional descriptions on these securities as well
as those listed in the table above. You can find additional information about
the investments in the Series' portfolio in the annual or semi-annual
shareholder report.
Lending securities
Social Awareness Series may lend up to 25% of its assets to qualified brokers,
dealers and institutional investors for their use in security transactions.
Portfolio turnover
We anticipate that Social Awareness Series' annual portfolio turnover will be
less than 100%. A turnover rate of 100% would occur if the Series sold and
replaced securities valued at 100% of its net assets within one year.
Borrowing from banks
Social Awareness Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Series you should
carefully evaluate the risks. An investment in the Series typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in Social Awareness Series. Please see the Statement
of Additional Information for further discussion of these risks and the other
risks not discussed here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Social Awareness Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or We maintain a long-term investment approach and focus on stocks we
a majority of the securities in a believe can appreciate over an extended time frame regardless of
certain market -- like the stock or interim market fluctuations. We do not try to predict overall
bond market -- will decline in stock market movements and do not trade for short-term purposes.
value because of factors such as
economic conditions, future We may hold a substantial part of the Series' assets in cash or
expectations or investor cash equivalents as a temporary, defensive strategy.
confidence.
- ---------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk We limit the amount of Social Awareness Series' assets invested in
that the value of securities in a any one industry and in any individual security.
particular industry or the value of an
individual stock or bond will decline Because Social Awareness Series avoids investing in companies that
because of changing expectations for don't meet socially responsible criteria, its exposure to certain
the performance of that industry or industry sectors may be greater or less than similar funds or
for the individual company market indexes. This could affect its performance positively or
issuing the stock or bond. negatively, depending on the performance of those sectors.
- ---------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, or can only be sold at
approximately the price that the Series has valued them.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Strategic Income Series
Our investment strategies
We evaluate the creditworthiness of individual bond issuers and analyze economic
and market conditions, seeking to identify bonds that we think are the best
investments for the Strategic Income Series. Following are descriptions of how
the portfolio managers pursue the Series' investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Strategic Income Series
Strategic Income Series is a type of fixed income fund that invests in three
distinct sectors of the fixed income market as it pursues its investment
objective of providing the high current income and total return. In determining
how much of the portfolio to allocate to each sector, we review economic and
market conditions and interest rate trends as well as the potential risks and
rewards associated with each sector. As little as 20% or as much as 60% of the
Series' assets may be invested in each fixed-income sector.
In addition, the Series may invest up to 10% of its assets in U.S. equity
securities.
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.
Securities we typically invest in
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Strategic Income Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
High-Yield Corporate Bonds: Debt obligations issued by a Strategic Income Series may invest up to 60% of net assets in
corporation and rated lower than investment grade by a high-yield corporate bonds. Emphasis is typically on those rated
BB nationally recognized statistical ratings organization or B by an NRSRO.
(NRSRO) such as S&P or Moody's or, if unrated, that we
believe are of comparable quality. High-yield bonds are We carefully evaluate an individual company's financial situation,
issued by corporations that have poor credit quality and may its management, the prospects for its industry and the technical
have difficulty repaying principal and interest. factors related to its bond offering. Our goal is to identify those
companies that we believe will be able to repay their debt
obligations in spite of poor ratings. The Series will invest in
both rated and unrated bonds. Unrated bonds may be more speculative
in nature than rated bonds.
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities: Direct U.S. obligations including The Series may invest up to 60% of net assets in direct U.S.
bills, notes, bonds and other debt securities issued by the government obligations; however, they will typically be a smaller
U.S. Treasury or securities of U.S. government agencies or percentage of the portfolio because they generally do not offer as
instrumentalities. high a level of current income as other fixed income securities the
Series may invest in.
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities that There is no limit on government-related mortgage-backed securities
represent pools of mortgages, with investors receiving or on fully collateralized privately issued mortgage-backed
principal and interest payments as the underlying mortgage securities.
loans are paid back. Many are issued and guaranteed against
default by the U.S. government or its agencies or We may invest up to 20% of net assets in mortgage-backed securities
instrumentalities, such as the Federal Home Loan Mortgage issued by private companies whether or not the securities are 100%
Corporation, Fannie Mae and the Government National Mortgage collateralized. However, these securities must be rated in one of
Association. Others are issued by private financial the four highest categories by an NRSRO at the time of purchase.
institutions, with some fully collateralized by certificates The privately issued securities we invest in are either CMOs or
issued or guaranteed by the government or its agencies or REMICs (see below).
instrumentalities.
- ------------------------------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations (CMOs): Privately issued See mortgage-backed securities above.
mortgage-backed bonds whose underlying value is the mortgages
that are grouped into different pools according to their
maturity.
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate mortgage investment conduits (REMICs): Privately See mortgage-backed securities above.
issued mortgage-backed bonds whose underlying value is a
fixed pool of mortgages secured by an interest in real
property. Like CMOs, REMICs offer different pools.
- ------------------------------------------------------------------------------------------------------------------------------------
Asset-backed securities: Bonds or notes backed by accounts We invest only in asset-backed securities rated in one of the four
receivables including home equity, automobile or credit highest categories by an NRSRO.
loans.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Strategic Income Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Grade Corporate bonds: Debt obligations issued by We focus on bonds rated in one of the four highest categories by
a corporation, rated in one of the four highest categories an NRSRO (or deemed equivalent).
by an NRSRO (or, if unrated that we believe are of equal
quality). Debt securities within the top three categories comprise what are
known as high-grade bonds and are regarded as having a strong
capacity to pay principal and interest. Securities in the fourth
category are known as medium-grade bonds and regarded as having an
adequate capacity to pay principal and interest but with greater
vulnerability to adverse economic conditions and speculative
characteristics.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Government Securities: We will generally invest only in foreign government securities
Securities issued by foreign governments or supranational rated AAA or AA by S&P or Aaa or Aa by Moody's or, if unrated,
entities. A supranational entity is an entity established or considered to be of comparable quality by us.
financially supported by the national governments of one or However, up to 15% of the Series' assets may also be
more countries. The International Bank for Reconstruction invested in foreign government securities issued by
and Development (more commonly known as the World Bank) is emerging or developing countries, which may be lower
one example of a Supranational entity. rated, including securities rated below investment
grade.
We may also invest in securities issued by supranational entities,
which are typically of higher quality.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Corporate Bonds: Debt obligations issued by a We may invest in both rated and unrated securities of foreign
foreign corporation. corporations. The rated securities that the Series may include
those rated BBB or lower by S&P or Fitch, Baa or lower by Moody's,
or similarly rated by another nationally recognized statistical
rating organization.
- ------------------------------------------------------------------------------------------------------------------------------------
Zero Coupon Bonds and Pay in Kind Bonds: Zero coupon We may invest in zero coupon bonds and payment in kind bonds,
securities are debt obligations which do not entitle the though this is not expected to be a significant component of our
holder to any periodic payments of interest prior to strategy. The market prices of these bonds are generally more
maturity or a specified date when the securities begin volatile than the market prices of securities that pay interest
paying current interest. Therefore, they are issued and periodically and are likely to react changes in interest rates to a
traded at a discount from their face amounts or par value. greater degree than interest-paying bonds having similar maturities
Payment-in-kind bonds pay interest or dividends in the form and credit quality. They may have certain tax consequences which,
of additional bonds or preferred stock. under certain conditions, could be adverse to the Series.
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Securities: Common stocks, preferred stocks (including Up to 10% of the Series' assets may be invested in U.S. equity
adjustable rate preferred stocks) and other equity securities.
securities, such as convertible securities and warrants.
Such investments must be consistent with the Series' objective of
high current income and total return.
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Company Securities: In some foreign countries, We may invest in either closed-end or open-end investment companies
investments by a mutual fund may only be made through consistent with the 1940 Act requirements. These investments
investments in closed-end investment companies that in turn involve an indirect payment of a portion of the expenses, including
invest in the securities of such countries. advisory fees, of such other investment companies.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Strategic Income Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Brady Bonds: These are debt securities issued under the We may invest in Brady Bonds. We believe that the economic reforms
framework of the Brady Plan, an initiative announced by the undertaken by countries in connection with the issuance of Brady
U.S. Treasury Secretary, Nicholas F. Brady in 1989, as a Bonds makes the debt of countries that have issued or have
mechanism for debtor nations to restructure their announced plans to issue Brady Bonds an attractive opportunity for
outstanding external indebtedness (generally, commercial investment.
bank debt).
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Currency, Foreign Currency Contracts or Forward We may invest in securities issued in any currency and may hold
Contracts: A forward contract involves an obligation to foreign currency.
purchase or sell a specific currency at a future date at a
price set at the time of the contract. Forward contracts In addition, the Series may enter into contracts to purchase or
are used to "lock-in" the price of a security it has agreed sell foreign currencies at a future date. Although the Series
to purchase or sell, in terms of U.S. dollars or other values its assets daily in terms of U.S. dollars, we do not convert
currencies. our holdings of foreign currencies into U.S. dollars on a daily
basis. We may, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency transactions
in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations. We may conduct foreign
currency transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through 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. By
entering into these transactions, the Series attempts to protect
against a possible loss resulting from an adverse change in
currency exchange rates during the period between when a security
is purchased or sold and the date on which payment is made or
received.
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term investment
the Series, and a seller of securities in which the seller for the a Series's cash position. In order to enter into these
agrees to buy into securities back within a specified time repurchase agreements, the Series must have collateral of at least
at the same price the buyer paid for them, plus an amount 102% of the repurchase price.
equal to an agreed upon interest rate. Repurchase agreements
are often viewed as equivalent to cash.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest without limitation in privately placed securities
resale is restricted under securities law. that are eligible for resale only among certain institutional
buyers without registration. These are commonly known as Rule 144A
Securities. Other restricted securities must be limited to 10% of
total Series assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 10% of total assets in illiquid securities.
market, and cannot be easily sold, if at all, at
approximately the price that the Series has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Series may also invest in futures contracts and options on futures contracts
subject to certain limitations. Please see the Statement of Additional
Information for additional descriptions on these securities as well as those
listed in the table above.
<PAGE>
Lending securities
Strategic Income Series may lend up to 25% of its assets to qualified brokers,
dealers and investors for their use in security transactions.
Borrowing from Banks
Strategic Income Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. A Series will not borrow
money in excess of one-third of the value of its net assets.
Purchasing securities on a when-issued or delayed delivery basis
Strategic Income Series may buy or sell securities on a when-issued or delayed
delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that Strategic Income Series' annual portfolio turnover will be
less than 100%. A turnover rate of 100% would occur if a Series sold and
replaced securities valued at 100% of its net assets within one year.
<PAGE>
The risks of investing in the Series
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in Strategic Income Series typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Strategic Income Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on
the securities in a certain market--like the bonds that we believe will continue to pay interest
stock or bond market--will decline in value regardless of interim market fluctuations. We do not try to
because of factors such as economic predict overall bond market or interest rate movements and
conditions, future expectations or investor do not trade for short-term purposes.
confidence.
We may hold a substantial part of Strategic Income Series'
assets in cash or cash equivalents as a temporary
defensive strategy.
- ---------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the We diversify the Series assets across three distinct sectors
value of of securities in a particular industry or the of the bond market and among a wide variety of individual
value an individual stock or bond will decline issuers.
because of changing expectations for the
performance of that industry or for the
individual company issuing the stock or bond.
- --------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities will Strategic Income Series is subject to interest rate risk. We
decrease in value if interest rates rise. The risk cannot eliminate that risk, but we do strive to manage it by
is greater for bonds with longer maturities than monitoring economic conditions.
for those with shorter maturities.
- --------------------------------------------------------------------------------------------------------------------------
Credit Risk
The possibility that a bond's issuer (or an Our careful, credit-oriented bond selection and our
entity that insures the bond) will be unable to commitment to hold a diversified selection of high-yield
make timely payments of interest and bonds are designed to manage this risk.
principal.
It is likely that protracted periods of economic uncertainty
Investing in so-called "junk" or "high-yield" would cause increased volatility in the market prices of
bonds entails the risk of principal loss, which high-yield bonds, an increase in the number of high-yield
may be greater than the risk involved in bond defaults and corresponding volatility in the Series' net
investment grade bonds. High-yield bonds are asset value.
sometimes issued by companies whose
earnings at the time of issuance are less than Our holdings of high quality investment grade bonds are
the projected debt service on the junk bonds. less subject to interest rate risk and may help to balance
any credit problems experienced by individual high yield
Although experts disagree on the impact bond issuers or foreign issuers.
recessionary periods have had and will have
on the high-yield market, some analysts
believe a protracted economic downturn would
severely disrupt the market for high-yield
bonds, adversely affect the value of
outstanding bonds and adversely affect the
ability of high-yield issuers to repay principal
and interest.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Strategic Income Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign risk is the risk that foreign securities The Series will attempt to reduce foreign investing risks
may be adversely affected by political through portfolio diversification, credit analysis and
instability (including governmental seizures or attention to trends in the economy, industries and financial
nationalization of assets), changes in currency markets.
exchange rates, foreign economic conditions or
inadequate regulatory and accounting We carefully evaluate the political and economic situations
standards. Foreign markets may also be less in the countries where we invest and take these risks into
efficient, less liquid, have greater price account before we select securities for the portfolio.
volatility, less regulation and higher transaction However, there is no way to eliminate foreign risks when
costs than U.S. markets. investing internationally.
- ---------------------------------------------------------------------------------------------------------------------------
Foreign Government Securities Risks Strategic Income Series attempts to reduce the risks
involve the ability of a foreign government or associated with investing in foreign governments by limiting
government related issuer to make timely and the portion of portfolio assets that may be invested in
ultimate payments on its external debt such securities.
obligations. This ability to make payments will
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.
- ---------------------------------------------------------------------------------------------------------------------------
Currency Risk is the risk that the value of an We may try to hedge currency risk by purchasing foreign
investment may be negatively affected by currency exchange contracts. By agreeing to purchase or
changes in foreign currency exchange rates. sell foreign securities at a pre-set price on a future date, the
Adverse changes in exchange rates may Series strive to protect the value of the stock they own from
reduce or eliminate any gains produced by future changes in currency rates. We will use forward
investments that are denominated in foreign currency exchange contracts only for defensive measures,
currencies and may increase any losses. not to enhance portfolio returns. However, there is no
assurance that a strategy such as this will be successful.
- ---------------------------------------------------------------------------------------------------------------------------
Emerging Markets Risk is the possibility that While the Strategic Income Series may purchase securities
the risks associated with international investing of issuers in any foreign country, developed and emerging,
will be greater in emerging markets than in no more than 15% of the Series' assets may be invested in
more developed foreign markets because, direct obligations of issuers located in emerging market
among other things, emerging markets may countries.
have less stable political and economic
environments.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
Strategic Income Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Liquidity risk is the possibility that securities A less liquid secondary market may have an adverse effect
cannot be readily sold, if at on our all, at ability to dispose of particular issues, when
approximately the price that a Series values necessary, to meet the Series' liquidity needs or in
them. response to a specific economic event, such as the
deterioration in the creditworthiness of the issuer. In
The secondary market for high-yield securities striving to manage this risk, we evaluate the size of a bond
is currently dominated by institutional investors, issuance as a way to anticipate its likely liquidity level.
including mutual funds and certain financial
institutions. The high-yield secondary market is We may invest only 10% of net assets in illiquid securities,
particularly susceptible to liquidity problems excluding Rule 144A securities described above.
when the institutions which dominate it
temporarily cease buying bonds for regulatory,
financial or other reasons, such as the savings
and loan crisis.
- ---------------------------------------------------------------------------------------------------------------------------
Valuation Risk We will strive to manage this risk by carefully evaluating
A less liquid secondary market as described individual bonds and by limiting the amount of the portfolio
above makes it more difficult for the Series to that can be allocated to privately placed high-yield
obtain precise valuations of the high-yield securities.
securities in its portfolio. During periods of
reduced liquidity, judgment plays a greater role
in valuing high-yield securities.
- ---------------------------------------------------------------------------------------------------------------------------
Legislative and Regulatory Risk We monitor the status of regulatory and legislative
The United States Congress has from time to proposals to evaluate any possible effects they might have
time taken or considered legislative actions that on the Series' portfolio.
could adversely affect the high-yield bond
market. Such actions in the future could
reduce liquidity for high-yield issues, reduce
the number of new high-yield securities being
issued and could make it more difficult for the
Series to attain its investment objective.
- ------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
<PAGE>
How we manage Trend Series
- --------------------------
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Trend Series. Following is a description of how the portfolio
manager pursues the Series' investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify small-companies that offer above-average opportunities for
long-term price appreciation because they are poised to benefit from changing
and dominant trends within society or the political arena. In striving to
identify such companies, we will evaluate a company's managerial skills, product
development and sales and earnings.
Because there is added risk when investing in smaller companies, which may
still be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding xx to xx different stocks, representing a wide
array of industries.
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Securities How we use them
Trend Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent Generally, we invest 90% to 100% of net assets in common
shares of ownership in a corporation. stock of small growth-oriented companies.
Stockholders participate in the corporation's
profits and losses, proportionate to the
number of shares they own.
- ---------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts We may hold ADRs when we believe they offer greater
ADRs are issued by a U.S.bank and represent the appreciation potential than U.S. securities.
bank's holdings of a stated number of shares of
a foreign corporation. An ADR entitles the
holder to all dividends and capital gains
earned by the underlying foreign shares. ADRs
are bought and sold the same as U.S.
securities.
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term
buyer, such as the Series, and a seller of investment for a Series' cash position. In order to enter into
securities in which the seller agrees to buy these repurchase agreements, the Series must have collateral
the securities back within a specified time at of at least 102% of the repurchase price.
the same price the buyer paid for them, plus an
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as
equivalent to cash.
- ---------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed We may invest without limitation in privately placed securities
securities whose resale is restricted under that are eligible for resale only among certain institutional
securities law. buyers without registration. These are commonly known as
Rule 144A Securities. Other restricted securities must be
limited to 10% of total Series assets.
- ---------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do not We may invest up to 10% of net assets in illiquid securities,
have a ready market, and cannot be easily including repurchase agreements with maturities of over seven
sold, if at all, at a reasonable price. days.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Trend Series may also invest in other securities including convertible
securities, warrants, preferred stocks, and bonds. Trend Series may invest a
portion of its net assets in foreign securities; however, the manager has no
present intention of doing so. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Series' portfolio in the annual or semi-annual
shareholder report.
Lending securities
Trend Series may lend up to 25% of its assets to qualified dealers and investors
for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Trend Series may buy or sell securities on a when-issued or delayed delivery
basis; that is, paying for securities before delivery or taking delivery at a
later date.
Portfolio turnover
We anticipate that Trend Series' annual portfolio turnover may be greater than
100%. A turnover rate of 100% would occur if a Series sold and replaced
securities valued at 100% of its net assets within one year. High turnover can
result in increased transaction costs and tax liability for the Series.
<PAGE>
Who manages the Series
Investment managers and sub-advisers
The Funds are managed by Delaware Management Company or Delaware International
Advisers Ltd. Certain Series are sub-advised by Delaware International Advisers
Ltd., Lincoln Investment Management, Inc. or Vantage Investment Advisors.
The following table shows the Series along with their Managers and Sub-advisers.
The following table also shows the aggregate fee paid to the managers and
sub-advisers for the last fiscal year.
<TABLE>
<CAPTION>
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Investment Management Fee (as a
percentage of average daily net
Series Manager Sub-Adviser assets)
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
<S> <C> <C> <C>
Aggressive Growth Delaware Management *
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Capital Reserves Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Cash Reserve Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Convertible Securities Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Delaware Balanced Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Delcap Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Delchester Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Devon Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Emerging Markets Delaware International
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Global Bond Delaware International
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Growth and Income Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
International Equity Delaware International
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
REIT Delaware Management Lincoln *
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Small Cap Value Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Social Awareness Delaware Management Vantage
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Strategic Income Delaware Management Delaware International
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
Trend Delaware Management
- ----------------------------- ---------------------------- -------------------------- ---------------------------------
</TABLE>
*Aggressive Growth Series and REIT Series each will pay the manger the following
fee:__________.
Delaware Management Company is a series of Delaware Management Business Trust
which is an indirect, wholly owned subsidiary of Delaware Management Holdings,
Inc. Delaware International Advisers Ltd. is an affiliate of Delaware Management
Company. Delaware Management Company or Delaware International makes investment
decisions for the Series, manages the Series' business affairs and provides
daily administrative services.
Lincoln Investment Management, Inc. as Sub-adviser to REIT Series, provides
Delaware Management Company with investment recommendations, asset allocation
advice, research, economic analysis and other investment services regarding the
types of securities in which we invest.
Vantage, as sub-adviser to Social Awareness Series, is responsible for
day-to-day management of the Series' assets. Delaware Management Company
administers the Series' affairs and has ultimate responsibility for all
investment advisory services for the Series. Delaware Management Company also
supervises the sub-adviser's performance.
<PAGE>
Portfolio Managers
The following individuals have day-to-day responsibility for making investment
decisions for the Series
Jeffrey J. Nick
Richard G. Unruh
John B. Fields, Vice President and Senior Portfolio Manager, Growth and Income
Series. Mr. Fields, who has 27 years experience in investment management, earned
a bachelor's degree and an MBA from Ohio State University. Before joining
Delaware Investments in 1992, he was Director of Domestic Equity Risk Management
at DuPont. Prior to that time, he was Director of Equity Research at Comerica
Bank. Mr. Fields is a member of the Financial Analysts Society of Wilmington,
Delaware. . In making investment decisions for the Decatur Total Return Series,
Mr. Fields works with a team of 12 portfolio managers and analysts, each of whom
specializes in a different industry sector and makes recommendations
accordingly. He has been managing this Series since 1992.
Paul A. Matlack, Vice President/Senior Portfolio Manager, Delchester Series,
Strategic Income Series A CFA charterholder, Mr. Matlack is a graduate of the
University of Pennsylvania with an MBA in Finance from George Washington
University. He began his career at Mellon Bank as a credit specialist, and later
served as a corporate loan officer for Mellon Bank and then Provident National
Bank. Mr. Matlack has been a member of the Delchester Series team since 1990 and
has been co-managing the Dechester Series since January 1993. He has primary
responsibility for allocating Strategic Income Series' assets among the
fixed-income and equity sectors and for making day-to-day investment decisions
for the Series regarding its investments in the high-yield sector. Mr. Matlack
has been a member of the Series' management team since its inception.
Gerald T. Nichols, Vice President/Senior Portfolio Manager, Delchester Series
Mr. Nichols is a graduate of the University of Kansas, where he received a BS in
Business Administration and an MS in Finance. Prior to joining Delaware
Investments, he was a high-yield credit analyst at Waddell & Reed, Inc. and
subsequently the investment officer for a private merchant banking firm. He is a
CFA charterholder. Mr. Nichols has been a member of the Delchester Series team
since 1990 and has been co-managing the Dechester Series since January 1993
Paul Grillo, Vice President/Portfolio Manager, Strategic Income Series Mr.
Grillo holds a BA in Business Management from North Carolina State University
and an MBA in Finance from Pace University. Prior to joining Delaware
Investments in 1993, he served as mortgage strategist and trader at the Dreyfus
Corporation. He also served as a mortgage strategist and portfolio manager for
the Chemical Investment Group and as financial analyst at the Chemical Bank. Mr.
Grillo is a CFA charterholder. He has primary responsibility for making
day-to-day investment decisions for this Series regarding its investments in
investment grade securities. Mr. Grillo has been a member of the Fund's
management team since its inception.
Babak Zenouzi, Vice President/Senior Portfolio Manager, Convertible Securities
Series 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 Delaware Investments 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. He has responsibility for making
day-to-day investment decisions for this Series regarding its investments in
U.S. equity securities. Mr. Zenouzi has been a member of the Series' management
team since its inception.
Gary A. Reed, Vice President/Senior Portfolio Manager, Capital Reserves Series
and Delaware Balanced Series He holds an AB in Economics from the University of
Chicago and an MA in Economics from Columbia University. He began his career in
1978 with the Equitable Life Assurance Company in New York City, where he
specialized in credit analysis. Prior to joining Delaware Investments in 1989,
Mr. Reed was Vice President and Manager of the fixed-income department at Irving
Trust Company in New York. Mr. Reed has been Capital Reserves Series' senior
portfolio manager since 1989 and Delaware Series' senior portfolio manager for
fixed-income since 1989.
<PAGE>
Gerald S. Frey, Vice President/Senior Portfolio Manager, Aggressive Growh
Series, DelCap Series and Trend Series Mr. Frey has 22 years' experience in the
money management business and holds a BA in Economics from Bloomsburg University
and attended Wilkes College and New York University. Prior to joining Delaware
Investments in 1996, he was a Senior Director with Morgan Grenfell Capital
Management in New York. Mr. Frey has been senior portfolio manager of the Series
since March 1997 and was Co-Manager from June 1996 to March 1997.
Marshall T. Bassett, Vice President, DelCap Series and Trend Series Mr. Bassett
joined Delaware Investments in 1997. In his most recent position, he served as
Vice President in Morgan Stanley Asset Management's Emerging Growth Group, where
he analyzed small growth companies. Prior to that, he was a trust officer at
Sovran Bank and Trust Company. He received his bachelor's degree and MBA from
Duke University.
John A. Heffern, Vice President, DelCap Series and Trend Series Mr. Heffern
holds a bachelor's degree and an MBA from the University of North Carolina at
Chapel Hill. He joined Delaware Investments in 1997. Previously, he was a Senior
Vice President, Equity Research at NatWest Securities Corporation's Specialty
Finance Services unit. Prior to that, he was a Principal and Senior Regional
Bank Analyst at Alex. Brown & Sons.
Jeffrey W. Hynoski, Vice President, DelCap Series and Trend Series Mr. Hynoski
joined Delaware Investments in 1998. Previously he served as a Vice President at
Bessemer Trust Company in the mid and large capitalization growth group, where
he specialized in the areas of science, technology, and telecommunications.
Prior to that, Mr. Hynoski held positions at Lord Abbett & Co. and Cowen Asset
Management. Mr. Hynoski holds a BS in Finance from the University of Delaware
and an MBA with a concentration in Investments/Portfolio Management and
Financial Economics from Pace University.
Lori P. Wachs, Vice President, DelCap Series and Trend Series Ms.Wachs joined
Delaware Investments in 1992 from Goldman Sachs, where she was an equity analyst
for two years. She is a graduate of the University of Pennsylvania's Wharton
School, where she majored in Finance and Oriental Studies.
George H. Burwell, Vice President/Senior Portfolio Manager, Delaware Balanced
Series and Devon Series Mr. Burwell holds a BA from the University of Virginia.
Prior to joining Delaware Investments in 1992, Mr. Burwell was a portfolio
manager for Midlantic Bank in Edison, New Jersey, where he managed an equity
mutual fund and three commingled funds. Mr. Burwell is a CFA charterholder. Mr.
Burwell has been Delaware Series' senior portfolio manager for equities since
1992 and Devon Series' senior portfolio manager since its inception
Christopher S. Beck, Vice President/Senior Portfolio Manager, Small Cap Value
Series Mr. Beck has been in the investment business for 16 years, starting with
Wilmington Trust in 1981. Later, he became Director of Research at Cypress
Capital Management in Wilmington and Chief Investment Officer of the University
of Delaware Endowment Fund. Prior to joining Delaware Investments in May 1997,
he managed the Small Cap Fund for two years at Pitcairn Trust Company. He holds
a BS from the University of Delaware, an MBA from Lehigh University and is a CFA
charterholder. When making investment decisions for the Fund, Mr. Beck regularly
consults with and Andrea Giles.
Andrea Giles, Research Analyst, Small Cap Value Series Ms. Giles holds a BSAD
from the Massachusetts Institute of Technology and an MBA in Finance from
Columbia University. Prior to joining Delaware Investments in 1996, she was an
account officer in the Leveraged Capital Group with Citibank.
<PAGE>
Damon Andres, Assistant Vice President/Portfolio Manger, Convertible Securities
Series Mr. Andres earned a BS in Business Administration with an emphasis in
Finance and Accounting from the University of Richmond. Prior to joining
Delaware Investments in 1994, Mr. Andres performed investment consulting
services as a Consulting Associate with Cambridge Associates, Inc. in Arlington,
Virginia.
David G. Tilles. Mr. Tilles, who is Chief Investment Officer for Delaware
International, is a graduate of the University of Warwick with a BS in
management sciences. Before joining Delaware International in 1990, he was Chief
Investment Officer of Hill Samuel Investment Advisers Ltd. He is a member of the
Institute of Investment Management & Research and the Operational Research
Society.
Clive A. Gillmore, International Equity Series, Emerging Markets Series Mr.
Gillmore is a graduate of the University of Warwick and began his career at
Legal and General Investment Management, which is the asset management division
of Legal and General Assurance Society Ltd., a large U.K. life and pension
company. Mr. Gillmore joined Delaware International in 1990 after eight years of
investment experience. His most recent position prior to joining Delaware
International was as a Pacific Basin equity analyst and senior portfolio manager
for Hill Samuel Investment Advisers Ltd. Mr. Gillmore completed the London
Business School Investment program. He has been managing each Series since their
inception.
Nigel A. May , International Equity Series Mr. May joined Mr. Gillmore as
Co-Manager of the Series on December 22, 1997. Mr. May is a graduate of Sidney
Sussex College, Cambridge. He joined Delaware International in 1991, assuming
portfolio management responsibilities and sharing analytical responsibilities
for continental Europe. He previously had been with Hill Samuel Investment
Management Group for five years. In making investment decisions for the Series,
Mr. Gillmore and Mr. May regularly consult with an international equity team of
fourteen members.
Robert Akester, Emerging Markets Series Prior to joining Delaware International
in 1996 as a Senior Portfolio Manager, Mr. Akester, who began his investment
career in 1969, was most recently a Director of Hill Samuel Investment Advisers
Ltd., which he joined in 1985. His prior experience included working as a Senior
Analyst and head of the South-East Asian Research team at James Capel, and as a
Fund Manager at Prudential Assurance Co., Ltd. Mr. Akester holds a BS in
Statistics and Economics from University College, London and is an associate of
the Institute of Actuaries, with a certificate in Finance and Investment.
Joshua Brooks, Emerging Markets Series Mr. Brooks holds a bachelor's degree from
Yale University and has undertaken graduate studies at The London Business
School. He began his investment career with Delaware Investments in 1991. Prior
to joining the emerging markets team in London, he was based in Philadelphia
with responsibilities that included equity market analysis and liaison with
Delaware International.
Ian G. Sims, Global Bond Series, Strategic Income Mr. Sims has been the senior
portfolio manager for this Series since its inception. Mr. Sims is a graduate of
the University of Newcastle-Upon-Tyne. He joined Delaware International in 1990
as a senior international fixed-income and currency manager. Mr. Sims began his
investment career with the Standard Life Assurance Co., and subsequently moved
to the Royal Bank of Canada Investment Management International Company, where
he was an international fixed-income manager. Prior to joining Delaware
International, he was a senior fixed-income and currency portfolio manager with
Hill Samuel Investment Advisers Ltd. Ian G. Sims has primary responsibility for
making day-to-day investment decisions for Strategic Income Series regarding its
investments in foreign securities. Mr. Sims has been a member of the Fund's
management team since its inception.
<PAGE>
Christopher Moth, Global Bond Series Mr. Moth became Co-Manager of the Series in
January 1997. Mr. Moth is a graduate of The City University London. Mr. Moth
joined Delaware International in 1992. He previously worked at the Guardian
Royal Exchange in an actuarial capacity where he was responsible for technical
analysis, quantitative models and projections. Mr. Moth has been awarded the
certificate in Finance & Investment from the Institute of Actuaries in London.
Hywel Morgan. Mr. Morgan was educated at the University of Wales and was
subsequently an Economics Lecturer at Dundee University. Prior to joining
Delaware International, he was Associate Director of the international
fixed-income department and head of the credit review committee at Hill Samuel
Investment Management responsible for over $500 million in multi-currency fixed
interest accounts. His prior experience included working as an economic adviser
for Credit Suisse and the Economic Intelligence Unit. Mr. Morgan started his
business career as a Corporate Economist & Strategist at Ford of Europe and Esso
Petroleum.
T. Scott Wittman, President of Vantage Investment Advisors, has had primary
responsibility for making day-to-day investment decisions for the Fund since its
inception. His responsibilities with Vantage Investment Advisors include both
business administration and equity portfolio management. Mr. Wittman is a
Certified Financial Analyst (CFA). He has spent his entire professional career
in quantitative investment firms, including TSA Capital Management, where he was
a managing director, and Mellon Bank, where he was Vice President and Manager of
Quantitative Analysis and Systems.
Enrique Chang, Senior Vice President and Chief Investment Officer of Vantage
Investment Advisors, became co-manager of the Fund in January 1999. Mr. Chang
oversees the management of all equity portfolios and directs Vantage's
quantitative research efforts. He received a BA in mathematics from Fairleigh
Dickinson University in May of 1985, an MBA in finance and quantitative analysis
from New York University in May of 1988, and an MS in statistics and operations
research from New York University in May of 1996. He was previously an actuary
with Prudential, Director of Quantitative Analysis and Strategy with General
Reinsurance Corporation, and Senior Vice President and Director of Quantitative
Analysis with J&W Seligman.
Christopher P. Harvey, Vice President of Vantage Investment Advisers, became
co-manager of the Fund in January 1999. Mr. Harvey manages portfolios, conducts
investment research and assists in equity trading. He graduated Bucknell
University with a BS degree in accounting. He received an M.B.A. from the Stern
School of Business at New York University. Prior to joining Vantage Investment
Advisors, Mr. Harvey was a financial analyst with Merrill Lynch.
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Directors
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Managers The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Delaware International Advisers Ltd.
Third Floor
80 Cheapside
London, England EC2V 6EE
Sub-Advisers
Lincoln Investment Management, Inc.
200 E. Berry Street
Fort Wayne, Indiana 46802
Vantage Investment Advisors
630 Fifth Avenue
New York, NY 10111
Portfolio managers Distributor
(see page x for details) Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
</TABLE>
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors are expected to exercise sound business judgment, establish procedures
and oversee and review the performance of the investment manager, the
distributor and others that perform services for the fund. At least 40% of the
board of directors must be independent of the fund's investment manager or
distributor. These independent fund directors, in particular, are advocates for
shareholder interests.
Custodian Mutual funds are legally required to protect their portfolio
securities by placing them with a custodian, typically a qualified bank
custodian who segregates fund securities from other bank assets.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with objectives and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
<PAGE>
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Distribution Shares of the Fund are only sold to separate accounts of insurance
companies used in connection with variable annuity or variable life products.
<PAGE>
Purchase and redemption of shares
Shares are sold only to separate accounts of life companies at net asset value.
(See Valuation of shares) 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. Cash Reserve Series is managed to
maintain a constant $10 per share net asset value although there is no assurance
that this objective can be achieved. Contract owners do not deal directly with
the Fund with respect to the acquisition or redemption of Fund shares.
Valuation of shares
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Series' net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject any purchase
order.
We determine a Series' net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
a Series' portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price debt securities on the basis of
valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any investments that have a maturity of less
than 60 days we price at amortized cost. We price all other securities at their
fair market value using a method approved by the board of directors.
<PAGE>
Dividends, distributions and taxes
For the Capital Reserves, Cash Reserve, Delchester and Strategic Income Series,
dividends, if any, are declared daily and paid monthly. Short-term capital gains
distributions, if any, may be paid with the dividend; otherwise, any
distributions from net realized securities profits normally will be distributed
following the close of the fiscal year.
For the Convertible Securities, Delaware Balanced, Devon and Global Bond and
Growth and Income Series, dividends, if any, are paid quarterly. Capital gain
distributions, if any, normally will be made following the close of the fiscal
year.
For the Aggressive Growth, DelCap, Emerging Markets, International Equity, REIT,
Small Cap Value, Social Awareness, and Trend Series, dividends and capital gain
distributions, if any, are distributed annually.
We automatically reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from these Funds is the same whether you
reinvest your dividends or receive them in cash. Distributions from a Fund's
long-term capital gains are taxable as capital gains, while distributions from
short-term capital gains and net investment income are generally taxable as
ordinary income. Any capital gains may be taxable at different rates depending
on the length of time the Fund held the assets. In addition, you may be subject
to state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
<PAGE>
Financial Information
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This represents the rate that an investor would have
earned or lost on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Ernst & Young
LLP, whose report, along with the Fund's financial statements, is included in
the Fund's annual report, which is available upon request by calling
800-523-1918.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Capital Reserves Series
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.690 $9.930 $9.300 $10.260
Income from investment operations
Net investment income 0.613 0.623 0.643 0.636
Net realized and net unrealized gain (loss) on investments 0.100 (0.240) 0.630 (0.905)
------- ------- ------- -------
Total from investment operations 0.713 0.383 1.273 (0.269)
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.613) (0.623) (0.643) (0.636)
Distributions from realized gain on investments none none none none
------- ------- ------- -------
Total dividends and distributions (0.613) (0.623) (0.643) (0.636)
------- ------- ------- -------
Net asset value, end of period $9.790 $9.690 $9.930 $9.300
Total return 9.60% 4.05% 14.08% (2.68%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $29,177 $27,768 $27,935 $25,975
Ratio of expenses to average net assets 0.75% 0.72% 0.71% 0.74%
Ratio of expenses to average net assets
prior to expense limitation 0.75% 0.72% 0.71% 0.74%
Ratio of net investment income to average net assets 6.31% 6.43% 6.64% 6.57%
Ratio of net investment income to average net assets
prior to expense limitation 6.31% 6.43% 6.64% 6.57%
Portfolio turnover 120% 122% 145% 219%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 9.60% 4.05% 14.08% (2.68%)
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Capital Reserves Series
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.000 $10.000 $10.000 $10.000
Income from investment operations
Net investment income 0.497 0.482 0.535 0.361
Net realized and net unrealized gain on investments none none none none
------- ------- ------- -------
Total from investment operations 0.497 0.482 0.535 0.361
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.497) (0.482) (0.535) (0.361)
Distributions from realized gain on investments none none none none
------- ------- ------- -------
Total dividends and distributions (0.497) (0.482) (0.535) (0.361)
------- ------- ------- -------
Net asset value, end of period $10.000 $10.000 $10.000 $10.000
======= ======= ======= =======
Total return 5.10% 4.93% 5.48% 3.68%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $30,711 $26,479 $16,338 $20,125
Ratio of expenses to average net assets 0.64% 0.61% 0.62% 0.66%
Ratio of expenses to average net assets
prior to expense limitation 0.64% 0.61% 0.62% 0.66%
Ratio of net investment income to average net assets 4.98% 4.82% 5.35% 3.79%
Ratio of net investment income to average net assets
prior to expense limitation 4.98% 4.82% 5.35% 3.79%
- -------------------------------------------------------------------------------------------------------------------------------
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
--------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 5.10% 4.93% 5.48% 3.68%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Convertible
Securities Series
Year Ended Period
12/31 5/1/97
------------------- through
Premium Fund 1998 12/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.000
Income from investment operations
Net investment income 0.318
Net realized and net unrealized gain on investments 1.342
-------
Total from investment operations 1.660
-------
Less dividends and distributions
Dividends from net investment income none
Distributions from realized gain on investments none
-------
Total dividends and distributions none
-------
Net asset value, end of period $11.660
=======
Total return 16.60%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,921
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets
prior to expense limitation 2.30%
Ratio of net investment income to average net assets 5.68%
Ratio of net investment income to average net assets
prior to expense limitation 4.18%
Portfolio turnover 209%
- ----------------------------------------------------------------------------------------------------------
Period
Volatility 5/1/97
through
Volatility, as indicated by year-by-year total return(1) 1998 12/31/97
--------------------------------
Volatility chart is not part of Financial highlights and has not 16.60%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Delaware Balanced Series
(Delaware Series)
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.640 $15.500 $12.680 $13.330
Income from investment operations
Net investment income 0.435 0.530 0.509 0.437
Net realized and net unrealized gain (loss) on investments 3.575 1.765 2.761 (0.447)
------- ------- ------- -------
Total from investment operations 4.010 2.295 3.270 (0.010)
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.530) (0.500) (0.450) (0.340)
Distributions from realized gain on investments (1.070) (0.655) none (0.300)
------- ------- ------- -------
Total dividends and distributions (1.600) (1.155) (0.450) (0.640)
------- ------- ------- -------
Net asset value, end of period $19.050 $16.640 $15.500 $12.680
======= ======= ======= =======
Total return 26.40% 15.91% 26.58% (0.15%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $127,675 $75,402 $63,215 $47,731
Ratio of expenses to average net assets 0.67% 0.68% 0.69% 0.70%
Ratio of expenses to average net assets
prior to expense limitation 0.67% 0.68% 0.69% 0.70%
Ratio of net investment income to average net assets 2.85% 3.56% 3.75% 3.71%
Ratio of net investment income to average net assets
prior to expense limitation 2.85% 3.56% 3.75% 3.71%
Portfolio turnover 67% 92% 106% 140%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 26.40% 15.91% 26.58% (0.15%)
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
DelCap Series
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.890 $15.130 $11.750 $12.240
Income from investment operations
Net investment income (loss) (0.010) (0.015) 0.072 0.069
Net realized and net unrealized gain (loss) on investments 2.260 2.030 3.378 (0.499)
------- ------- ------- -------
Total from investment operations 2.250 2.015 3.450 (0.430)
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income none (0.070) (0.070) (0.060)
Distributions from realized gain on investments (0.870) (1.185) none none
------- ------- ------- -------
Total dividends and distributions (0.870) (1.255) (0.070) (0.060)
------- ------- ------- -------
Net asset value, end of period $17.270 $15.890 $15.130 $11.750
======= ======= ======= =======
Total return 14.90% 14.46% 29.53% (3.54%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $110,455 $79,900 $58,123 $39,344
Ratio of expenses to average net assets 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation 0.87% 0.82% 0.85% 0.88%
Ratio of net investment income (loss) to average net assets (0.06%) (0.11%) 0.61% 0.64%
Ratio of net investment income (loss) to average net assets
prior to expense limitation (0.13%) (0.13%) 0.56% 0.56%
Portfolio turnover 134% 85% 73% 43%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 14.90% 14.46% 29.53% (3.54%)
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Delchester Series
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.170 $8.940 $8.540 $9.770
Income from investment operations
Net investment income 0.863 0.853 0.872 0.962
Net realized and net unrealized gain (loss) on investments 0.332 0.230 0.400 (1.230)
------- ------- ------- -------
Total from investment operations 1.195 1.083 1.272 (0.268)
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.855) (0.853) (0.872) (0.962)
Distributions from realized gain on investments none none none none
------- ------- ------- -------
Total dividends and distributions (0.855) (0.853) (0.872) (0.962)
------- ------- ------- -------
Net asset value, end of period $9.510 $9.170 $8.940 $8.540
====== ====== ====== ======
Total return 13.63% 12.79% 15.50% (2.87%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $98,875 $67,665 $56,605 $43,686
Ratio of expenses to average net assets 0.70% 0.70% 0.69% 0.72%
Ratio of expenses to average net assets
prior to expense limitation 0.70% 0.70% 0.69% 0.72%
Ratio of net investment income to average net assets 9.24% 9.54% 9.87% 10.56%
Ratio of net investment income to average net assets
prior to expense limitation 9.24% 9.54% 9.87% 10.56%
Portfolio turnover 121% 93% 74% 47%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 13.63% 12.79% 15.50% (2.87%)
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Devon
Series
Year Period
Ended 12/31 5/1/97
-------------------- through
Premium Fund 1998 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.000
Income from investment operations
Net investment income 0.080
Net realized and net unrealized gain on investments 2.650
-------
Total from investment operations 2.730
-------
Less dividends and distributions
Dividends from net investment income none
Distributions from realized gain on investments none
-------
Total dividends and distributions none
-------
Net asset value, end of period $12.730
=======
Total return 27.30%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $16,653
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets
prior to expense limitation 0.91%
Ratio of net investment income to average net assets 2.01%
Ratio of net investment income to average net assets
prior to expense limitation 1.90%
Portfolio turnover 80%
- ------------------------------------------------------------------------------------------------------------
Period
Volatility 5/1/97
through
Volatility, as indicated by year-by-year total return(1) 1998 12/31/97
------------------------------------
Volatility chart is not part of Financial highlights and has not 27.30%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Emerging
Markets
Series Period
Year Ended 12/31 5/1/97
------------------- through
Premium Fund 1998 12/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.000
Income from investment operations
Net investment income 0.060
Net realized and net unrealized gain (loss) on investments (1.180)
-------
Total from investment operations (1.120)
-------
Less dividends and distributions
Dividends from net investment income none
Distributions from realized gain on investments none
------
Total dividends and distributions none
------
Net asset value, end of period $8.880
======
Total return (11.20%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,776
Ratio of expenses to average net assets 1.50%
Ratio of expenses to average net assets
prior to expense limitation 2.45%
Ratio of net investment income to average net assets 0.89%
Ratio of net investment income (loss) to average net assets
prior to expense limitation (0.06%)
Portfolio turnover 48%
- ----------------------------------------------------------------------------------------------------------
Period
Volatility 5/1/97
through
Volatility, as indicated by year-by-year total return(1) 1998 12/31/97
-----------------------------------
Volatility chart is not part of Financial highlights and has not (11.20%)
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Global Bond Series Period
Year Ended 12/31 5/2/96
- -------------------------------------------------------------------------------------------- through
Premium Fund 1998 1997 12/31/96
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.960 $10.000
Income from investment operations
Net investment income 0.636 0.339
Net realized and net unrealized gain (loss) on investments (0.551) 0.831
------- -------
Total from investment operations 0.085 1.170
------- -------
Less dividends and distributions
Dividends from net investment income (0.460) (0.210)
Distributions from realized gain on investments (0.085) none
------- -------
Total dividends and distributions (0.545) (0.210)
------- -------
Net asset value, end of period $10.500 $10.960
======= =======
Total return 0.88% 11.79%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $16,876 $9,471
Ratio of expenses to average net assets 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation 1.08% 1.19%
Ratio of net investment income to average net assets 6.03% 6.51%
Ratio of net investment income to average net assets
prior to expense limitation 5.75% 6.12%
Portfolio turnover 97% 56%
- -------------------------------------------------------------------------------------------------------
Period
Volatility 5/2/96
through
Volatility, as indicated by year-by-year total return(1) 1998 1997 12/31/96
--------------------------------
Volatility chart is not part of Financial highlights and has not 0.88% 11.79%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund
(formerly Decatur Total Return Series)
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.980 $14.830 $11.480 $12.510
Income from investment operations
Net investment income 0.324 0.377 0.416 0.412
Net realized and net unrealized gain (loss) on investments 4.216 2.398 3.574 (0.422)
------- ------- ------- -------
Total from investment operations 4.540 2.775 3.990 (0.010)
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.370) (0.420) (0.430) (0.420)
Distributions from realized gain on investments (1.350) (1.205) (0.210) (0.600)
------- ------- ------- -------
Total dividends and distributions (1.720) (1.625) (0.640) (1.020)
------- ------- ------- -------
Net asset value, end of period $18.800 $15.980 $14.830 $11.480
======= ======= ======= =======
Total return 31.00% 20.72% 36.12% (0.20%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $401,402 $166,647 $109,003 $72,725
Ratio of expenses to average net assets 0.71% 0.67% 0.69% 0.71%
Ratio of expenses to average net assets
prior to expense limitation 0.71% 0.67% 0.69% 0.71%
Ratio of net investment income to average net assets 2.02% 2.66% 3.24% 3.63%
Ratio of net investment income to average net assets
prior to expense limitation 2.02% 2.66% 3.24% 3.63%
Portfolio turnover 54% 81% 85% 91%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 31.00% 20.72% 36.12% (0.20%)
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
International Equity Series
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.110 $13.120 $11.840 $11.620
Income from investment operations
Net investment income 0.359 0.557 0.419 0.220
Net realized and net unrealized gain on investments 0.596 1.966 1.191 0.080
------- ------- ------- -------
Total from investment operations 0.955 2.523 1.610 0.300
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.545) (0.420) (0.240) (0.070)
Distributions from realized gain on investments none (0.113) (0.090) (0.010)
------- ------- ------- -------
Total dividends and distributions (0.545) (0.533) (0.330) (0.080)
------- ------- ------- -------
Net asset value, end of period $15.520 $15.110 $13.120 $11.840
======= ======= ======= =======
Total return 6.60% 20.03% 13.98% 2.57%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $198,863 $131,428 $81,548 $57,649
Ratio of expenses to average net assets 0.85% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation 0.90% 0.91% 0.89% 1.01%
Ratio of net investment income to average net assets 2.28% 4.71% 3.69% 2.63%
Ratio of net investment income to average net assets
prior to expense limitation 2.23% 4.60% 3.60% 2.42%
Portfolio turnover 7% 8% 19% 13%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 6.60% 20.03% 13.98% 2.57%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
REIT
Series
------------
Period
5/1/98
through
Premium Fund 12/31/98
- -------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period
Income from investment operations
Net investment income
Net realized and net unrealized gain (loss) on investments
Total from investment operations
Less dividends and distributions
Dividends from net investment income
Distributions from realized gain on investments
Total dividends and distributions
Net asset value, end of period
Total return
Ratios and supplemental data: Net assets, end of period (000 omitted) Ratio of
expenses to average net assets Ratio of expenses to average net assets
prior to expense limitation
Ratio of net investment income to average net assets
Ratio of net investment income to average net assets
prior to expense limitation
Portfolio turnover
- -------------------------------------------------------------------------------------
Period
Volatility 5/1/98
through
Volatility, as indicated by year-by-year total return(1) 12/31/98
------------
Volatility chart is not part of Financial highlights and has not
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Series
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.500 $12.470 $10.290 $10.210
Income from investment operations
Net investment income 0.122 0.112 0.192 0.148
Net realized and net unrealized gain (loss) on investments 4.338 2.548 2.208 (0.068)
------- ------- ------- -------
Total from investment operations 4.460 2.600 2.400 0.080
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.110) (0.180) (0.150) none
Distributions from realized gain on investments (0.930) (0.450) (0.070) none
------- ------- ------- -------
Total dividends and distributions (1.040) (0.630) (0.220) none
------- ------- ------- -------
Net asset value, end of period $17.920 $14.500 $12.470 $10.290
======= ======= ======= =======
Total return 32.91% 22.55% 23.85% 0.78%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $84,071 $23,683 $11,929 $6,291
Ratio of expenses to average net assets 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation 0.90% 0.99% 0.96% 1.41%
Ratio of net investment income to average net assets 1.24% 1.28% 2.13% 2.62%
Ratio of net investment income to average net assets
prior to expense limitation 1.14% 1.09% 1.97% 2.01%
Portfolio turnover 41% 84% 71% 26%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 32.91% 22.55% 23.85% 0.78%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Social
Awareness
Series
Year Period
Ended 12/31 5/1/97
-------------------- through
Premium Fund 1998 12/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.000
Income from investment operations
Net investment income 0.051
Net realized and net unrealized gain on investments 2.789
-------
Total from investment operations 2.840
-------
Less dividends and distributions
Dividends from net investment income none
Distributions from realized gain on investments none
-------
Total dividends and distributions none
-------
Net asset value, end of period $12.840
=======
Total return 28.40%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $7,800
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets
Prior to expense limitation 1.40%
Ratio of net investment income to average net assets 1.13%
Ratio of net investment income to average net assets
Prior to expense limitation 0.53%
Portfolio turnover 52%
- ----------------------------------------------------------------------------------------------------------
Period
Volatility 5/1/97
through
Volatility, as indicated by year-by-year total return(1) 1998 12/31/97
-----------------------------------
Volatility chart is not part of Financial highlights and has not 28.40%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Strategic
Income
Series Period
Year Ended 12/31 5/1/97
------------------- through
Premium Fund 1998 12/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.000
Income from investment operations
Net investment income 0.523
Net realized and net unrealized gain on investments 0.097
-------
Total from investment operations 0.620
-------
Less dividends and distributions
Dividends from net investment income none
Distributions from realized gain on investments none
-------
Total dividends and distributions none
-------
Net asset value, end of period $10.620
=======
Total return 6.20%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $8,606
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets
Prior to expense limitation 1.23%
Ratio of net investment income to average net assets 7.44%
Ratio of net investment income to average net assets
Prior to expense limitation 7.01%
Portfolio turnover 70%
- ----------------------------------------------------------------------------------------------------------
Period
Volatility 5/1/97
through
Volatility, as indicated by year-by-year total return(1) 1998 12/31/97
-----------------------------------
Volatility chart is not part of Financial highlights and has not 6.20%
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Trend Series
Year Ended 12/31
------------------------------------------------------
Premium Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.560 $14.020 $10.160 $10.200
Income from investment operations
Net investment income 0.019 0.050 0.098 0.079
Net realized and net unrealized gain (loss) on investments 3.031 1.380 3.852 (0.119)
------- ------- ------- -------
Total from investment operations 3.050 1.430 3.950 (0.040)
------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.050) (0.090) (0.090) none
Distributions from realized gain on investments (0.180) (0.800) none none
------- ------- ------- -------
Total dividends and distributions (0.230) (0.890) (0.090) none
------- ------- ------- -------
Net asset value, end of period $17.380 $14.560 $14.020 $10.160
======= ======= ======= =======
Total return 21.37% 11.00% 39.21% (0.39%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $118,276 $56,423 $20,510 $7,087
Ratio of expenses to average net assets 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
Prior to expense limitation 0.88% 0.92% 0.96% 1.47%
Ratio of net investment income to average net assets 0.16% 0.56% 1.03% 1.63%
Ratio of net investment income to average net assets
Prior to expense limitation 0.08% 0.44% 0.87% 0.96%
Portfolio turnover 125% 112% 76% 59%
- -----------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return(1) 1998 1997 1996 1995 1994
------------------------------------------------------
Volatility chart is not part of Financial highlights and has not 21.37% 11.00% 39.21% (0.39%)
been audited by Ernst & Young LLP
</TABLE>
<PAGE>
BACK COVER
Additional information about the Series' investments is available in the Series'
Annual and Semi-Annual Reports to shareholders. In the Series' shareholder
reports you will find a discussion of the market conditions and investment
strategies that significantly affected the Series' performance during their last
fiscal period. You can find more detailed information about the Series in the
current Statement of Additional Information (SAI), which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
legally a part of this prospectus. You may obtain a free copy of these documents
by writing to us at One Commerce Square, 2005 Market Street, Philadelphia, PA
19103, or call toll-free 800-231-8002.
You can find reports and other information about the Series on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Series, including their
Statement of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. You can get information on the public
reference room by calling the SEC at 1-800-SEC-0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Shareholder Inquiries
Call the Series at 1-800-523-1918
Investment Company Act File No. 811-6322
<PAGE>
INVESTMENT MANAGERS
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
Delaware International Advisers Ltd.
Third Floor
80 Cheapside
London, England EC2V 6EE
SUB-ADVISERS
Lincoln Investment Management, Inc.
200 E. Berry Street
Fort Wayne, Indiana 46802
Vantage Investment Advisors
630 Fifth Avenue
New York, NY 10111
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, INC.
- --------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- --------------------------------------
MAY 1, 1999
DELAWARE
INVESTMENTS
===========
- --------------------------------------
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
MAY 1, 1999
- --------------------------------------------------------------------------------
DELAWARE GROUP
- --------------------------------------------------------------------------------
PREMIUM FUND, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
- --------------------------------------------------------------------------------
Investment Objectives and Policies
- --------------------------------------------------------------------------------
Accounting and Tax Issues
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
- --------------------------------------------------------------------------------
Offering Price
- --------------------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Investment Management Agreements
and Sub-Advisory Agreements
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Appendix A--Description of Ratings
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
-1-
<PAGE>
Delaware Group Premium Fund, Inc. ("Premium Fund" or the "Fund") is a
diversified, open-end management investment company which is intended to meet a
wide range of investment objectives with its separate Portfolios ("Series").
Each Series is in effect a separate fund issuing its own shares.
The shares of the Fund are sold only to separate accounts of life
insurance companies ("life companies"). The separate accounts are used in
conjunction with variable annuity contracts and variable life insurance policies
("variable contracts"). The separate accounts invest in shares of the various
Series in accordance with allocation instructions received from contract owners.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses of
the Fund dated May 1, 1999, as they may be amended from time to time. It should
be read in conjunction with the prospectuses for the variable contracts and the
Fund. Part B is not itself a prospectus but is, in its entirety, incorporated by
reference into the Fund's Prospectuses. The Fund's Prospectuses may be obtained
by writing or calling your investment dealer or by contacting the Series'
national distributor, Delaware Distributors, L.P. (the "Distributor"), 1818
Market Street, Philadelphia, PA 19103. The Funds' financial statements, the
notes relating thereto, the financial highlights and the report of independent
auditors are incorporated by reference from the Annual Report into this Part B.
The Annual Report will accompany any request for Part B. The Annual Report can
be obtained, without charge, by calling 800-523-1918
-2-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Series are below. There can be no
assurance that the objectives of any Series will be realized.
Aggressive Growth Series seeks long-term capital appreciation. The
Series attempts to achieve its investment objective by investing
primarily in equity securities of companies which the manager believes
have the potential for high earnings growth. This Series has the same
objective and investment discipline as Aggressive Growth Fund of
Voyageur Mutual Funds III, Inc., a separate fund in the Delaware
Investments family.
Capital Reserves Series seeks a high stable level of current income
while minimizing fluctuations in principal by investing in a
diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term
money market instruments. This Series has the same objective and
investment disciplines as Delaware Group Cash Reserve, Inc., a separate
fund in the Delaware Investments family.
Convertible Securities Series seeks a high level of total return on its
assets through a combination of capital appreciation and current
income. The Series intends to pursue its investment objective by
investing primarily in convertible securities. Under normal conditions,
the Series intends to invest at least 65% of its total assets in
convertible securities, which may include privately placed convertible
securities. In pursuit of its investment objective, the Series may
invest the balance of its assets in, among other things, preferred and
common stock, U.S. Government securities, non-convertible fixed income
securities and money market securities.
-3-
<PAGE>
Delaware Balanced Series seeks a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies
that are believed to demonstrate potential for income and capital
growth. This Series has the same objective and investment disciplines
as Delaware Balanced Fund of Delaware Group Equity Funds I, Inc., a
separate fund in the Delaware Investments family, in that, as a
"balanced" fund, the Series, consistent with its objective, invests at
least 25% of its assets in fixed-income securities and the remainder
primarily in equity securities.
-4-
<PAGE>
DelCap Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the
potential for significant growth. This Series has the same objective
and investment disciplines as DelCap Fund of Delaware Group Equity
Funds IV, Inc., a separate fund in the Delaware Investments family, in
that it invests in common stocks and other securities including, but
not limited to, convertible securities, warrants, preferred stocks,
bonds and foreign securities, consistent with the Series' objective.
Delchester Series seeks as high a current income as possible by
investing in rated and unrated corporate bonds (including high-yield
bonds commonly known as junk bonds), U.S. government securities and
commercial paper. This Series has the same objective and investment
disciplines as Delchester Fund of Delaware Group Income Funds, Inc., a
separate fund in the Delaware Investments family. An investment in the
Series may involve greater risks than an investment in a portfolio
comprised primarily of investment grade bonds.
Devon Series seeks current income and capital appreciation. The Series
will seek to achieve its objective by investing primarily in
income-producing common stocks, with a focus on common stocks that the
investment adviser believes have the potential for above-average
dividend increases over time. Under normal circumstances, the Series
will invest at least 65% of its total assets in dividend paying common
stocks. This Series has the same objective and investment disciplines
as Devon Fund of Delaware Group Equity Funds I, Inc., a separate fund
in the Delaware Investments family.
Emerging Markets Series seeks to achieve long-term capital
appreciation. The Series seeks to achieve its objective by investing
primarily in equity series of issuers located in emerging countries.
The Series is an international fund. As such, under normal market
conditions, at least 65% of the Series' assets will be invested in
equity securities of issuers organized or having a majority of their
assets or deriving a majority of their operating income in at least
three countries that are considered to be emerging or developing. This
Series has the same objective and investment disciplines as Emerging
Markets Fund of Delaware Group Global & International Funds, Inc., a
separate fund in the Delaware Investments family.
Global Bond Series seeks current income consistent with preservation of
principal by investing primarily in fixed-income securities that may
also provide the potential for capital appreciation. This Series is a
global fund, as such, at least 65% of the Series' assets will be
invested in fixed-income securities of issuers organized or having a
majority of their assets in or deriving a majority of their operating
income in at least three different countries, one of which may be the
United States. This Series has the same objective and investment
disciplines as Global Bond Series of Delaware Group Global &
International Funds, Inc., a separate fund in the Delaware Investments
family.
Growth and Income Series (formerly named Decatur Total Return Series)
seeks the highest possible total rate of return by selecting issues
that exhibit the potential for capital appreciation while providing
higher than average dividend income. This Series has the same objective
and investment disciplines as Growth and Income Fund of Delaware Group
Equity Funds II, Inc., a separate fund in the Delaware Investments
family, in that it invests generally, but not exclusively, in common
stocks and income-producing securities convertible into common stocks,
consistent with the Series' objective.
-5-
<PAGE>
International Equity Series seeks long-term growth without undue risk
to principal by investing primarily in equity securities of foreign
issuers providing the potential for capital appreciation and income.
This Series has the same objective and investment disciplines as
International Equity Series of Delaware Group Global & International
Funds, Inc., a separate fund in the Delaware Investments family, in
that it invests in a broad range of equity securities of foreign
issuers including common stocks, preferred stocks, convertible
securities and warrants, consistent with the Series' objective.
REIT Series seeks 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 funds in the Delaware Investments family, which also
invest in securities of companies primarily engaged in the real estate
industry.
Small Cap Value Series (formerly Value Series) seeks capital
appreciation by investing primarily in small cap common stocks whose
market value appears low relative to their underlying value or future
earnings and growth potential. Emphasis will also be placed on
securities of companies that may be temporarily out of favor or whose
value is not yet recognized by the market. This Series has the same
objective and investment disciplines as Small Cap Value Fund of
Delaware Group Equity Funds V, Inc., a separate fund in the Delaware
Investments family.
Social Awareness Series (formerly Quantum Series) seeks to achieve
long-term capital appreciation. The Series seeks to achieve its
objective by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series'
"Social Criteria" strategy. This Series has the same objective and
investment disciplines as Social Awareness Fund of Delaware Group
Equity Funds II, Inc., a separate fund in the Delaware Investments
family.
Strategic Income Series seeks high current income and total return. The
Series seeks to achieve its objective by using a multi-sector
investment approach, investing primarily in three sectors of the
fixed-income securities markets: high yield, higher risk securities;
investment grade fixed-income securities; and foreign government and
other foreign fixed-income securities. In addition, the Series may
invest in U.S. equity securities. This Series has the same objective
and investment disciplines as Strategic Income Fund of Delaware Group
Income Funds, Inc., a separate fund in the Delaware Investments family.
Trend Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will
have been judged to be responsive to changes in the market place and to
have fundamental characteristics to support growth. Income is not an
objective. This Series has the same objective and investment
disciplines as Trend Fund of Delaware Group Trend Fund, Inc., a
separate fund in the Delaware Investments family.
-6-
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has the following restrictions for each Series (other than
Aggressive Growth, Strategic Income, Devon, Emerging Markets, Convertible
Securities, Social Awareness and REIT Series) which may not be amended without
approval of a majority of the outstanding voting securities of the affected
Series, which is the lesser of more than 50% of the outstanding voting
securities or 67% of the voting securities of the affected Series present at a
shareholder meeting if 50% or more of the voting securities are present in
person or represented by proxy. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities. Each such Series will not:
1. Invest more than 5% of the value of its assets in securities of any
one issuer (other than obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities). This restriction shall apply to only 75% of
the assets of International Equity, Small Cap Value and Trend Series and to only
50% of the assets of Global Bond Series.
2. Purchase more than 10% of the voting securities of any company, or
invest in any company for the purpose of exercising control or management.
3. Purchase or retain securities of a company which has an officer or
director who is an officer or director of the Fund, or an officer or director of
its investment manager if such persons, each owning beneficially more than 1/2
of 1% of the shares of the company, own in the aggregate more than 5% thereof.
4. Purchase any security issued by any other investment company
(except in connection with a merger, consolidation or offer of exchange) if
after such purchase it would: (a) own more than 3% of the voting stock of such
company, (b) own securities of such company having a value in excess of 5% of a
Series' assets or (c) own securities of investment companies having an aggregate
value in excess of 10% of a Series' assets. Any such purchase shall be at the
customary brokerage commission. The limitations set forth in this restriction do
not apply to purchases by International Equity Series of securities issued by
closed-end investment companies, all of which must be at the customary brokerage
commission.
5. Make any investment in real estate unless necessary for office
space or the protection of investments already made. (This restriction does not
preclude a Series' purchase of securities secured by real estate or interests
therein, or securities issued by companies which invest in real estate or
interests therein, including real estate investment trusts.)
6. Purchase securities on margin, make short sales of securities or
maintain a net short position (except that a Series may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities). This restriction shall not prohibit the Series from satisfying
margin requirements with respect to futures transactions.
7. Invest in interests in oil, gas or other mineral exploration or
development programs, commodities or commodities contracts. This restriction
shall not prohibit International Equity, Small Cap Value and Trend Series from
entering into futures contracts or options thereon, to the extent that not more
than 5% of its assets are required as futures contract margin deposits and
premiums on options and only to the extent that obligations under such contracts
and transactions represent not more than 20% of the Series' assets.
-7-
<PAGE>
8. Borrow money in excess of one-third of the value of its net assets
and then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Series have no intention of increasing their net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of a Series' assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Series shall, within three days thereafter (not including
Sunday and holidays) or such longer period as the Securities and Exchange
Commission may prescribe by rules and regulations, reduce the amount of its
borrowings to an extent that the asset coverage of such borrowings shall be at
least 300%. A Series will not pledge more than 15% of its net assets. A Series
shall not issue senior securities as defined in the Investment Company Act of
1940 (the "1940 Act"), except for notes to banks.
9. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements) in accordance with each Series' investment
objective and policies are considered loans and except that each Series may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
10. Invest more than 5% of the value of its total assets in securities
of companies less than three years old. Such three-year period shall include the
operation of any predecessor company or companies.
11. Invest more than 25% of its total assets in any particular
industry, except that a Series may invest more than 25% of the value of its
total assets in obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, certificates of deposit and bankers' acceptances
of banks with over one billion dollars in assets or bank holding companies whose
securities are rated A-2 or better by Standard & Poor's Ratings Group ("S&P") or
P-2 or better by Moody's Investors Service, Inc. ("Moody's").
12. Act as an underwriter of securities of other issuers, except that a
Series may acquire restricted or not readily-marketable securities under
circumstances where, if such securities are sold, a Series might be deemed to be
an underwriter for the purposes of the Securities Act of 1933.
Investment restrictions 2, 3, 7 and 10 above are nonfundamental
policies of Global Bond Series. In addition, although not considered a
fundamental policy, Global Bond Series will not invest more than 10% of its net
assets in repurchase agreements maturing in more than seven days and other
illiquid assets. Securities of foreign issuers which are not listed on a
recognized domestic or foreign exchange or for which a bona fide market does not
exist at the time of purchase or subsequent valuation are included in the
category of illiquid assets.
In addition, the following investment restrictions of such Series may
be changed by the Board of Directors:
(a) Each Series will not invest in warrants valued at lower of cost or
market exceeding 5% of a Series' net assets. Included within that amount, but
not to exceed 2% of a Series' net assets, may be warrants not listed on the New
York Stock Exchange or American Stock Exchange. This restriction shall not apply
to International Equity Series.
(b) The Money Market Series will not invest more than 25% of its assets
in foreign banks which are subject to the same regulation as United States banks
or to foreign branches of United States banks where such a bank is liable for
the obligations of the branch.
-8-
<PAGE>
While such Series are permitted under certain circumstances to borrow
money, they do not normally do so. No investment securities will be purchased
while a Series has an outstanding borrowing. The Fund has undertaken, for so
long as required by California Regulatory Authority and so long as insurance
policy premiums or proceeds of contracts sold in California are used to purchase
Fund shares, each Series will not borrow money in excess of 25% of the value of
its net assets.
The following restrictions are fundamental policies of Strategic
Income, Devon, Emerging Markets, Convertible Securities and Social Awareness
Series, which may not be changed without the approval of the holders of a
majority of the affected Series' outstanding voting securities:
1. Each such Series, other than Emerging Markets Series, will not with
respect to 75% of its total assets, purchase the securities of any issuer (other
than those of other investment companies or of the U.S. Government or its
agencies or instrumentalities), if immediately thereafter the Series would (a)
have more than 5% of the value of its total assets in the securities of such
issuer or (b) own more than 10% of the outstanding voting securities of such
issuer.
2. Each such Series will not invest 25% or more of its total assets in
any one 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.
3. Each such 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), whether or not the purchase was made upon the original issuance of
the securities, and except that each Series may loan its assets to qualified
broker/dealers or institutional investors.
4. Each such 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.
5. Each such 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, each Series may engage in
short sales, purchase securities on margin, and write put and call options.
6. Each such 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.
7. 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.
The Fund has adopted the following restrictions for the REIT Series
which may not be amended without approval of a majority of the outstanding
voting securities of the REIT Series, which is the lesser of more than 50% of
the outstanding voting securities or 67% of the voting securities of the REIT
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.
-9-
<PAGE>
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.
2. To the extent that the Series 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.
The Fund has adopted the following restrictions for the Aggressive
Growth Series which may not be amended without approval of a majority of the
outstanding voting securities of the Aggressive Growth Series, which is the
lesser of more than 50% of the outstanding voting securities or 67% of the
voting securities of the Aggressive Growth 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.
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Aggressive Growth Series shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the 1940 Act, any rule or other thereunder, or U.S. Securities
and Exchange Commission ("SEC") staff interpretation thereof) of its investments
in the securities of issuers primarily engaged in the same industry, provided
that this restriction does not limit the Series from investing in obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
or in certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Series
may engage in transactions involving the acquisition, disposition or resale of
its portfolio securities, under circumstances where it may be considered to be
an underwriter under the Securities Act of 1933.
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Series from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Series from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the
Series from purchasing debt obligations, entering into repurchase agreements,
loaning its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
In applying the Series' fundamental policy concerning concentration
that is described above, it is a matter of non-fundamental policy that: (i)
utility companies will be divided according to their services, for example, gas,
gas transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
prospectus, the Aggressive Growth Series will be subject to the following
investment restrictions, which are considered non-fundamental and may be changed
by the Board of Directors without shareholder approval.
1. The Series is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Series may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
2. The Series may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Series has valued the
investment.
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ADDITIONAL INFORMATION ON THE CASH RESERVE AND CAPITAL RESERVES SERIES
Money Market Instruments
The Capital Reserves Series may, from time to time, invest all or part
of its available assets in money market instruments maturing in one year or
less. Cash Reserve Series will invest all of its available assets in instruments
which have a remaining maturity of 13 months or less at the time of acquisition
and which will otherwise meet the maturity, quality and diversification
conditions with which taxable money market funds must comply. The types of
instruments which these Series may purchase are described below:
1. U.S. Government Securities--Securities issued or guaranteed by the
U.S. government, including Treasury Bills, Notes and bonds.
2. U.S. Government Agency Securities--Obligations issued or guaranteed
by agencies or instrumentalities of the U.S. government whether supported by the
full faith and credit of the U.S. Treasury or the credit of a particular agency
or instrumentality.
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3. Bank Obligations--Certificates of deposit, bankers' acceptances and
other short-term obligations of U.S. commercial banks and their overseas
branches and foreign banks of comparable quality, provided each such bank
combined with its branches has total assets of at least one billion dollars, and
certificates and issues of domestic savings and loan associations of one billion
dollars in assets whose deposits are insured by the Federal Deposit Insurance
Corporation. Any obligations of foreign banks shall be denominated in U.S.
dollars. Obligations of foreign banks and obligations of overseas branches of
U.S. banks are subject to somewhat different regulations and risks than those of
U.S. domestic banks. In particular, a foreign country could impose exchange
controls which might delay the release of proceeds from that country. Such
deposits are not covered by the Federal Deposit Insurance Corporation. Because
of conflicting laws and regulations, an issuing bank could maintain that
liability for an investment is solely that of the overseas branch which could
expose the Series to a greater risk of loss. The Series will only buy short-term
instruments in nations where these risks are minimal. The Series will consider
these factors along with other appropriate factors in making an investment
decision to acquire such obligations and will only acquire those which, in the
opinion of management, are of an investment quality comparable to other debt
securities bought by the Series. Either Series may invest more than 25% of its
assets in foreign banks except that this limitation shall not apply to United
States branches of foreign banks which are subject to the same regulations as
United States banks or to foreign branches of United States banks where such a
bank is liable for the obligations of the branch. This policy may be changed by
the Board of Directors without shareholder approval.
Cash Reserve Series is subject to certain maturity, quality and
diversification conditions applicable to taxable money market funds. Thus, if a
bank obligation or, as relevant, its issuer is considered to be rated at the
time of the proposed purchase, it or, as relevant, its issuer must be so rated
in one of the two highest rating categories by at least two
nationally-recognized statistical rating organizations or, if such security or,
as relevant, its issuer is not so rated, the purchase of the security must be
approved or ratified by the Board of Directors in accordance with the maturity,
quality and diversification conditions with which taxable money market funds
must comply.
4. Commercial Paper--Short-term promissory notes issued by corporations
which at the time of purchase are rated A-2 or better by S&P or P-2 or better by
Moody's or which have received comparable ratings from a nationally-recognized
statistical rating organization approved by the Board of Directors or, if not
rated, issued or guaranteed by a corporation with outstanding debt rated AA, Aa
or better by S&P or Moody's. Cash Reserve Series invests in commercial paper in
accordance with the restrictions set forth in the Prospectuses.
5. Short-term Corporate Debt--In addition to the other debt securities
described in the Prospectuses, corporate notes, bonds and debentures which at
the time of purchase are rated AA or better by S&P or Aa or better by Moody's or
which have received comparable ratings from a nationally-recognized statistical
rating organization approved by the Board of Directors, provided such securities
have one year or less remaining to maturity. Such securities generally have
greater liquidity and are subject to considerably less market fluctuation than
longer issues. Cash Reserve Series invests in corporate notes, bonds and
debentures in accordance with the restrictions set forth in the Prospectuses.
The ratings of S&P, Moody's and other rating services represent their
opinions as to the quality of the money market instruments which they undertake
to rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. These ratings are the initial criteria for
selection of portfolio investments, but the Series will further evaluate these
securities. See Appendix A--Description of Ratings.
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ADDITIONAL INFORMATION ON THE CAPITAL RESERVES, CASH RESERVE, DELAWARE AND DEVON
SERIES
Asset-Backed Securities
The Capital Reserves, Cash Reserve, Delaware and Devon Series may
invest a portion of their assets in asset-backed securities. The rate of
principal payment on asset-backed securities generally depends on the rate of
principal payments received on the underlying assets. Such rate of payments may
be affected by economic and various other factors such as changes in interest
rates or the concentration of collateral in a particular geographic area.
Therefore, the yield may be difficult to predict and actual yield to maturity
may be more or less than the anticipated yield to maturity. The credit quality
of most asset-backed securities depends primarily on the credit quality of the
assets underlying such securities, how well the entities issuing the securities
are insulated from the credit risk of the originator or affiliated entities, and
the amount of credit support provided to the securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Series will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquencies or losses in excess of those anticipated could adversely
affect the return on an investment in such issue.
ADDITIONAL INFORMATION ON THE CAPITAL RESERVES SERIES
Average Weighted Maturity
The Capital Reserves Series ordinarily maintains its average dollar
weighted portfolio maturity within the five to seven year range, but not in
excess of ten years. However, many of the securities in which the Series invests
will have remaining maturities in excess of seven years. The Series may purchase
individual securities with a remaining maturity of up to 15 years.
Some of the securities in the Series' portfolio may have periodic
interest rate adjustments based upon an index such as the 91-day Treasury Bill
rate. This periodic interest rate adjustment tends to lessen the volatility of
the security's price. With respect to securities with an interest rate
adjustment period of one year or less, the
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Series will, when determining average weighted maturity, treat such a security's
maturity as the amount of time remaining until the next interest rate
adjustment.
Instruments such as GNMA, FNMA and FHLMC securities and similar
securities backed by amortizing loans generally have shorter effective
maturities than their stated maturities. This is due to changes in amortization
caused by demographic and economic forces such as interest rate movements. These
effective maturities are calculated based upon historical payment patterns. For
purposes of determining the Series' average weighted maturity, the maturities of
such securities will be calculated based upon the issuing agency's payment
factors using industry-accepted valuation models.
ADDITIONAL INFORMATION ON THE CASH RESERVE SERIES
The Series intends to achieve its objective by investing its assets in
a diversified portfolio of money market instruments. See Money Market
Instruments below and Appendix A--Description of Ratings.
The Series maintains its net asset value at $10 per share by valuing
its securities on an amortized cost basis. See Offering Price. The Series
maintains a dollar weighted average portfolio maturity of not more than 90 days
and does not purchase any issue having a remaining maturity of more than 13
months. In addition, the Series limits its investments, including repurchase
agreements, to those instruments which the Board of Directors determines present
minimal credit risks and which are of high quality. The Series may sell
portfolio securities prior to maturity in order to realize gains or losses or to
shorten the average maturity if it deems such actions appropriate to maintain a
stable net asset value. While the Series will make every effort to maintain a
fixed net asset value of $10 per share, there can be no assurance that this
objective will be achieved.
While the Series intends to hold its investments until maturity when
they will be redeemable at their full principal value plus accrued interest, it
may attempt, from time to time, to increase its yield by trading to take
advantage of market variations. Also, revised evaluations of the issuer or
redemptions may cause sales of portfolio investments prior to maturity or at
times when such sales might otherwise not be desirable. The Series' right to
borrow to facilitate redemptions may reduce but does not guarantee a reduction
in the need for such sales. The Series will not purchase new securities while
any borrowings are outstanding. See Dividends and Realized Securities Profits
Distributions and Taxes for effect of any capital gains distributions.
A shareholder's rate of return will vary with the general interest rate
levels applicable to the money market instruments in which the Series invests.
In the event of an increase in current interest rates, a national credit crisis
or if one or more of the issuers became insolvent prior to the maturity of the
instruments, principal values could be adversely affected. Investments in
obligations of foreign banks and of overseas branches of U.S. banks may be
subject to less stringent regulations and different risks than those of U.S.
domestic banks. The rate of return and the net asset value will be affected by
such other factors as sales of portfolio securities prior to maturity and the
Series' operating expenses.
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ADDITIONAL INFORMATION ON THE INTERNATIONAL EQUITY, VALUE, TREND, GLOBAL BOND,
STRATEGIC INCOME, DEVON, EMERGING MARKETS, CONVERTIBLE SECURITIES, SOCIAL
AWARENESS, REIT AND AGGRESSIVE GROWTH SERIES
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures Contracts--Each of International Equity, Small Cap Value, Trend, Global
Bond, Strategic Income, Devon, Emerging Markets, Convertible Securities, Social
Awareness, REIT and Aggressive Growth Series may enter into futures contracts
relating to securities, securities indices or interest rates. In addition,
International Equity, Global Bond, Strategic Income, Emerging Markets and
Convertible Securities Series may enter into foreign currency futures contracts.
(Unless otherwise specified, interest rate futures contracts, securities and
securities index futures contracts and foreign currency futures contracts are
collectively referred to as "futures contracts.") Such investment strategies
will be used as a hedge and not for speculation.
Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Series' current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Series may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of the
Series' securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
part, by gains on the futures position. When a Series is not fully invested in
the securities market and anticipates a significant market advance, it may
purchase stock or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Series intends to purchase. As such purchases are made, the
corresponding positions in stock or bond index futures contracts will be closed
out.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on a
Series' current or intended investments in fixed-income securities. For example,
if a Series owned long-term bonds and interest rates were expected to increase,
that Series might sell interest rate futures contracts. Such a sale would have
much the same effect as selling some of the long-term bonds in that Series'
portfolio. However, since the futures market is more liquid than the cash
market, the use of interest rate futures contracts as a hedging technique allows
a Series to hedge its interest rate risk without having to sell its portfolio
securities. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of that Series' interest rate futures
contracts would be expected to increase at approximately the same rate, thereby
keeping the net asset value of that Series from declining as much as it
otherwise would have. On the other hand, if interest rates were expected to
decline, interest rate futures contracts could be purchased to hedge in
anticipation of subsequent purchases of long-term bonds at higher prices.
Because the fluctuations in the value of the interest rate futures contracts
should be similar to those of long-term bonds, a Series could protect itself
against the effects of the anticipated rise in the value of long-term bonds
without actually buying them until the necessary cash became available or the
market had stabilized. At that time, the interest rate futures contracts could
be liquidated and that Series' cash reserve could then be used to buy long-term
bonds on the cash market.
As noted in the Prospectus, International Equity, Global Bond,
Strategic Income, Emerging Markets and Convertible Securities Series may each
purchase and sell foreign currency futures contracts for hedging purposes to
attempt to protect its current or intended investments from fluctuations in
currency exchange rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or increase the cost of
foreign-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant.
Each of International Equity, Global Bond,
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Strategic Income, Emerging Markets and Convertible Securities Series may sell
futures contracts on a foreign currency, for example, when a Series holds
securities denominated in such currency and it anticipates a decline in the
value of such currency relative to the dollar. In the event such decline occurs,
the resulting adverse effect on the value of foreign-denominated securities may
be offset, in whole or in part, by gains on the futures contracts. However, if
the value of the foreign currency increases relative to the dollar, the Series'
loss on the foreign currency futures contract may or may not be offset by an
increase in the value of the securities because a decline in the price of the
security stated in terms of the foreign currency may be greater than the
increase in value as a result of the change in exchange rates.
Conversely, each of International Equity, Global Bond, Strategic
Income, Emerging Markets and Convertible Securities Series could protect against
a rise in the dollar cost of foreign-denominated securities to be acquired by
purchasing futures contracts on the relevant currency, which could offset, in
whole or in part, the increased cost of such securities resulting from a rise in
the dollar value of the underlying currencies. When a Series purchases futures
contracts under such circumstances, however, and the price of securities to be
acquired instead declines as a result of appreciation of the dollar, the Series
will sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired.
The Series may also engage in currency "cross hedging" when, in the
opinion of the Series' investment manager Delaware Management Company ("Delaware
Management") or Delaware International Advisers Ltd. ("Delaware International"),
as applicable, the historical relationship among foreign currencies suggests
that a Series may achieve protection against fluctuations in currency exchange
rates similar to that described above at a reduced cost through the use of a
futures contract relating to a currency other than the U.S. dollar or the
currency in which the foreign security is denominated. Such "cross hedging" is
subject to the same risks as those described above with respect to an
unanticipated increase or decline in the value of the subject currency relative
to the dollar.
Options on Futures Contracts--As noted in the Prospectus, each of
International Equity, Small Cap Value, Trend, Global Bond, Strategic Income,
Emerging Markets, Convertible Securities, REIT and Aggressive Growth Series may
purchase and write options on the types of futures contracts that Series could
invest in.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities in the Series'
portfolio. If the futures price at expiration of the option is below the
exercise price, a Series will retain the full amount of the option premium,
which provides a partial hedge against any decline that may have occurred in the
Series' portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the securities or other
instruments required to be delivered under the terms of the futures contract. If
the futures price at expiration of the put option is higher than the exercise
price, a Series will retain the full amount of the option premium, which
provides a partial hedge against any increase in the price of securities which
the Series intends to purchase. If a put or call option a Series has written is
exercised, the Series will incur a loss which will be reduced by the amount of
the premium it receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value of its options
on futures positions, a Series' losses from exercised options on futures may to
some extent be reduced or increased by changes in the value of portfolio
securities.
The Series may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected marketwide decline or changes in interest or exchange
rates, a Series could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such decrease occurs, it may be offset, in
whole or in part, by a profit on the option. If the market decline does not
occur, the Series will
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suffer a loss equal to the price of the put. Where it is projected that the
value of securities to be acquired by a Series will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates, a
Series could purchase call options on futures contracts, rather than purchasing
the underlying futures contracts. If the market advances, the increased cost of
securities to be purchased may be offset by a profit on the call. However, if
the market declines, the Series will suffer a loss equal to the price of the
call, but the securities which the Series intends to purchase may be less
expensive.
Options on Foreign Currencies
International Equity, Global Bond, Strategic Income, Emerging Markets,
Convertible Securities, REIT and Aggressive Growth Series may purchase and write
options on foreign currencies for hedging purposes in a manner similar to that
in which futures contracts on foreign currencies, or forward contracts, will be
utilized. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Series may purchase put options on the foreign currency. If the value of the
currency does decline, the Series will have the right to sell such currency for
a fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Series may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movement in exchange rates. As in the case of other types of options,
however, the benefit to the Series deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Series could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
The Series may write options on foreign currencies for the same types
of hedging purposes. For example, where the Series anticipate a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates, they could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in the value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against the
anticipated increase in the dollar cost of securities to be acquired, the Series
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Series to hedge such
increased costs up to the value of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Series would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Series also may be required to forego all or
a portion of the benefit which might otherwise have been obtained from favorable
movements in exchange rates.
Each Series intends to write covered call options on foreign
currencies. A call option written on a foreign currency by a Series is "covered"
if the Series owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the Series' custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Series has a call on
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the same foreign currency and in the same principle amount as the call written
where the exercise price of the call held (a) is equal to less than the exercise
price of the call written, or (b) is greater than the exercise price of the call
written if the difference is maintained by the Series in cash, U.S. government
securities or other high-grade liquid debt securities in a segregated account
with its custodian bank.
With respect to writing put options, at the time the put is written, a
Series will establish a segregated account with its custodian bank consisting of
cash, U.S. government securities or other high-grade liquid debt securities in
an amount equal in value to the amount the Series will be required to pay upon
exercise of the put. The account will be maintained until the put is exercised,
has expired, or the Series has purchased a closing put of the same series as the
one previously written.
ADDITIONAL INFORMATION ON THE DEVON SERIES
Mortgage-Backed Securities--In addition to mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
or government sponsored corporations, Devon Series may also invest its assets in
securities issued by certain private, nongovernment corporations, such as
financial institutions. Certain of these private-backed securities are fully
collateralized at the time of issuance by securities or certificates issued or
guaranteed by the U.S. government, its agencies or instrumentalities. Two
principal types of mortgage-backed securities are collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Devon Series will
invest in such private-backed securities only if they are 100% collateralized at
the time of issuance by securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities. The Series currently invests in
privately-issued CMOs and REMICs only if they are rated at the time of purchase
in the four highest grades by a nationally-recognized rating agency.
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Convertible Securities--The Series may invest in convertible
securities, including corporate debentures, bonds, notes and preferred stocks
that may be converted into or exchanged for common stock. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, the
Series may be required to pay for a convertible security an amount in excess of
the value of the underlying common stock. Common stock acquired by the Series
upon conversion of a convertible security will generally be held for so long as
Delaware Management anticipates such stock will provide the Series with
opportunities which are consistent with the Series' investment objectives and
policies.
The Series may invest in convertible debentures without regard to
rating categories. Investing in convertible debentures that are rated below
investment grade or unrated but of comparable quality entails certain risks,
including the risk of loss of principal, which may be greater than the risks
involved in investing in investment grade convertible debentures. Under rating
agency guidelines, lower rated securities and comparable unrated securities will
likely have some quality and protective characteristics that are outweighed by
large uncertainties or major risk exposures to adverse conditions.
The Series may have difficulty disposing of such lower rated
convertible debentures because the trading market for such securities may be
thinner than the market for higher rated convertible debentures. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary trading market for higher rated securities. The lack of
a liquid secondary market as well as adverse publicity with respect to these
securities, may have an adverse impact on market price and the Series' ability
to dispose of particular issues in response to a specific economic event such as
a deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Series to obtain accurate market quotations for purposes of pricing the Series'
portfolio and calculating its net asset value. The market behavior of
convertible securities in lower rating categories is often more volatile than
that of higher quality securities. Lower quality convertible securities are
judged by Moody's and S&P to have speculative elements or characteristics; their
future cannot be considered as well assured and earnings and asset protection
may be moderate or poor in comparison to investment grade securities.
In addition, such lower quality securities face major ongoing
uncertainties or exposure to adverse business, financial or economic conditions,
which could lead to inadequate capacity to meet timely payments. The market
values of securities rated below investment grade tend to be more sensitive to
company specific developments and changes in economic conditions than higher
rated securities. Issuers of these securities are often highly leveraged, so
that their ability to service their debt obligations during an economic downturn
or during sustained periods of rising interest rates may be impaired. In
addition, such issuers may not have more traditional methods of financing
available to them, and may be unable to repay debt at maturity by refinancing.
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ADDITIONAL INFORMATION ON THE STRATEGIC INCOME, EMERGING MARKETS, CONVERTIBLE
SECURITIES, REIT AND AGGRESSIVE GROWTH SERIES
When-Issued, "When, As and If Issued" and Delayed Delivery Securities
and Forward Commit- ments -- The Series may purchase securities on a when-issued
or delayed delivery basis or may purchase or sell securities on a forward
commitment basis. The Series may also purchase securities on a "when, as and if
issued" basis under which the issuance of the security depends upon the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. When such transactions are negotiated, the
price is fixed at the time of commitment, but delivery and payment can take
place a month or more after the date of the commitment. The Series will
establish a segregated account with its custodian bank in which it will
continually maintain cash or cash equivalents or other portfolio securities
equal in value to commitments to purchase securities on a when-issued, "when, as
and if issued," delayed delivery or forward commitment basis.
While the Series will only purchase securities on a when-issued, "when,
as and if issued," delayed delivery or forward commitment basis with the
intention of acquiring the securities, the Series may sell the securities before
the settlement date if it is deemed advisable. The securities so purchased or
sold are subject to market fluctuation and no interest accrues to the purchaser
during this period. At the time a Series makes the commitment to purchase or
sell securities on a when-issued, "when, as and if issued," delayed delivery or
forward commitment basis, it will record the transaction and thereafter reflect
the value, each day, of the security purchased or, if a sale, the proceeds to be
received, in determining its net asset value. At the time of delivery of the
securities, their value may be more or less than the purchase or sale price.
Enhanced Convertible Securities -- Most PERCS expire three years from
the date of issue, at which time they are convertible into common stock of the
issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after three years the issuer's common stock is trading
at a price below that set by the capital appreciation limit, the PERCS would
convert into one share of common stock. If, however, the 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 thus do not provide call protection. However, if
called early, the issuer must pay a 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.
Strategic Income and Emerging Markets Series may also invest in other
enhanced convertible securities. See Enhanced Convertible Securities under
Convertible Securities Series in the Prospectus.
Restricted Securities
The Series may purchase privately-placed debt and other securities
whose resale is restricted under applicable securities laws. Such restricted
securities generally offer a higher return than comparable registered securities
but involve some additional risk since they can be resold only in
privately-negotiated transactions or after registration under applicable
securities laws. The registration process may involve delays which could result
in the Series obtaining a less favorable price on a resale. Aggressive Growth,
Strategic Income, Convertible Securities and REIT Series will not purchase
illiquid assets if more than 15% of its respective net assets would then consist
of such illiquid securities.
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ADDITIONAL INFORMATION ON THE SOCIAL AWARENESS SERIES
Investment Company Securities--Any investments that Social Awareness
Series makes in either closed-end or open-end investment companies will be
limited by the 1940 Act, and would involve an indirect payment of a portion of
the expenses, including advisory fees, of such other investment companies. Under
the 1940 Act's current limitations, the Series may not (1) own more than 3% of
the voting stock of another investment company; (2) invest more than 5% of the
Series' total assets in the shares of any one investment company; nor (3) invest
more than 10% of the Series' total assets in shares of other investment
companies. If a Series elects to limit its investment in other investment
companies to closed-end investment companies, the 3% limitation described above
is increased to 10%. These percentage limitations also apply to the Series'
investments in unregistered investment companies.
Unseasoned Companies--Social Awareness Series may invest in relatively
new or unseasoned companies which are in their early stages of development, or
small companies positioned in new and emerging industries where the opportunity
for rapid growth is expected to be above average. Securities of unseasoned
companies present greater risks than securities of larger, more established
companies. The companies in which the Series may invest may have relatively
small revenues, limited product lines, and may have a small share of the market
for their products or services. Small companies may lack depth of management,
they may be unable to internally generate funds necessary for growth or
potential development or to generate such funds through external financing or
favorable terms, or they may be developing or marketing new products or services
for which markets are not yet established and may never become established. Due
these and other factors, small companies may suffer significant losses as well
as realize substantial growth, and investments in such companies tend to be
volatile and are therefore speculative.
In addition, as a matter of non-fundamental policy, Social Awareness
Series will adhere to a Social Criteria strategy:
Vantage will utilize the Social Investment Database published by KLD in
determining whether a company is engaged in any activity precluded by the
Series' Social Criteria. The Social Investment Database reflects KLD's
determination of the extent to which a company's involvement in the activities
prohibited by the Social Criteria is significant enough to merit a concern or a
major concern. Significance may be determined on the basis of percentage of
revenue generated by, or the size of the operations attributable to, activities
related to such Social Criteria, or other factors selected by KLD. The social
screening undergoes continual refinement and modification.
Pursuant to the Social Criteria presently in effect, the Series will
not knowingly invest in or hold securities of companies which engage in:
1. Activities which result or are likely to result in damage to the
natural environment;
2. The production of nuclear power, the design or construction of
nuclear power plants, or the manufacture of equipment for the
production of nuclear power;
3. The manufacture of, or contracting for, military weapons; or
4. The liquor, tobacco or gambling industries.
Because of its Social Criteria, the Series may not be able to take the
same advantage of certain investment opportunities as do funds which do not have
Social Criteria. Only securities of companies not
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excluded by any of the Social Criteria will be eligible for consideration for
purchase by the Series according to its objective and policies described in the
Prospectus.
The Series will commence the orderly sale of securities of a company
when it is determined by Vantage that such company no longer adheres to the
Social Criteria. The Series will sell such securities in a manner so as to
minimize any adverse affect on the Series' assets. Typically, such sales will be
made within 90 days from the date of Vantage's determination, unless a sale
within the 90 day period would produce a significant loss to the overall value
of the Series' assets.
REPURCHASE AGREEMENTS
Each of the Fund's 17 Series may, from time to time, enter into
repurchase transactions. Repurchase agreements are instruments under which
securities are purchased from a bank or securities dealer with an agreement by
the seller to repurchase the securities. Under a repurchase agreement, the
purchaser acquires ownership of the security but the seller agrees, at the time
of sale, to repurchase it at a mutually agreed-upon time and price. The Series
will take custody of the collateral under repurchase agreements. Repurchase
agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred. The resale price is in excess of
the purchase price and reflects an agreed-upon market rate unrelated to the
coupon rate or maturity of the purchase security. Such transactions afford an
opportunity for the Series to invest temporarily available cash. The Series'
risk is limited to the seller's ability to buy the security back at the
agreed-upon sum at the agreed-upon time, since the repurchase agreement is
secured by the underlying obligation. Should such an issuer default, the
investment managers believe that, barring extraordinary circumstances, the
Series will be entitled to sell the underlying securities or otherwise receive
adequate protection for its interest in such securities, although there could be
a delay in recovery. The Series consider the creditworthiness of the bank or
dealer from whom it purchases repurchase agreements. The Series will monitor
such transactions to assure that the value of the underlying securities subject
to repurchase agreements is at least equal to the repurchase price. The
underlying securities will be limited to those described above.
The funds in the Delaware Investments family have obtained an exemption
from the joint-transaction prohibitions of Section 17(d) of the Investment
Company Act of 1940 to allow the funds in the Delaware Investments family
jointly to invest cash balances. Each Series of the Fund may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
Order and subject generally to the conditions described above.
PORTFOLIO LOAN TRANSACTIONS
Each of the Fund's 17 Series, except for Cash Reserve Series, may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
It is the understanding of the Series' respective investment manager
that the staff of the Securities and Exchange Commission permits portfolio
lending by registered investment companies if certain conditions are met. These
conditions are as follows: 1) each transaction must have 100% collateral in the
form of cash, short-term U.S. government securities, or irrevocable letters of
credit payable by banks acceptable to the Fund from the borrower; 2) this
collateral must be valued daily and should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Series; 3) the Series must be able to terminate the loan after notice, at any
time; 4) the Series must receive reasonable interest on any loan, and any
dividends, interest or other distributions on the lent securities, and any
increase in the market value of such securities; 5) the Series may pay
reasonable custodian fees in connection with the loan; 6) the voting rights on
the lent securities may pass to the borrower; however, if the directors of the
Fund know that a material event will occur
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affecting an investment loan, they must either terminate the loan in order to
vote the proxy or enter into an alternative arrangement with the borrower to
enable the directors to vote the proxy.
The major risk to which a Series would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, a Series will only enter into loan arrangements
after a review of all pertinent facts by the Series' respective investment
manager, under the supervision of the Board of Directors, including the
creditworthiness of the borrowing broker, dealer or institution and then only if
the consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the Series' respective
investment manager.
FOREIGN SECURITIES
To the extent the Fund's 17 Series are authorized and intend to invest
in foreign securities, investors should recognize that investing in securities
of foreign issuers involves certain considerations, including those set forth in
the Prospectuses, which are not typically associated with investing in United
States issuers. Since the stocks of foreign companies are frequently denominated
in foreign currencies, and since the Series may temporarily hold uninvested
reserves in bank deposits in foreign currencies, the Series will be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies. The investment policies of certain of the Series permit them to
enter into forward foreign currency exchange contracts and various related
currency transactions in order to hedge the Series' holdings and commitments
against changes in the level of future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract.
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There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by a Series. Payment of
such interest equalization tax, if imposed, would reduce such Series' rate of
return on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Series by United States
corporations. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instruments other than
any "regulated futures contract" or "nonequity option" marked to market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However, foreign
currency-related regulated futures contracts and non-equity options are
generally not subject to the special currency rules, if they are or would be
treated as sold for their fair market value at year-end under the marking to
market rules applicable to other futures contracts, unless an election is made
to have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. Certain transactions subject to the special
currency rules that are part of a "section 988 hedging transaction" (as defined
in the Internal Revenue Code of 1986 (the "Code"), as amended, and the Treasury
Regulations) will be integrated and treated as a single transaction or otherwise
treated consistently for purposes of the Code. The income tax effects of
integrating and treating a transaction as a single transaction are generally to
create a synthetic debt instrument that is subject to the original discount
provisions. It is anticipated that some of the non-U.S. dollar denominated
investments and foreign currency contracts a Series may make or enter into will
be subject to the special currency rules described above.
FOREIGN CURRENCY TRANSACTIONS
In connection with a Series' investment in foreign securities, a Series
may purchase or sell currencies and/or engage in forward foreign currency
transactions in order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations.
Forward foreign currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A Series will account for
forward contracts by marking to market each day at daily exchange rates.
When a Series enters into a forward contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of that Series' assets
denominated in such foreign currency, the Series' custodian bank or subcustodian
will place cash or liquid high grade debt securities in a separate account of
the Series in an amount not less than the value of such Series' total assets
committed to the consummation of such forward contracts. If the additional cash
or securities placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Series' commitments with respect to
such contracts.
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OPTIONS
Each of the Fund's 17 Series, except for Cash Reserve Series, may write
call options and purchase put options on a covered basis only. International
Equity, Global Bond, Emerging Markets, Convertible Securities, REIT and
Aggressive Growth Series may also purchase call options. The Series also may
enter into closing transactions with respect to such options transactions. No
Series will engage in option transactions for speculative purposes.
To the extent authorized to engage in option transactions, the Series
may invest in options that are Exchange listed and International Equity, Global
Bond, Emerging Markets, Convertible Securities, REIT and Aggressive Growth
Series may also invest in options that are traded over-the-counter. The other
Series reserve the right to invest in over-the-counter options upon written
notice to their shareholders. The Series will enter into an option position only
if there appears to be a liquid market for such options. However, there can be
no assurance that a liquid secondary market will be maintained. Thus, it may not
be possible to close option positions and this may have an adverse impact on a
Series' ability to effectively hedge its securities.
A. Covered Call Writing--A Series may write covered call options from
time to time on such portion of its portfolio, without limit, as the respective
investment manager determines is appropriate in seeking to obtain the Series'
investment objective. A call option gives the purchaser of such option the right
to buy, and the writer, in this case the Series, has the obligation to sell the
underlying security at the exercise price during the option period. The
advantage to a Series of writing covered calls is that the Series receives a
premium which is additional income. However, if the security rises in value, the
Series may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to such options, the Series may enter into closing
purchase transactions. A closing purchase transaction is one in which the
Series, when obligated as a writer of an option, terminates its obligation by
purchasing an option of the same series as the option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Series may realize a
net gain or loss from a closing purchase transaction depending upon whether the
net amount of the original premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. Any loss incurred
in a closing purchase transaction may be partially or entirely offset by the
premium received from a sale of a different call option on the same underlying
security. Such a loss may also be wholly or partially offset by unrealized
appreciation in the market value of the underlying security. Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part by a decline in the market value of the underlying security.
If a call option expires unexercised, the Series will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Series will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the
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underlying security and the proceeds of the sale of the security plus the amount
of the premium on the option less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
A Series will write call options only on a covered basis, which means
that the Series will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Series would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold.
Options written by the Series will normally have expiration dates between one
and nine months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
B. Purchasing Put Options--A Series may invest up to 2% of its total
assets in the purchase of put options. The Series will, at all times during
which it holds a put option, own the security covered by such option.
A put option purchased by the Series gives it the right to sell one of
its securities for an agreed price up to an agreed date. The Series intend to
purchase put options in order to protect against a decline in market value of
the underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options will allow a
Series to protect unrealized gain in an appreciated security in its portfolio
without actually selling the security. If the security does not drop in value,
the Series will lose the value of the premium paid. A Series may sell a put
option which it has previously purchased prior to the sale of the securities
underlying such option. Such sales will result in a net gain or loss depending
on whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio
securities. Additionally, the Series may enter into closing sale transactions. A
closing sale transaction is one in which a Series, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
C. Purchasing Call Options--International Equity, Global Bond, Emerging
Markets, Convertible Securities, REIT and Aggressive Growth Series may purchase
call options to the extent that premiums paid by the Series do not aggregate
more than 2% of the Series' total assets. When the Series purchases a call
option, in return for a premium paid by the Series to the writer of the option,
the Series obtains the right to buy the security underlying the option at a
specified exercise price at any time during the term of the option. The writer
of the call option, who receives the premium upon writing the option, has the
obligation, upon exercise of the option, to deliver the underlying security
against payment of the exercise price. The advantage of purchasing call options
is that the Series may alter portfolio characteristics and modify portfolio
maturities without incurring the cost associated with portfolio transactions.
The Series may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Series will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Series will realize a loss from a closing sale
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transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
Although the Series will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Series would have
to exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Series may expire without any value
to the Series.
D. Options on Stock Indices--The DelCap, International Equity, Small
Cap Value, Trend, Global Bond, Emerging Markets, Convertible Securities, REIT
and Aggressive Growth Series also may write call options and purchase put
options on certain stock indices and enter into closing transactions in
connection therewith. A stock index assigns relative values to the common stocks
included in the index with the index fluctuating with changes in the market
values of the underlying common stock.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to the Series on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, DelCap, International Equity, Small Cap Value,
Trend, Global Bond, Emerging Markets, Convertible Securities, REIT and
Aggressive Growth Series may offset positions in stock index options prior to
expiration by entering into a closing transaction on an Exchange or may let the
option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indices are currently
traded on the following Exchanges among others: The Chicago Board Options
Exchange, New York Stock Exchange and American Stock Exchange.
The Series' ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the Series' portfolio securities. Since the Series' portfolio will
not duplicate the components of an index, the correlation will not be exact.
Consequently, the Series bear the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument. It is also
possible that there may be
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a negative correlation between the index or other securities underlying the
hedging instrument and the hedged securities which would result in a loss on
both such securities and the hedging instrument.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on the Series' ability to effectively
hedge its securities. The Series will enter into an option position only if
there appears to be a liquid secondary market for such options.
DelCap, International Equity, Small Cap Value, Trend, Global Bond,
Emerging Markets, Convertible Securities, REIT and Aggressive Growth Series will
not engage in transactions in options on stock indices for speculative purposes
but only to protect appreciation attained, to offset capital losses and to take
advantage of the liquidity available in the option markets.
E. Writing Covered Puts--Convertible Securities, REIT and Aggressive
Growth Series may purchase or sell (write) put options on securities as a means
of achieving additional return or of hedging the value of the Series' portfolio.
A put option is a contract that gives the holder of the option the right to sell
to the writer (seller), in return for a premium, the underlying security at a
specified price during the term of the option. The writer of the put, who
receives the premium, has the obligation to buy the underlying security upon
exercise, at the exercise price during the option period. The Series will write
only "covered" options. In the case of a put option written (sold) by the
Series, the Series will, through its custodian, deposit and maintain cash and
short-term U.S. Treasury obligations with a securities depository or the
custodian having a value equal to or greater than the exercise price of the
underlying security.
F. Closing Transactions-- If a Series has written an option, it may
terminate its obligation by effecting a closing purchase transaction. This is
accomplished by purchasing an option of the same series as the option previously
written. There can be no assurance that either a closing purchase or sale
transaction can be effected when a Series so desires. An option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series. Although the Series will generally purchase or write only
those 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.
A Series will realize a profit from a closing transaction if the price
of the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; a Series will realize a
loss from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Series.
If a Series purchases a put option, the loss to the Series is limited to the
premium paid for, and transaction costs in connection with, the put plus the
initial excess, if any, of the market price of the underlying security over the
exercise price. However, if the market price of the security underlying the put
rises, the profit a Series realizes on the sale of the security will be reduced
by the premium paid for the put option less any amount (net of transaction
costs) for which the put may be sold.
-29-
<PAGE>
ACCOUNTING AND TAX ISSUES
When a Series writes a call, or purchases a put option, an amount equal
to the premium received or paid by it is included in the Series' assets and
liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Series has written
expires on its stipulated expiration date, a Series recognizes a capital gain.
If a Series enters into a closing purchase transaction with respect to an option
which a Series has written, a Series realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option which a
Series has written is exercised, a Series realizes a capital gain or loss from
the sale of the underlying security and the proceeds from such sale are
increased by the premium originally received.
The premium paid by a Series for the purchase of a put option is
recorded in the Series' assets and liabilities as an investment and subsequently
adjusted daily to the current market value of the option. For example, if the
current market value of the option exceeds the premium paid, the excess would be
unrealized appreciation and, conversely, if the premium exceeds the current
market value, such excess would be unrealized depreciation. The current market
value of a purchased option is the last sale price on the principal Exchange on
which such option is traded or, in the absence of a sale, the mean between the
last bid and asked prices. If an option which a Series has purchased expires on
the stipulated expiration date, a Series realizes a short-term or long-term
capital loss for federal income tax purposes in the amount of the cost of the
option. If a Series exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid.
Options on Certain Stock Indices--Accounting for options on certain
stock indices will be in accordance with generally accepted accounting
principles. The amount of any realized gain or loss on closing out such a
position will result in a realized gain or loss for tax purposes. Such options
held by the DelCap, International Equity, Small Cap Value, Trend, Global Bond,
Emerging Markets, Convertible Securities, REIT and Aggressive Growth Series at
the end of each fiscal year will be required to be "marked to market" for
federal income tax purposes. Sixty percent of any net gain or loss recognized on
such deemed sales or on any actual sales will be treated as long-term capital
gain or loss, and the remainder will be treated as short-term capital gain or
loss.
Other Tax Requirements--Each Series, other than Strategic Income,
Devon, Emerging Markets, Convertible Securities, Social Awareness, REIT and
Aggressive Growth Series, has qualified, and intends to continue to qualify, as
a regulated investment company under Subchapter M of the Internal Revenue Code
(the "Code"). Strategic Income, Devon, Emerging Markets, Convertible Securities,
Social Awareness, REIT and Aggressive Growth Series intend to qualify as
regulated investment companies under the Code. As such, a 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, a Series must meet certain specific requirements,
including:
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<PAGE>
(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.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, a 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--A Series is
authorized to invest a limited amount in foreign securities. Such investments,
if made, will have the following additional tax consequences to a 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
-31-
<PAGE>
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.
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
-32-
<PAGE>
schedule (Form 1116) and report your foreign taxes paid directly on page 2 of
Form 1040. You should note that this simplified procedure is not 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 a 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.
A 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
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.
-33-
<PAGE>
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
Contract owners and prospective investors will be interested in
learning from time to time the current yield of Delchester, Capital Reserves,
Global Bond and Strategic Income Series and, in addition, the effective
compounded yield of Cash Reserve Series. Advertisements of performance of the
underlying Series, if any, will be accompanied by a statement of performance of
the separate account. As explained under Dividends and Realized Securities
Profits Distributions, dividends for Delchester, Capital Reserves, Strategic
Income and Cash Reserve Series are declared daily from net investment income and
dividends for Global Bond Series are declared quarterly. Yield will fluctuate as
income earned fluctuates.
From time to time, the Fund may state each Series' total return in
advertisements and other types of literature. Any statements of total return
performance data will be accompanied by information on the Series' average
annual total rate of return over the most recent one-, five- and ten-year
periods. Each Series may also advertise aggregate and average total return
information over additional periods of time.
Each Series' average annual total rate of return is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase at
the end of the period.
Aggregate total return is calculated in a similar manner, except that
the results are not annualized. Each calculation assumes all distributions are
reinvested at net asset value.
The performance of the Series, as shown below, is the average annual
total return quotations through December 31, 1998. Securities prices fluctuated
during the periods covered and past results should not be considered as
representative of future performance.
-34-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Series 1 year ended 3 years ended 5 years ended 10 years ended Life of Fund
12/31/98 12/31/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and Income
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Delchester
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Reserves
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Reserve
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Balanced
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
DelCap
(Inception 7/12/91)
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity
(Inception 10/29/92)
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value
(Inception 12/27/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Trend
(Inception 12/27/93)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Global Bond
(Inception 5/2/96)
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Income
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Devon
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible Securities
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Social Awareness
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The respective investment manager elected to waive voluntarily the portion of
its annual compensation under its Investment Management Agreement with each
Series to limit operating expenses of the Series to the amounts noted under
Investment Management Agreements and Sub-Advisory Agreements. In the absence
of such voluntary waiver, performance would have been affected negatively.
-36-
<PAGE>
Delchester, Capital Reserves, Global Bond and Strategic Income Series
may also quote its current yield, calculated as described below, in
advertisements and investor communications.
The yield computation for Delchester, Capital Reserves, Global Bond and
Strategic Income Series is determined by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period and annualizing the resulting figure, according to the
following formula:
a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends;
d = the maximum offering price per share on the last day of
the period.
The above formula will be used in calculating quotations of yield,
based on specific 30-day periods identified in advertising by the Series. The
yields of Delchester, Capital Reserves and Strategic Income Series as of
December 31, 1998 using this formula were 0.00%, 0.00% and 0.00%, respectively.
Yield quotations are based on the offering price determined by the
Series' net asset value on the last day of the period and will fluctuate
depending on the period covered.
Cash Reserve Series may also quote its current yield in advertisements
and investor communications.
Yield calculation for Cash Reserve Series begins with the value of a
hypothetical account of one share at the beginning of a seven-day period; this
is compared with the value of that same account at the end of the same period
(including shares purchased for the account with dividends earned during the
period). The net change in the account value is generally the net income earned
per share during the period, which consists of accrued interest income plus or
minus amortized purchase discount or premium, less all accrued expenses
(excluding expenses reimbursed by the investment manager) but does not include
realized gains or losses or unrealized appreciation or depreciation.
The current yield of Cash Reserve Series represents the net change in
this hypothetical account annualized over 365 days. In addition, a shareholder
may achieve a compounding effect through reinvestment of dividends which is
reflected in the effective yield shown below.
-37-
<PAGE>
The following is an example, for purposes of illustration only, of the
current and effective yield calculations for Cash Reserve Series for the
seven-day period ended December 31, 1998.
Value of a hypothetical account with one
share at the beginning of the period.................... $10.00000000
Value of the same account at the
end of the period....................................... .00000000
============
Net change in account value.................................... .00000000*
Base period return = net change in account
value ) beginning account value......................... .000000000
Current yield [base period return x (365) 7)]................. 0.00%**
====
Effective yield (1 + base period)365/7 - 1..................... 0.00%***
====
Weighted average life to maturity of the portfolio on December 31, 1998 was 00
days.
* This represents the net income per share for the seven calendar days ended
December 31, 1998.
** This represents the average of annualized net investment income per share
for the seven calendar days ended December 31, 1998.
*** This represents the current yield for the seven calendar days ended December
31, 1998 compounded daily.
The yield quoted at any time represents the amount being earned on a
current basis and is a function of the types of instruments in Cash Reserve
Series' portfolio, their quality and length of maturity and the Series'
operating expenses. The length of maturity for the portfolio is the average
dollar weighted maturity of the portfolio. This means that the portfolio has an
average maturity of a stated number of days for its issues. The calculation is
weighted by the relative value of the investment.
The yield will fluctuate daily as the income earned on the investments
of Cash Reserve Series fluctuates. Accordingly, there is no assurance that the
yield quoted on any given occasion will remain in effect for any period of time.
It should also be emphasized that the Fund is an open-end investment company and
that there is no guarantee that the net asset value or any stated rate of return
will remain constant. Investment performance is not insured. Investors comparing
results of Cash Reserve Series with investment results and yields from other
sources such as banks or savings and loan associations should understand these
distinctions. Historical and comparative yield information may, from time to
time, be presented by Cash Reserve Series. Although Cash Reserve Series
determines the yield on the basis of a seven-calendar-day period, it may, from
time to time, use a different time span.
Other funds of the money market type may calculate their yield on a
different basis and the yield quoted by the Series could vary upward or downward
if another method of calculation or base period were used.
-38-
<PAGE>
Investors should note that income earned and dividends paid by
Delchester, Capital Reserves, Global Bond and Strategic Income Series will also
vary depending upon fluctuations in interest rates and performance of each
Series' portfolio. The net asset value of each Series may change. Unlike Cash
Reserve Series, Delchester, Capital Reserves, Global Bond and Strategic Income
Series invest in longer-term securities that fluctuate in value and do so in a
manner inversely correlated with changing interest rates. The Series' net asset
values will tend to rise when interest rates fall. Conversely, the Series' net
asset values will tend to fall as interest rates rise. Normally, fluctuations in
interest rates have a greater effect on the prices of longer-term bonds. The
value of the securities held in the Series will vary from day to day and
investors should consider the volatility of the Series' net asset values as well
as their yields before making a decision to invest.
Comparative Information
From time to time, each Series may also quote its actual total return
performance, dividend results and other performance information in advertising
and other types of literature. This information may be compared to that of other
mutual funds with similar investment objectives and to stock, bond and other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of a Series may be compared to data prepared by
Lipper Analytical Services, Inc., Morningstar, Inc., or to the S&P 500 Index,
the Dow Jones Industrial Average, the Morgan Stanley Capital International
(MSCI), Europe, Australia and Far East (EAFE) Index, the MSCI Emerging Markets
Free Index, or the Salomon Brothers World Government Bond Index. Performance
also may be compared to data prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc. or the performance of unmanaged indices compiled or maintained
by statistical research firms such as Lehman Brothers or Salomon Brothers, Inc.
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 purposes. Generally, the indices
selected will be representative of the types of securities in which a Series may
invest and the assumptions that were used in calculating the blended performance
will be described.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare a Series'
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 500 and
the Dow Jones Industrial Average are industry-accepted unmanaged indices of
generally-conservative securities used for measuring general market performance.
Similarly, the MSCI EAFE Index, the MSCI Emerging Markets Free Index, and the
Salomon Brothers World Government Bond Index are industry-accepted unmanaged
indices of equity securities in developed countries and global debt securities,
respectively, used for measuring general market performance. The total return
performance reported for these indices will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The indices do
not take into account any sales charges or other fees. A direct investment in an
unmanaged index is not possible.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. 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.
-39-
<PAGE>
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 also be used in preparing comparative
illustrations.
Each Series may also promote its yield and/or total return performance
and use comparative performance information computed by and available from
certain industry and general market research and publications, such as Lipper
Analytical Services, Inc., IBC/Donoghue's Money Market Report and Morningstar,
Inc.
The performance of multiple indices compiled and maintained by
statistical research firms, such as Morgan Stanley, Salomon Brothers and Lehman
Brothers, may be combined to create a blended performance result for comparative
purposes. 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.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Series may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Series. The Series may also compare performance to that of other
compilations or indices that may be developed and made available in the future.
The Series may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Series (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments or global or international investments),
economic and political conditions, the relationship between sectors of the
economy and the economy as a whole, the effects of inflation and historical
performance of various asset classes, including but not limited to, stocks,
bonds and Treasury bills. From time to time advertisements, sales literature,
communications to shareholders or other materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Series), as well as the views as to current market, economic,
trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Series. In addition, selected indices may be used to illustrate
historic performance of selected asset classes. The Series may also include in
advertisements, sales literature, communications to shareholders or other
materials, charts, graphs or drawings which illustrate the potential risks and
rewards of investment in various investment vehicles, including but not limited
to, domestic and international stocks, and/or bonds, treasury bills and shares
of a Series. In addition, advertisements, sales literature, communications to
shareholders or other materials may include a discussion of certain attributes
or benefits to be derived by an investment in a Series
-40-
<PAGE>
and/or other mutual funds, shareholder profiles and hypothetical investor
scenarios, timely information on financial management and tax planning and
investment alternatives to certificates of deposit and other financial
instruments. Such sales literature, communications to shareholders or other
materials may include symbols, headlines or other material which highlight or
summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Series and may
illustrate how to find the listings of the Series in newspapers and periodicals.
Materials may also include discussions of other Series, products, and services.
The Series may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Series may compare these measures
to those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. A Series may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Series may include information
regarding the background and experience of its portfolio managers.
The following table is an example, for purposes of illustration only,
of cumulative total return performance for the Series through December 31, 1998.
For these purposes, the calculations assume the reinvestment of any realized
securities profits distributions and income dividends paid during the indicated
periods.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Series 3 months 6 months 9 months 1 year 3 years 5 years 10 years
ended ended ended ended ended ended ended
12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 Life of Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and Income
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Delchester
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Reserves
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Reserve
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Balanced
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
DelCap
(Inception 7/12/91)
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity
(Inception 10/29/92)
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value
(Inception 12/27/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Trend
(Inception 12/27/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Global Bond
(Inception 5/2/96)
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Income
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Devon
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible Securities
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Social Awareness
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
REIT
(Inception 5/1/98)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The respective investment manager elected to waive voluntarily the portion of
its annual compensation under its Investment Management Agreement with each
Series to limit operating expenses of the Series to the amounts noted under
Investment Management Agreements and Sub-Advisory Agreements. In the absence
of such voluntary waiver, performance would have been affected negatively.
-41-
<PAGE>
Because every investor's goals and risk threshold are different,
certain advertising and other related literature may provide general information
about investment alternatives and scenarios that will allow investors to assess
their personal goals. This information will include general material about
investing as well as materials reinforcing various industry-accepted principles
of prudent and responsible personal financial planning. One typical way of
addressing these issues is to compare an individual's goals and the length of
time the individual has to attain these goals to his or her risk threshold. In
addition, information may be provided discussing the respective investment
manager's overriding investment philosophy and how that philosophy affects
investment disciplines of the Series and other funds in the Delaware Investments
family employed in meeting their objectives.
-42-
<PAGE>
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Prices of securities such as stocks and bonds tend to move up and down over
various market cycles and are generally intended for longer term investing.
Money market funds, which typically maintain stable prices, are generally
intended for your short-term investment needs and can often be used as a basis
for building a long-term investment plan.
Though logic says to invest when prices are low, even experts can't
always pick the highs and the lows. By using a strategy known as dollar-cost
averaging, you schedule your investments ahead of time. If you invest a set
amount on a regular basis, that money will always buy more shares when the price
is low and fewer when the price is high. You can choose to invest at any regular
interval--for example, monthly or quarterly--as long as you stick to your
regular schedule.
Dollar-cost averaging looks simple and it is, but there are important
things to remember. Dollar-cost averaging works best over longer time periods,
and it doesn't guarantee a profit or protect against losses in declining
markets. If you need to sell your investment when prices are low, you may not
realize a profit no matter what investment strategy you utilize. That's why
dollar-cost averaging can make sense for long-term goals. Since the potential
success of a dollar-cost averaging program depends on continuous investing, even
through periods of fluctuating prices, you should consider your dollar-cost
averaging program a long-term commitment and invest an amount you can afford and
probably won't need to withdraw.
-43-
<PAGE>
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
-----------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of a Series.
THE POWER OF COMPOUNDING
As part of your Variable Annuity contract, any earnings from your
investment selection are automatically reinvested to purchase additional shares
of a Series. This gives your investment yet another opportunity to grow. It's
called the Power of Compounding. Each Series may included illustrations showing
the Power of Compounding in advertisements and other types of literature.
-44-
<PAGE>
TRADING PRACTICES AND BROKERAGE
The Fund or, in the case of International Equity, Global Bond and
Emerging Markets Series, Delaware International, selects banks, brokers or
dealers to execute transactions on behalf of the Series for the purchase or sale
of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have banks,
brokers or dealers execute transactions at best price and execution. Best price
and execution refers to many factors, including the price paid or received for a
security, the commission charged, the promptness and reliability of execution,
the confidentiality and placement accorded the order and other factors affecting
the overall benefit obtained by the account on the transaction. The Fund pays
reasonably competitive brokerage commission rates based upon the professional
knowledge of its trading department or, in the case of International Equity,
Global Bond and Emerging Markets Series, Delaware International, as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Fund pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Fund either buys the securities directly from the dealer or sells them to
the dealer. In these instances, there is no direct commission charged, but there
is a spread (the difference between the buy and sell price) which is in the
equivalent of a commission.
During the fiscal years ended December 31, 1996, 1997 and 1998, the
aggregate dollar amounts of brokerage commissions were paid by the Series noted
below:
1996 1997 1998
Growth and Income Series $302,434 $518,762
Delaware Balanced Series $83,262 $120,307
DelCap Series $101,211 $270,393
International Equity Series $110,181 $215,242
Small Cap Value Series $53,113 $119,689
Trend Series $80,172 $182,867
Devon Series* N/A $21,022
Emerging Markets Series* N/A $28,640
Convertible Securities Series* N/A $5,517
Social Awareness Series* N/A $7,416
REIT Series** N/A N/A
*Commenced operations on May 1, 1997.
**Commenced operations on May 1, 1998.
The respective investment manager may allocate out of all commission
business generated by all of the funds and accounts under management by the
respective investment manager, brokerage business to brokers or
-45-
<PAGE>
dealers who provide brokerage and research services. These services include
advice, either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers; securities or industries;
providing information on economic factors and trends; assisting in determining
portfolio strategy; providing computer software and hardware used in security
analyses; and providing portfolio performance evaluation and technical market
analyses. Such services are used by the respective investment manager in
connection with its investment decision-making process with respect to one or
more funds and accounts managed by it, and may not be used, or used exclusively,
with respect to the fund or account generating the brokerage.
During the fiscal year ended December 31, 1998, portfolio transactions
of the following Series in the amounts listed below, resulting in brokerage
commissions in the amounts listed below were directed to brokers for brokerage
and research services provided:
Portfolio Brokerage
Transactions Commissions
Amounts Amounts
------------ -----------
Growth and Income Series
Delaware Balanced Series
DelCap Series
International Equity Series
Small Cap Value Series
Trend Series
Devon Series
Emerging Markets Series
Convertible Securities Series
Social Awareness Series
REIT Series*
*Commenced operations on May 1, 1998.
As provided in the Securities Exchange Act of 1934 and the Investment
Management Agreements, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the respective investment manager which constitute in some part brokerage and
research services used by the respective
-46-
<PAGE>
investment manager in connection with its investment decision-making process and
constitute in some part services used by the respective investment manager in
connection with administrative or other functions not related to its investment
decision-making process. In such cases, the respective investment manager will
make a good faith allocation of brokerage and research services and will pay out
of its own resources for services used by the respective investment manager in
connection with administrative or other functions not related to its investment
decision-making process. In addition, so long as no fund is disadvantaged,
portfolio transactions which generate commissions or their equivalent are
allocated to broker/dealers who provide daily portfolio pricing services to the
Fund and to other funds in the Delaware 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.
The respective investment manager may place a combined order for two or
more accounts or funds engaged in the purchase or sale of the same security if,
in its judgment, joint execution is in the best interest of each participant and
will result in best price and execution. Transactions involving commingled
orders are allocated in a manner deemed equitable to each account or fund. When
a combined order is executed in a series of transactions at different prices,
each account participating in the order may be allocated an average price
obtained from the executing broker. It is believed that the ability of the
accounts to participate in volume transactions will generally be beneficial to
the accounts and funds. Although it is recognized that, in some cases, the joint
execution of orders could adversely affect the price or volume of the security
that a particular account or fund may obtain, it is the opinion of the
respective investment manager and the Fund's Board of Directors that the
advantages of combined orders outweigh the possible disadvantages of separate
transactions.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best price and execution,
the Fund may place orders with broker/dealers which have agreed to defray
certain expenses of the funds in the Delaware Investments family, such as
custodian fees, and may, at the request of the Distributor, give consideration
to sales of such funds shares as a factor in the selection of brokers and
dealers to execute Series portfolio transactions.
Portfolio Turnover
The rate of portfolio turnover will not be a limiting factor when
portfolio changes are deemed appropriate for each Series. Given the respective
Series' investment objectives, the Fund anticipates that the annual portfolio
turnover rates are not expected to exceed 100% for the Growth and Income,
International Equity, Global Bond, Strategic Income, Emerging Markets, Devon,
Social Awareness and REIT Series, 200% for the Capital Reserves, and Delaware
Balanced Series, and may exceed 100% for the Delchester, Small Cap Value and
Trend Series and 200% for the Convertible Securities Series. Although the DelCap
Series' portfolio turnover exceeded 100% for the previous fiscal year, it is not
expected to exceed 100% in the current fiscal year. It is possible that in any
particular year market conditions or other factors might result in portfolio
activity at a greater rate than anticipated. The portfolio turnover rate of each
Series is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value of
the portfolio securities owned by the Series during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.
The degree of portfolio activity may affect brokerage costs incurred by
each Series. A turnover rate of 100% would occur, for example, if all the
investments in a Series' portfolio at the beginning of the year were replaced by
the end of the year. In investing to achieve their respective objective, a
Series may hold securities for any period of time. Portfolio turnover will also
be increased if a Series writes a large number of call options which are
subsequently exercised. The turnover rate also may be affected by cash
requirements from redemptions and repurchases of Series' shares.
-47-
<PAGE>
The portfolio turnover rates for the Series noted below for the past
two fiscal years were as follows:
Year Ended Year Ended
Series December 31, 1997 December 31, 1998
------ ----------------- -----------------
Growth and Income Series 54%
Delchester Series 121%
Capital Reserves Series 120%
Delaware Balanced Series 67%
DelCap Series 134%
International Equity Series 7%
Small Cap Value Series 41%
Trend Series 125%
Global Bond Series 97%
Strategic Income Series 70%*
Devon Series 80%*
Emerging Markets Series 48%*
Convertible Securities Series 209%*
Social Awareness Series 52%*
REIT Series N/A **
* Annualized. Commenced operations on May 1, 1997.
** Annualized. Commenced operations on May 1, 1998.
-48-
<PAGE>
OFFERING PRICE
The offering price of shares is the net asset value per share next to
be determined after an order is received. The purchase of shares becomes
effective at the close of business on the day on which the investment is
received from the life company and after any dividend is declared. Dividends, if
any, begin to accrue on the next business day. There is no sales charge.
The purchase will be effected at the net asset value next computed
after the receipt of Federal Funds provided they are received by the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when such exchange is open. The New York Stock Exchange is
scheduled to be open Monday through Friday throughout the year except for New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the New York
Stock Exchange is closed, the Fund will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed. In the event of changes in Securities and Exchange Commission
requirements or the Fund's change in time of closing, the Fund reserves the
right to price at a different time, to price more often than once daily or to
make the offering price effective at a different time.
An example showing how to calculate the net asset value per share is
included in the Series' financial statements which are incorporated by reference
into this Part B.
The net asset value per share is computed by adding the value of all
securities and other assets in a Series' portfolio, deducting any liabilities of
that Series and dividing by the number of that Series' shares outstanding.
Expenses and fees are accrued daily. Each Series' net asset value per share is
computed by adding the value of all the securities and other assets in the
Series' portfolio, deducting any liabilities of the Series, and dividing by the
number of Fund shares outstanding. Expenses and fees are accrued daily. In
determining a Series' total net assets, portfolio securities primarily listed or
traded on a national or foreign securities exchange, except for bonds, are
valued at the last sale price on that exchange. Exchange traded options are
valued at the last reported sale price or, if no sales are reported, at the mean
between bid and asked prices. Non-exchange traded options are valued at fair
value using a mathematical model. Futures contracts are valued at their daily
quoted settlement price. For valuation purposes, foreign currencies and foreign
securities denominated in foreign currency values will be converted into U.S.
dollar values at the mean between the bid and offered quotations of such
currencies against U.S. dollars based on rates in effect that day. Securities
not traded on a particular day, over-the-counter securities, and government and
agency securities are valued at the mean value between bid and asked prices.
Money market instruments having a maturity of less than 60 days are valued at
amortized cost. Debt securities (other than short-term obligations) are valued
on the basis of valuations provided by a pricing service when such prices are
believed to reflect the fair value of such securities. Foreign securities and
the prices of foreign securities denominated in foreign currencies are
translated to U.S. dollars based on rates in effect as of 12 p.m., Eastern time.
Use of a pricing service has been approved by the Board of Directors. Prices
provided by a pricing service take into account appropriate factors such as
institutional trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, trading characteristics and other market data.
Subject to the foregoing, securities for which market quotations are not readily
available and other assets are valued at fair value as determined in good faith
and in a method approved by the Board of Directors.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Series of securities owned by it is not reasonably
practical, or it is not reasonably practical for a Series fairly to value its
assets, or in the event that the Securities and Exchange
-49-
<PAGE>
Commission has provided for such suspension for the protection of shareholders,
the Fund may postpone payment or suspend the right of redemption or repurchase.
In such case, the shareholder may withdraw a request for redemption or leave it
standing as a request for redemption at the net asset value next determined
after the suspension has been terminated.
Money Market Series
The Board of Directors has adopted certain procedures to monitor and
stabilize the price per share of Cash Reserve Series. Calculations are made each
day to compare part of the Series' value with the market value of instruments of
similar character. At regular intervals all issues in the portfolio are valued
at market value. Securities maturing in more than 60 days are valued more
frequently by obtaining market quotations from market makers. The portfolio will
also be valued by market makers at such other times as is felt appropriate. In
the event that a deviation of more than 1/2 of 1% exists between the Series' $10
per share offering and redemption prices and the net asset value calculated by
reference to market quotations, or if there is any other deviation which the
Board of Directors believes would result in a material dilution to shareholders
or purchasers, the Board of Directors will promptly consider what action, if
any, should be initiated, such as changing the price to more or less than $10
per share.
-50-
<PAGE>
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
Dividends for the Delchester, Capital Reserves and Strategic Income
Series are declared daily and paid monthly. Short-term capital gains
distributions, if any, may be paid with the dividend; otherwise, any
distributions from net realized securities profits normally will be distributed
following the close of the fiscal year. The Fund's fiscal year ends on December
31.
For the Growth and Income, Delaware Balanced, Devon, Convertible
Securities and Global Bond Series, the Fund will make payments from the Series'
net investment income quarterly. Distributions from the respective Series' net
realized securities profits, if any, normally will be made following the close
of the fiscal year.
For the Aggressive Growth, DelCap, International Equity, Small Cap
Value, Trend, Emerging Markets, Social Awareness and REIT Series, the Fund will
make payments from the Series' net income and net realized securities profits,
if any, once a year.
All dividends and distributions are automatically reinvested in
additional Series shares.
Cash Reserve Series
The Fund declares a dividend of this Series' net investment income on a
daily basis, to shareholders of record at the time of the previous calculation
of the Series' net asset value, each day that the Fund is open for business.
Payment of dividends will be made monthly on the first business day following
the end of the month. The amount of net investment income will be determined at
the time the offering price and net asset value are determined (see Offering
Price), and shall include investment income accrued, less the estimated expenses
of the Series incurred since the last determination of net asset value. Gross
investment income consists principally of interest accrued and, where
applicable, net pro-rata amortization of premiums and discounts since the last
determination. The dividend declared at the time the offering price and net
asset value are determined, as noted above, will be deducted immediately before
the net asset value calculation is made. See Offering Price. Net investment
income earned on days when the Fund is not open will be declared as a dividend
on the next business day. An investor begins earning dividends when payments for
shares purchased are converted into Federal Funds and are available for
investment.
To the extent necessary to maintain a $10 per share net asset value,
the Board of Directors will consider temporarily reducing or suspending payment
of daily dividends, or making a distribution of realized securities profits or
other distributions at the time the net asset value per share has changed.
-51-
<PAGE>
TAXES
Each Series, other than Aggressive Growth, Strategic Income, Devon,
Emerging Markets, Convertible Securities, Social Awareness and REIT Series, has
qualified, and intends to continue to qualify, as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code"). Aggressive Growth,
Strategic Income, Devon, Emerging Markets, Convertible Securities, Social
Awareness and REIT Series intend to qualify as regulated investment companies
under the Code. As such, a Series 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:
"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 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.
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<PAGE>
"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 higher rate brackets may
also make an election for shares held on January 1, 2001 to recognize
gain on their shares (any loss is disallowed) in order to qualify such
shares as qualified 5-year property as though purchased after December
31, 2000. These gains will be taxable to individual investors at a
maximum rate of 18% for investors in the 28% or higher federal income
tax brackets, and at a maximum rate of 8% for investors in the 15%
federal income tax bracket when sold after the 5 year holding period.
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<PAGE>
INVESTMENT MANAGEMENT AGREEMENTS AND SUB-ADVISORY AGREEMENTS
Delaware Management Company ("Delaware Management"), located at One
Commerce Square, 2005 Market Street, Philadelphia, PA 19103, furnishes
investment management services to Growth and Income, Delchester, Capital
Reserves, Cash Reserve, DelCap, Delaware Balanced, Small Cap Value, Trend,
Strategic Income, Devon, Convertible Securities, Social Awareness and REIT
Series. Delaware International Advisers Ltd. ("Delaware International"), located
at Third Floor, 80 Cheapside, London, England EC2V 6EE, furnishes investment
management services to International Equity, Global Bond and Emerging Markets
Series. Such services are provided subject to the supervision and direction of
the Fund's Board of Directors. Delaware International is affiliated with
Delaware Management.
Delaware Management and its predecessors have been managing the funds
in Delaware Investments since 1938. On December 31, 1998, Delaware Management
and its affiliates within Delaware Investments, including Delaware
International, were supervising in the aggregate more than $00 billion in assets
in the various institutional or separately managed (approximately
$00,000,000,000) and investment company (approximately $00,000,000,000)
accounts. Delaware Management is a series of Delaware Management Business Trust.
Delaware Management changed its form of organization from a corporation to a
business trust on March 1, 1998.
The Investment Management Agreements for Growth and Income, Delchester,
Capital Reserves, Cash Reserve, DelCap, Delaware Balanced, International Equity,
Small Cap Value and Trend Series are dated April 3, 1995 and were approved by
shareholders on March 29, 1995. The Investment Management Agreement for Global
Bond Series is dated May 1, 1996 and was approved by the initial shareholder on
May 1, 1996 and will remain in effect for an initial period of two years. The
Investment Management Agreements for Strategic Income, Devon, Emerging Markets,
Convertible Securities and Social Awareness Series are dated May 1, 1997 and
were approved by the initial shareholder May 1, 1997 and will remain in effect
for an initial period of two years. The Investment Management Agreement for REIT
Series is dated May 1, 1998 and was approved by the initial shareholder on that
date and will remain in effect for an initial period of two years. The
Investment Management Agreement for Aggressive Growth Series is dated May 1,
1999 and was approved by the initial shareholder on that date and will remain in
effect for an initial period of two years. The Agreements may be renewed only if
such renewal and continuance are specifically approved at least annually by the
Board of Directors or by vote of a majority of the outstanding voting securities
of the Series, and only if the terms and the renewal thereof have been approved
by the vote of a majority of the directors of the Fund who are not parties
thereto or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Agreements are terminable
without penalty on 60 days' notice by the directors of the Fund or by the
respective investment manager. The Agreements will terminate automatically in
the event of their assignments.
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<PAGE>
Delaware Management is paid an annual fee equal to the following
percentage rates of the average daily net assets of the Series noted below,
less, in the case of Growth and Income, Delchester, Capital Reserves, Cash
Reserve, DelCap and Delaware Balanced Series, a proportionate share of all
directors' fees paid to the unaffiliated directors of the Fund:
Growth and Income Series 0.60%
Delchester Series 0.60%
Capital Reserves Series 0.60%
Cash Reserve Series 0.50%
DelCap Series 0.75%
Delaware Balanced Series 0.60%
Small Cap Value Series 0.75%
Trend Series 0.75%
Strategic Income Series 0.65%
Devon Series 0.60%
Convertible Securities Series 0.75%
Social Awareness Series 0.75%
REIT Series 0.75%*
Aggressive Growth Series
*Assets up to $500 million: 0.75% of average daily net assets
Assets over $500 million - $1,000 million: 0.70% of average daily net assets
Assets over $1,000 million - $2,500 million: 0.65% of average daily net assets
Assets over $2,500 million: 0.60% of average daily net assets
Delaware International is paid an annual fee equal to the following
percentage rates of the average daily net assets of the Series, less, in the
case of International Equity Series, a proportionate share of all directors'
fees paid to the unaffiliated directors of the Fund:
International Equity Series 0.75%
Global Bond Series 0.75%
Emerging Markets Series 1.25%
The respective investment manager administers the affairs of and is
ultimately responsible for the investment management of each of the Series to
which it provides investment management services. In addition, Delaware
Management pays the salaries of all directors, officers and employees who are
affiliated with both it and the Fund.
Subject to the overall supervision of Delaware Management, Delaware
International manages the international sector of Strategic Income Series'
portfolio and furnishes Delaware Management with investment recommendations,
asset allocation advice, research and other investment services with respect to
foreign securities. For the services provided to Delaware Management, Delaware
Management pays the Sub-Adviser a fee equal to one- third of the fee paid to
Delaware Management under the terms of Strategic Income Series' Investment
Management Agreement.
Pursuant to the terms of Sub-Advisory Agreements with Delaware
Management, Vantage Investment Advisors ("Vantage") participates in the
management of Social Awareness Series' assets. Vantage is responsible for
day-to-day investment management of the Series, makes investment decisions for
the Series in
-55-
<PAGE>
accordance with the Series' investment objectives and stated policies and places
orders on behalf of the Series to effect the investment decisions made. Delaware
Management continues to have ultimate responsibility for all investment advisory
services in connection with the management of the Series pursuant to the
Investment Management Agreement and supervises Vantage's performance of such
services For the services provided to Delaware Management, Delaware Management
pays Vantage a fee equal to (i) 0.25% of average daily net assets up to $20
million; (ii) 0.35% of average daily net assets between $20 million and $50
million; and (iii) 0.40% of average daily net assets over $50 million. Vantage's
address is 630 Fifth Avenue, New York, NY 10111.
Lincoln Investment Management, Inc. ("Lincoln"), a wholly owned
subsidiary of Lincoln National Corporation ("Lincoln National"), acts as
sub-adviser to Delaware Management with respect to REIT Series. In its capacity
as sub-adviser, Lincoln furnishes Delaware Management with investment
recommendations, asset allocation advice, research, economic analysis and other
investment services with respect to the securities in which the Series may
invest. Lincoln receives 30% of the advisory fee paid to Delaware Management for
acting as sub-adviser to Delaware Management with respect to the Series.
Lincoln's address is 200 E. Berry Street, Fort Wayne, Indiana 46802.
On December 31, 1998, the total net assets of the Fund were
$0,000,000,000, broken down as follows:
Growth and Income Series $000,000,000
Delchester Series $00,000,000
Capital Reserves Series $00,000,000
Cash Reserve Series $00,000,000
DelCap Series $000,000,000
Delaware Balanced Series $000,000,000
International Equity Series $000,000,000
Small Cap Value Series $00,000,000
Trend Series $000,000,000
Global Bond Series $00,000,000
Strategic Income Series $0,000,000
Devon Series $00,000,000
Convertible Securities Series $0,000,000
Social Awareness Series $0,000,000
Emerging Markets Series $0,000,000
REIT Series $000,000
Aggressive Growth Series did not publicly offer shares prior to May 1,
1998.
-56-
<PAGE>
Investment management fees were incurred with respect to the Series
noted below for the last three fiscal years.
<TABLE>
<CAPTION>
Series December 31, 1998 December 31, 1997 December 31, 1996
- ------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Growth and Income Series paid $1,640,377 paid $765,301 paid
Delchester Series paid $483,877 paid $348,693 paid
Capital Reserves Series paid $166,300 paid $164,296 paid
Cash Reserve Series paid $110,155 paid
DelCap Series earned $505,739 earned
paid $491,404 paid
waived $14,335 waived
Delaware Balanced Series paid $402,509 paid
International Equity Series earned $768,150 earned
paid $650,392 paid
waived $117,758 waived
Small Cap Value Series earned $117,000 earned
paid $87,687 paid
waived $29,313 waived
Trend Series earned $247,520 earned
paid $205,501 paid
waived $42,019 waived
Global Bond Series* earned $26,503 earned
paid $12,597 paid
waived $13,906 waived
Strategic Income Series** earned N/A
paid
waived
Devon Series** earned N/A
paid
waived
Emerging Markets Series** earned N/A
paid
waived
Convertible Securities Series** earned $14,026 earned N/A
paid -0- paid
waived $14,026 waived
Social Awareness Series** earned $20,293 earned N/A
paid $3,692 paid
waived $16,601 waived
REIT Series*** earned N/A N/A
paid
waived
</TABLE>
* Commenced operations on May 2, 1996.
** Commenced operations on May 1, 1997.
*** Commenced operations on May 1, 1998.
-57-
<PAGE>
During the period May 1, 1997 (date of commencement of operations)
through December 31, 1997, Delaware International received $2,424 from Delaware
Management for serving as Sub-Adviser to the Strategic Income Series and for the
fiscal year ended December 31, 1998, Delaware International received $00,000 for
such services. During the period May 1, 1997 (date of commencement of
operations) through December 31, 1997, Vantage received $5,449 from Delaware
Management for serving as Sub-Adviser to the Social Awareness Series and for the
fiscal year ended December 31, 1998, Vantage received $000,000 for such
services. During the period May 1, 1998 (date of commecement of operations
through December 31, 1998, Lincoln received $0,000 from Delaware Management for
serving as Sub-Adviser to the REIT Series.
Except for those expenses borne by the respective investment manager
under the Investment Management Agreements and the Distributor under the
Distribution Agreements, each Series is responsible for all of its own expenses.
Among others, these include the Series' proportionate share of rent and certain
other administrative expenses; the investment management fees; transfer and
dividend disbursing agent fees and costs; custodian expenses; federal securities
registration fees; proxy costs; and the costs of preparing prospectuses and
reports sent to shareholders.
Beginning May 1, 1998, Delaware Management elected voluntarily to waive
its fee and pay the expenses of a Series to the extent necessary to ensure that
a Series' annual operating expenses, exclusive of taxes, interest, brokerage
commissions and extraordinary expenses, do not exceed the following percentages
of average daily net assets through , 1999:
Growth and Income Series 0.80%
Delchester Series 0.80%
Capital Reserves Series 0.80%
Cash Reserve Series 0.80%
DelCap Series 0.85%
Delaware Balanced Series 0.80%
Small Cap Value Series 0.85%
Trend Series 0.85%
Strategic Income Series 0.80%
Devon Series 0.80%
Convertible Securities Series 0.85%
Social Awareness Series 0.85%
REIT Series 0.85%
Aggressive Growth Series
-58-
<PAGE>
Beginning May 1, 1998, Delaware International elected voluntarily to
waive its fee and pay the expenses of a Series to the extent necessary to ensure
that a Series' annual operating expenses, exclusive of taxes, interest,
brokerage commissions and extraordinary expenses, do not exceed the following
percentages of average daily net assets through , 1999:
International Equity Series 0.95%
Global Bond Series 0.85%
Emerging Markets Series 1.50%
Prior to May 1, 1998, Delaware Management elected voluntarily to waive
its fee and pay the expenses of a Series to the extent necessary to ensure that
a Series' annual operating expenses, exclusive of taxes, interest, brokerage
commissions and extraordinary expenses, did not exceed 0.80% of average daily
net assets from the commencement of operations through April 30, 1998 for the
Delchester, Capital Reserves, Cash Reserve, Small Cap Value, Trend, Strategic
Income, Devon, Convertible Securities and Social Awareness Series.
Prior to May 1, 1998, Delaware Management elected voluntarily to waive
its fee and pay the expenses of Growth and Income, Delaware and DelCap Series to
the extent necessary to ensure that a Series' annual operating expenses,
exclusive of taxes, interest, brokerage commissions and extraordinary expenses,
did not exceed 0.80% of average daily net assets for the period July 1, 1992
through April 30, 1998.
Prior to May 1, 1998, Delaware International elected voluntarily to
waive its fee and pay the expenses of International Equity and Global Bond
Series to the extent necessary to ensure that a Series' annual operating
expenses, exclusive of taxes, interest, brokerage commissions and extraordinary
expenses, did not exceed 0.80% of average daily net assets from the commencement
of operations through June 30, 1997. The waiver and payment commitment was
extended through April 30, 1998 for Global Bond Series. Beginning July 1, 1997,
Delaware International elected voluntarily to waive its fee and pay the expenses
of International Equity to the extent necessary to ensure that the Series'
annual operating expenses, exclusive of taxes, interest, brokerage commissions
and extraordinary expenses, did not exceed 0.95% of average daily net assets
through April 30, 1998.
Prior to May 1, 1998, Delaware International elected voluntarily to
waive its fee and pay the expenses of the Emerging Markets Series to the extent
necessary to ensure that the Series' annual operating expenses, exclusive of
taxes, interest, brokerage commissions and extraordinary expenses, did not
exceed 1.50% of average daily net assets from the commencement of operations
through April 30, 1998.
Distribution and Service
Delaware Distributors, L.P., located at 1818 Market Street,
Philadelphia, PA 19103, serves as the Fund's national distributor under
Distribution Agreements dated as of April 3, 1995 for all Series other than
Global Bond, Strategic Income, Devon, Emerging Markets, Convertible Securities,
Social Awareness, REIT and Aggressive Growth Series. Global Bond Series'
Distribution Agreement is dated as of May 1, 1996. Strategic Income, Devon,
Emerging Markets, Convertible Securities and Social Awareness Series'
Distribution Agreements are dated as of May 1, 1997. REIT Series Distribution
Agreement is dated as of May 1, 1998. Aggressive Growth Series Distribution
Agreement is dated as of May 1, 1999. The Distributor is an affiliate of
Delaware Management and Delaware International 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.
-59-
<PAGE>
Delaware Service Company, Inc., another affiliate of Delaware
Management and Delaware International, is the Fund's shareholder servicing,
dividend disbursing and transfer agent for the Growth and Income, Delchester,
Capital Reserves, Delaware Balanced, DelCap, International Equity, Small Cap
Value, Trend, Global Bond, Strategic Income, Devon, Emerging Markets,
Convertible Securities, Social Awareness and REIT Series pursuant to the Amended
and Restated Shareholders Services Agreement dated May 1, 1999 and for Cash
Reserve Series pursuant to the Shareholders Services Agreement dated June 29,
1988. The Transfer Agent also provides accounting services to the Series
pursuant to the terms of a separate Fund Accounting Agreement. The Transfer
Agent is also an indirect, wholly owned subsidiary of Delaware Management
Holdings, Inc.
-60-
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of
its Board of Directors.
Certain officers and directors of the Fund hold identical positions in
each of the other funds in the Delaware Investments family.
DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware
Management Business Trust, Delaware Management Company, Delaware Investment
Advisers, 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 Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. In connection with the merger, new Investment Management Agreements
between the Fund on behalf of all of the Series, except Global Bond, Strategic
Income, Devon, Emerging Markets, Convertible Securities, Social Awareness and
REIT Series, and, as relevant, Delaware Management and Delaware International,
were executed following shareholder approval. DMH, Delaware Management and
Delaware International 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.
* Jeffrey J. Nick (45)
Chairman of the Board, President, Chief Executive Officer and Director
and/or Trustee of the Fund and each of the other 33 investment
companies in the Delaware Investments family, Delaware Management
Business Trust, Delvoy, Inc., DMH Corp. and Founders Holdings, Inc.
Chairman of the Board, Chief Executive Officer and Director of Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware
International Holdings Ltd., Delaware International Advisers Ltd.
Chairman of the Board and Chief Executive Officer of Delaware
Management Company (a series of Delaware Management Business Trust)
Chairman of the Board and Director of Delaware Capital Management,
Inc.
Chairman of Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware Distributors, L.P.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc.
President and Chief Executive Officer of Delaware Management Holdings,
Inc.; Director of Delaware Service Company, Inc. and Retirement
Financial Services, Inc.
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.
- ----------------------
* Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
-61-
<PAGE>
*Wayne A. Stork (61)
Director and/or Trustee of the Fund and each of the other 33 investment
companies in the Delaware Investments family.
Chairman and Director of Delaware Management Holdings, Inc.
Prior to January 1, 1999, Mr. Stork was Chairman and Director and/or
Trustee of the Fund and each of the other 33 investment companies in
the Delaware Investments family and Delaware Capital Management,
Inc.; Chairman, President, Chief Executive Officer and Director of
DMH Corp., Delaware Distributors, Inc. and Founders Holdings, Inc.;
Chairman, President, Chief Executive Officer, Chief Investment
Officer and Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust; Chairman, President, Chief
Executive Officer and Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business Trust); Chairman,
Chief Executive Officer and Chief Investment Officer of Delaware
Investment Advisers (a series of Delaware Management Business Trust);
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd., Delaware International Holdings Ltd. and
Delaware Management Holdings, Inc.; President and Chief Executive
Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.;
Director of Delaware Service Company, Inc. and Retirement Financial
Services, Inc.
During the five years, prior to January 1, 1999, Mr. Stork has served
in various executive capacities at different times within the
Delaware organization.
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.
Executive Vice President and Trustee of Delaware Management Business
Trust.
President of Delaware Investment Advisers.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of the
Fund, each of the other 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. and
Delaware Management Business Trust.
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.
- ----------------------
*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
-62-
<PAGE>
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.
Executive Vice President, Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust.
Director of Delaware International Advisers Ltd. and Delaware Voyageur
Holding, Inc.
Vice President of Lincoln Funds Corporation
During the past five years, Mr. Downes has served in various executive
capacities at different times within the Delaware organization.
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.
-63-
<PAGE>
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.
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.
George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of the Fund and
each of the other 33 investment companies in the Delaware Investments
family
Senior Vice President and Secretary of Delaware Distributors, L.P.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust), Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Retirement Financial Services, Inc.,
Delaware Capital Management, Inc., Delvoy, Inc. and Delaware
Management Business Trust
Senior Vice President, Secretary and Director of Founders Holdings,
Inc.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company
Senior Vice President of Delaware International Holdings Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
executive capacities at different times within the Delaware
organization.
-64-
<PAGE>
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 Business Trust, 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.
During the past five years, Mr. Hastings has served in various
capacities at different times within the Delaware organization.
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.
Gerald S. Frey (52)
Vice President/Senior Portfolio Manager of the Fund, of nine other
investment companies in the Delaware Investments family and of
Delaware Management Company, Inc.
Before joining Delaware Investments in 1996, Mr. Frey was a Senior
Director with Morgan Grenfell Capital Management, New York, NY from
1986 to 1995.
John B. Fields (52)
Vice President/Senior Portfolio Manager of the Fund, of nine other
investment companies in the Delaware Investments family, Delaware
Management Company, Inc., Delaware Investment Advisers, Delaware
Management Company and Delaware Capital Management, Inc.
During the past five years, Mr. Fields has served in various capacities
within the Delaware organization.
-65-
<PAGE>
George H. Burwell (36)
Vice President/Senior Portfolio Manager of the Fund, of nine other
investment companies in the Delaware Investments family, Delaware
Management Company, Inc. and Delaware Management Company.
During the past five years, Mr. Burwell has served in various
capacities at different times within the Delaware organization.
Gary A. Reed (43)
Vice President/Senior Portfolio Manager of the Fund, of nine other
investment companies in the Delaware Investments family, of Delaware
Management Company, Inc., Delaware Investment Advisers, Delaware
Management Company and Delaware Capital Management, Inc.
During the past five years, Mr. Reed has served in such capacities
within the Delaware organization.
Gerald T. Nichols (40)
Vice President/Senior Portfolio Manager of the Fund, of 24 other
investment companies in the Delaware Investments family, Delaware
Management Company, Inc., Delaware Investment Advisers and Delaware
Management Company.
Vice President of Founders Holdings, Inc.
Treasurer and Director of Founders CBO Corporation.
During the past five years, Mr. Nichols has served in various
capacities at different times within the Delaware organization.
Paul A. Matlack (38)
Vice President/Senior Portfolio Manager of the Fund, of 24 other
investment companies in the Delaware Investments family, Delaware
Management Company, Inc., Delaware Investment Advisers and Delaware
Management Company.
Vice President of Founders Holdings, Inc.
President and Director of Founders CBO Corporation.
During the past five years, Mr. Matlack has served in various
capacities at different times within the Delaware organization.
Christopher S. Beck (40)
Vice President/Senior Portfolio Manager of the Fund, of nine other
investment companies in the Delaware Investments family, Delaware
Management Company, Inc. and Delaware Management Company.
Before joining Delaware Investments in 1997, Mr. Beck managed the Small
Cap Fund for two years at Pitcairn Trust Company. Prior to 1995, he
was Director of Research at Cypress Capital Management in Wilmington
and Chief Investment Officer of the University of Delaware Endowment
Fund.
Babak Zenouzi (35)
Vice President/Portfolio Manager of the Fund and 11 other investment
companies in the Delaware Investments family.
Vice President/Assistant Portfolio Manager of Delaware Investment
Advisers.
During the past five years, Mr. Zenouzi has served in various
capacities at different times within the Delaware organization.
-66-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Fund and the total compensation received from all Delaware Investments funds for
the fiscal year ended December 31, 1998 and an estimate of annual benefits to be
received upon retirement under the Delaware Investments Retirement Plan for
Directors/Trustees as of December 31, 1998. Only the independent directors of
the Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Accrued Annual from the Investment
expected to be as Part of Benefits Companies
received from Fund Upon in Delaware
the Fund Expenses Retirement(1) Investments(2)
-------------- ---------------- ------------- -------------------
<S> <C> <C> <C> <C>
Name
- ----
W. Thacher Longstreth $ None $38,500 $
Ann R. Leven $ None $38,500 $
Walter P. Babich $ None $38,500 $
Anthony D. Knerr $ None $38,500 $
Charles E. Peck $ None $38,500 $
Thomas F. Madison $ None $38,500 $
John H. Durham (3) $ None $31,000 $
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family
for which he or she serves as a director or trustee for a period equal to
the lesser of the number of years that such person served as a director or
trustee 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/trustees of each investment company at the time
of such person's retirement. If an eligible director/trustee retired as of
Decenber 31, 1998, he or she would be entitled to annual payments totaling
the amounts noted above, in the aggregate, from all of the investment
companies in the Delaware Investments family for which he or she serves as
a director or trustee, based on the number of investment companies in the
Delaware Investments family as of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,500 for serving as a director
or trustee for all 34 investment companies in Delaware Investments, plus
$3,145 for each Board Meeting attended. John H. Durham currently receives a
total annual retainer fee of $31,000 for serving as a director or trustee
for 19 investment companies in Delaware Investments, plus
-67-
<PAGE>
$1,757.50 for each Board Meeting attended. Ann R. Leven, Walter P. Babich,
Anthony D. Knerr and Thomas F. Madison serve on the Fund's audit committee;
Ms. Leven is the chairperson. Members of the audit committee currently
receive additional annual compensation of $5,000 from all investment
companies, in the aggregate, with the exception of the chairperson, who
receives $6,000.
(3) John H. Durham joined the Board of Directors of the Fund and 18 other
investment companies in Delaware Investments on April 16, 1998.
-68-
<PAGE>
As of 1999, management believes the following accounts held 5% of
record or more of the outstanding shares of each series of the Fund. Management
has no knowledge of beneficial ownership of the Fund's shares:
<TABLE>
<CAPTION>
Series Name and Address of Account Share Amount Percentage
- ------ --------------------------- ------------ ----------
<S> <C> <C> <C>
Growth and Income Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Lincoln National Life Company
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801
Delchester Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Capital Reserves Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Delaware Balanced Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Cash Reserve Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
</TABLE>
<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
International Equity Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Trend Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Lincoln National Life Company
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801
Small Cap Value Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654 5,361,951 98.91%
Global Bond Series Lincoln National Life Company
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801
SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
</TABLE>
-69-
<PAGE>
<TABLE>
<CAPTION>
Series Name and Address of Account Share Amount Percentage
- ------ --------------------------- ------------ ----------
<S> <C> <C> <C>
Strategic Income Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Lincoln National Life Company
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801
Devon Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Emerging Markets Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Lincoln National Life Company
Separate Account - C See Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Series Name and Address of Account Share Amount Percentage
- ------ --------------------------- ------------ ----------
<S> <C> <C> <C>
Convertible Securities Series Lincoln National Life Company
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801
SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Social Awareness Series SMA Life Assurance Company
Separate Account VA-K
440 Lincoln Street
Worcester, MA 01654
Lincoln National Life Company
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801
</TABLE>
-70-
<PAGE>
GENERAL INFORMATION
The Fund, which was organized as a Maryland corporation in 1987, is an
open-end registered management investment company. With the exception of Global
Bond, Emerging Markets and REIT Series, each Series operates as a diversified
fund as defined by the Investment Company Act of 1940 (the "1940 Act"). Global
Bond, Emerging Markets and REIT Series operate as nondiversified funds as
defined by the 1940 Act.
Delaware Management is the investment manager of each Series of the
Fund other than International Equity, Global Bond and Emerging Markets Series.
Delaware International is the investment manager of International Equity, Global
Bond and Emerging Markets Series. Delaware Management or its affiliate, Delaware
International, manages the other funds in the Delaware Investments family. While
investment decisions for each Series are made independently from those of the
other funds and accounts, investment decisions for such other funds and accounts
may be made at the same time as investment decisions for the Series.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to Delaware Management, Delaware International or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
Delaware Distributors, L.P. acts as national distributor for the Fund
and for the other mutual funds in the Delaware Investments family.
In addition, Delaware Service Company, Inc., an affiliate of Delaware
Management, acts as shareholder servicing, dividend disbursing and transfer
agent for the Fund and for the other mutual funds in the Delaware 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 each Series' net asset value and providing
all financial reporting services, regulatory compliance testing and other
related accounting services. For its services, the Transfer Agent is paid a fee
based on total assets of all funds in the Delaware Investments family for which
it provides such accounting services. Such fee is equal to 0.25% multiplied by
the total amount of assets in the complex for which the Transfer Agent furnishes
accounting services, where such aggregate complex assets are $10 billion or
less, and 0.20% of assets if such aggregate complex assets exceed $10 billion.
The fees are charged to each fund, including the 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.
Delaware Management and its affiliates own the name "Delaware Group."
Under certain circumstances, including the termination of the Fund's advisory
relationship with Delaware Management or its distribution relationship with
Delaware Distributors, L.P., Delaware Management and its affiliates could cause
the Fund to delete the words "Delaware Group" from the Fund's name.
-71-
<PAGE>
The initial public offering date for the Growth and Income, Delchester,
Capital Reserves, Cash Reserve and Delaware Balanced Series was July 28, 1988.
The initial public offering date for DelCap Series was July 2, 1991.
International Equity Series commenced operations on October 29, 1992. Small Cap
Value and Trend Series commenced operations on December 27, 1993. The initial
public offering date for Global Bond Series was May 1, 1996 and for Strategic
Income, Devon, Emerging Markets, Convertible Securities and Social Awareness
Series was May 1, 1997. REIT Series commenced on May 1, 1998. Aggressive Growth
Series did not commence operation prior to the date of this 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 each Series. While all shares have equal
voting rights on matters affecting the entire Fund, each Series would vote
separately on any matter which affects only that Series, such as investment
objective and policy or action to dissolve the Series, and as otherwise
prescribed by the 1940 Act. Shares of each Series have a priority in that
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.
-72-
<PAGE>
APPENDIX A--DESCRIPTION OF RATINGS
Commercial Paper
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from Duff and Phelps, Inc.'s description of its two highest
ratings: Category 1--Top Grade: Duff 1-Plus--Highest certainty of timely
payment. Short-term liquidity, including internal operating factors and/or ready
access to alternative sources of funds, is clearly outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations. Duff 1--Very high
certainty of timely payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are minor. Duff 1-Minus--High
certainty of timely payment. Liquidity factors are strong and supported by good
fundamental protection factors. Risk factors are very small. Category 2--Good
Grade: Duff 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds' needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
Excerpts from Fitch Investors Service, Inc.'s description of its two
highest ratings: F-1--Highest grade commercial paper assigned this rating is
regarded as having the strongest degree of assurance for timely payment.
F-2--Very good grade issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than the strongest issues.
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the
-73-
<PAGE>
obligation. BB indicates the lowest degree of speculation and CC the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions; C--reserved for income bonds on which no
interest is being paid; D--in default, and payment of interest and/or repayment
of principal is in arrears.
-74-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditor for each Series of
the Fund and, in its capacity as such, audits the annual financial statements of
each Series. Each Series', other than Aggressive Growth Series', Statement of
Net Assets, Statement of Operations, Statement of Changes in Net Assets,
Financial Highlights and Notes to Financial Statements, as well as the reports
of Ernst & Young LLP, independent auditors, for the fiscal year ended December
31, 1998 are included in the Fund's Annual Reports to shareholders. The
financial statements and financial highlights, the notes relating thereto and
the reports of Ernst & Young LLP listed above are incorporated by reference from
the Annual Reports into this Part B. Aggressive Growth Series did not commence
operations prior to the date of this Part B.
<PAGE>
PART C - Other Information
(continued)
PART C
Other Information
Item 23 Exhibits
(a) Articles of Incorporation.
(1) 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.
(2) 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.
(3) Executed Articles Supplementary to Articles of
Incorporation (April 24, 1997) incorporated into this
filing by reference to Post-Effective Amendment No. 24
filed April 27, 1998.
(4) Executed Articles of Amendment to Articles of
Incorporation (April 24, 1997) incorporated into this
filing by reference to Post-Effective Amendment No. 24
filed April 27, 1998.
(5) Executed Articles Supplementary to Articles of
Incorporation (April 24, 1997) incorporated into this
filing by reference to Post-Effective Amendment No. 24
filed April 27, 1998.
(6) Form of Articles Supplementary to Articles of
Incorporation (March 1998) incorporated into this filing
by reference to Post-Effective Amendment No. 23 filed
March 16, 1998.
(7) Form of Articles Supplementary to Articles of
Incorporation (1999) to be filed by Amendment.
(b) 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.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) 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) Executed Articles Supplementary (April 24, 1997)
incorporated into this filing by reference to
Post-Effective Amendment No. 24 filed April 27, 1998.
(iv) Form of Articles Supplementary (March 1998)
incorporated into this filing by reference to
Post-Effective Amendment No. 23 filed March 16, 1998.
<PAGE>
PART C - Other Information
(continued)
(v) Form of Articles Supplementary (1999) to be filed by
Amendment.
(2) 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.
(d) Investment Management Agreements.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) Executed Investment Management Agreement (April 3, 1995)
between Delaware Management Company, Inc. and the
Registrant on behalf of Value Series (renamed Small Cap
Value Series) incorporated into this filing by reference
to Post-Effective Amendment No. 15 filed April 27, 1995.
(7) 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.
(8) Executed Investment Management Agreement (May 1, 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. 24 filed April 27, 1998.
(9) Executed Investment Management Agreement (May 1, 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.
24 filed April 27, 1998.
<PAGE>
PART C - Other Information
(continued)
(10) 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.
(11) Executed Investment Management Agreement (May 1, 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. 24 filed April 27, 1998.
(12) Executed Investment Management Agreement (May 1997)
between Delaware Management Company, Inc. and the
Registrant on behalf of Quantum Series (renamed Social
Awareness Series) incorporated into this filing by
reference to Post-Effective Amendment No. 24 filed April
27, 1998.
(13) Executed Investment Management Agreement (April 30, 1998)
between Delaware Management Company and the Registrant on
behalf of REIT Series attached as Exhibit.
(14) 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.
(15) Executed Sub-Advisory Agreement (May 1, 1997) between
Delaware Management Company, Inc. and Vantage Global
Advisors, Inc. on behalf of Quantum Series (renamed Social
Awareness Series) incorporated into this filing by
reference to Post-Effective Amendment No. 24 filed April
27, 1998.
(17) Form of Sub-Advisory Agreement (May 1998) between Delaware
Management Company 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.
(18) Form of Investment Management Agreement (1999) between
Delaware Management Company and the Registrant on behalf
of Aggressive Growth Series attached as Exhibit.
(e) Distribution Agreements.
(1) 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.
(2) 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.
(3) 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.
(4) Executed Distribution Agreement (April 3, 1995) between
Delaware Distributors, L.P. and
<PAGE>
PART C - Other Information
(continued)
the Registrant on behalf of International Equity Series
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed January 22, 1996.
(5) Executed Distribution Agreement (April 3, 1995) between
Delaware Distributors, L.P. and the Registrant on behalf
of Value Series (renamed Small Cap Value Series)
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed January 22, 1996.
(6) 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.
(7) 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.
(8) Executed Distribution Agreement (May 1, 1997) between
Delaware Distributors, L.P. and the Registrant on behalf
of Convertible Securities Series, Devon Series, Emerging
Markets Series, Quantum Series (renamed Social Awareness
Series) and Strategic Income Series incorporated into this
filing by reference to Post-Effective Amendment No. 24
filed April 27, 1998.
(9) Executed Distribution Agreement (April 30, 1998) between
Delaware Distributors, L.P. and the Registrant on behalf
of REIT Series attached as Exhibit.
(10) Form of Distribution Agreement (1999) between Delaware
Distributors, L.P. and the Registrant on behalf of
Aggressive Growth Series attached as Exhibit.
(f) Bonus, Profit Sharing, Pension Contracts.
(1) 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.
(2) Amendment to Profit Sharing Plan (December 21, 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed January 22, 1996.
(g) Custodian Agreements.
(1) 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.
(2) 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.
(3) 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.
(4) Letter of notice (May 1, 1997) to add Convertible
Securities Series, Devon Series, Emerging Markets Series,
Quantum Series (renamed Social Awareness Series) and
Strategic Income Series to Custodian Agreement between The
Chase Manhattan Bank and the Registrant
<PAGE>
PART C - Other Information
(continued)
incorporated into this filing by reference to
Post-Effective Amendment No. 24 filed April 27, 1998.
(5) Letter of notice (April 30, 1998) to add REIT Series to
Custodian Agreement between The Chase Manhattan Bank and
the Registrant attached as Exhibit.
(6) Form of Letter of notice (1999) to add Aggressive Growth
Series to Custodian Agreement between The Chase Manhattan
Bank and the Registrant attached as Exhibit.
(h) Other Material Contracts.
(1) 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.
(2) Executed Amended and Restated Shareholders Services
Agreement (May 1, 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 (renamed Small
Cap 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 (renamed Social
Awareness Series) incorporated into this filing by
reference to Post-Effective Amendment No. 24 filed April
27, 1998.
(3) Executed Amended and Restated Shareholder Services
Agreement (April 30, 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 (renamed Small
Cap Value Series), Emerging Growth Series (renamed Trend
Series), Global Bond Series, Strategic Income Series,
Devon Series, Emerging Markets Series, Convertible
Securities Series, Quantum Series (renamed Social
Awareness Series) and REIT Series attached as Exhibit.
(4) Form of Amended and Restated Shareholder Services
Agreement (1999) 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 (renamed Small Cap Value Series), Emerging
Growth Series (renamed Trend Series), Global Bond Series,
Strategic Income Series, Devon Series, Emerging Markets
Series, Convertible Securities Series, Quantum Series
(renamed Social Awareness Series), REIT and Aggressive
Growth Series attached as Exhibit.
(5) 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. 9 (March 31, 1998) to Schedule A to
Delaware Group of
<PAGE>
PART C - Other Information
(continued)
Funds Fund Accounting Agreement attached as Exhibit.
(ii) Executed Amendment No. 10 (August 31, 1998) to Schedule A
to Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(iii) Executed Amendment No. 11 (September 14, 1998) to Schedule
A to Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(iv) Executed Amendment No. 12 (1998) to Schedule A to Delaware
Group of Funds Fund Accounting Agreement attached as
Exhibit.
(v) Executed Amendment No. 13 (1998) to Schedule A to Delaware
Group of Funds Fund Accounting Agreement attached as
Exhibit.
(vi) Form of Amendment No. 14 (1999) to Schedule A to Delaware
Group of Funds Fund Accounting Agreement attached as
Exhibit.
(i) Opinion of Counsel. Attached as Exhibit.
(j) Consent of Auditors. To be filed by Amendment.
(k-m) Inapplicable.
(n) Financial Data Schedules. To be filed by Amendment.
(o) Inapplicable.
(p) Other: Directors' Power of Attorney.
(a) Incorporated into this filing by reference to Post-Effective
Amendment No. 23 filed March 16, 1998.
(b) Power of Attorney for John H. Durham attached as Exhibit.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification. Incorporated into this filing by reference
to 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 26. 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
<PAGE>
PART C - Other Information
(continued)
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:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Jeffrey J. Nick(1) Chairman of the Board, President, Chief Executive Officer and Director and/or
Trustee of the Registrant and each of the other investment companies in the
Delaware Investments family, Delaware Management Business Trust, Delvoy, Inc.,
DMH Corp. and Founders Holdings, Inc.; Chairman of the Board, Chief Executive
Officer and Director of Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware International Holdings Ltd., Delaware International
Advisers Ltd.; Chairman of the Board and Chief Executive Officer of Delaware
Management Company (a series of Delaware Management Business Trust);
Chairman of the Board and Director of Delaware Capital Management, Inc.;
Chairman of Delaware Investment Advisers (a series of Delaware Management
Business Trust) and Delaware Distributors, L.P.; President, Chief Executive Officer
and Director of Lincoln National Investment Companies, Inc.; President and Chief
Executive Officer of Delaware Management Holdings, Inc.; Director of Delaware
Service Company, Inc. and Retirement Financial Services, Inc.
Richard G. Unruh, Jr. Executive Vice President/Chief Investment Officer, Equity of Delaware
Management Company, Inc., the Registrant, each of the other investment companies
in the Delaware Investments family, Delaware Management Holdings, Inc.,
Delaware Capital Management, Inc. and Delaware Management Company (a series
of Delaware Management Business Trust); Executive Vice President and Trustee of
Delaware Management Business Trust; Chief Executive Officer, Chief Investment
Officer, Equity of Delaware Investment Advisers (a series of Delaware Management
Business Trust); 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
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------- -----------------------------------------------
<S> <C>
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant, each of the other investment
companies in the Delaware Investments family and Delaware Management
Holdings, Inc.; Executive Vice President and Director of Founders Holdings, Inc.;
Executive Vice President of Delaware Capital Management, Inc. and Delaware
Management Business Trust; and Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
David K. Downes Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp, Delaware Distributors, Inc., Founders Holdings, Inc.,
Delaware Capital Management, Inc. and Delvoy, Inc.; Executive Vice President,
Chief Financial Officer and Trustee of Delaware Management Business Trust;
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
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Distributors, L.P.; Chairman, 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 and Director of Retirement Financial Services, Inc. and
Delaware Management Trust Company; President and Director of Delaware
Management Company, Inc. and Delaware Management Company (a series of
Delaware Management Business Trust); and Director of Delaware International
Advisers Ltd.
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton Place,
Newtown Square, PA
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware Management Trust
Company, Delaware Capital Management, Inc., Delaware Service Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business
Trust), Founders CBO Corporation and Retirement Financial Services, Inc.;
Executive Vice President/General Counsel and Director of Delaware International
Holdings Ltd., Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice President of
the Registrant and each of the other funds in the Delaware Investments family;
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
George M.
Chamberlain, Jr. Senior Vice President and Secretary of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Retirement Financial Services, Inc., Delvoy, Inc. and Delaware
Management Business Trust; Senior Vice President, Secretary and General Counsel of
the Registrant and each of the other funds in the Delaware Investments family;
Senior Vice President and Secretary of Delaware Distributors, L.P., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and Delaware
Management Holdings, Inc.; Senior Vice President of Delaware International
Holdings Ltd.; Executive Vice President, Secretary and Director of Delaware
Management Trust Company; and Senior Vice President, Secretary and Director of
Founders Holdings, Inc.
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
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, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.; Senior Vice President and Treasurer/
Manager, Investment Accounting of Delaware Distributors, L.P. and Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior
Vice President and Assistant Treasurer of Founders CBO Corporation; and Senior
Vice President and Manager of Investment Accounting of Delaware International
Holdings Ltd.
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Capital Management, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., Delaware International Holdings Ltd., Delaware
Management Company (a series of Delaware Management Business Trust), Delvoy,
Inc. and Delaware Management Business Trust; 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 Retirement Financial Services, Inc.; and Senior Vice
President/Assistant Treasurer of Founders CBO Corporation
Michael T. Taggart Vice President/Facilities Management and Administrative Services of Delaware
Management Company, Inc. and Delaware Management Company (a series of
Delaware Management Business Trust)
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Retirement Financial Services, Inc. and Delaware Service Company, Inc.;
Senior Vice President/ Operations and Director of Delaware Management Trust
Company
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
James L. Shields Senior Vice President/Chief Information Officer of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc. and Retirement
Financial Services, Inc.
Eric E. Miller Senior 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, Inc., Delaware Management Company (a series
of Delaware Management Business Trust), Delaware Investment Advisers (a series
of Delaware Management Business Trust), 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 Retirement Financial Services, Inc.;
Assistant Secretary of Delaware Management Business Trust; and Vice President
and Assistant Secretary of Delvoy, Inc.
Richelle S. Maestro Senior Vice President, Assistant Secretary and Deputy General Counsel of the
Registrant, each of the other funds in the Delaware Investments family, Delaware
Management Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware Management Holdings, Inc.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., DMH Corp., Delaware Management Trust Company, Delaware
Capital Management, Inc., Retirement Financial 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 Vice President/Assistant Controller of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Management Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of the Registrant, each of the other
funds in the Delaware Investments family, Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Management Holdings, Inc., DMH Corp., Delaware Management
Trust Company and Retirement Financial Services, Inc.; Vice President/Director of
Internal Audit of Delvoy, Inc.
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Joel A. Ettinger(2) Vice President/Director of Taxation of the Registrant, each of the other funds in the
Delaware Investments family, Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust) and
Delaware Management Holdings, Inc., Founders Holdings, Inc. and Founders CBO
Corporation
Christopher Adams Vice President/Business Manager, Equity Department of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.
Dennis J. Mara(3) Vice President/Acquisitions of Delaware Management Company, Inc. and Delaware
Management Company (a series of Delaware Management Business Trust)
Scott Metzger Vice President/Business Development of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.
Lisa O. Brinkley Vice President/Compliance of the Registrant, Delaware Management Company,
Inc., each of the other funds in the Delaware Investments family, Delaware
Management Company (a series of Delaware Management Business Trust), DMH
Corp., Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company, Delaware Capital
Management, Inc. and Retirement Financial Services, Inc.; Vice
President/Compliance Officer of Delaware Management Business Trust; and Vice
President of Delvoy, Inc.
Mary Ellen Carrozza Vice President/Client Services of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware Pooled Trust,
Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business
Trust) and the fixed-income investment companies in the Delaware Investments
family; Vice President of Founders Holdings, Inc.; and Treasurer, Assistant
Secretary and Director of Founders CBO Corporation
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business
Trust) and the fixed-income investment companies 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, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), the fixed-income
investment companies in the Delaware Investments family and Delaware Capital Management,
Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware ManagementCompany, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust), the fixed-income investment
companies in the Delaware Investments family and Delaware Capital Management, Inc.
Roger A. Early Vice resident/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and the fixed-income
investment companies in the Delaware Investments family
Mitchell L. Conery(4) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust), the fixed-income investment
companies in the Delaware Investments family and Delaware Capital Management, Inc.
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management Business
Trust), the Registrant and the other equity investment companies in the Delaware
Investments family
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business
Trust), the Registrant, the other equity investment companies in the Delaware
Investments family, Delaware Capital Management, Inc. and Trustee of Delaware
Management Business Trust
Gerald S. Frey Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust), the Registrant and the other
investment companies in the Delaware Investments family
Christopher S. Beck(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust), the Registrant and the other
investment companies in the Delaware Investments family
Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust) and the
fixed-income investment companies in the Delaware Investments family
Andrew M.
McCullagh, Jr.(7) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust) and the
fixed-income investment companies in the Delaware Investments family
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust), the
Registrant and the other investment companies in the Delaware Investments family
J. Paul Dokas(8) Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust), the
Registrant and the other investment company in the Delaware Investments family
</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 with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust) and the
fixed-income investment companies in the Delaware Investments family
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and the fixed-income
investment companies in the Delaware Investments family
Marshall T. Bassett(9) Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust), the Registrant and the other
equity investment companies in the Delaware Investments family
John A. Heffern(10) Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), the Registrant and
the other equity investment companies in the Delaware Investments family
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), the Registrant and the other equity investment companies in the Delaware
Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(1) MANAGING DIRECTOR, Lincoln National UK plc prior to 1996.
(2) TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
(3) CORPORATE CONTROLLER, IIS prior to July 1997.
(4) INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
(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.
(8) DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior to February
1997.
(9) VICE PRESIDENT, Morgan Stanley Asset Management prior to March 1997.
(10) SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities Corporation
prior to March 1997.
<PAGE>
PART C - Other Information
(continued)
(b) 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-investment adviser to the Social
Awareness Series (formerly named Quantum Series). 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. and its Principal
Business Address Affiliates and Other Positions and Offices Held
- ------------------ --------------------------------------------------------------------------
<S> <C>
T. Scott Wittman President and Director of Vantage Global Advisors, Inc.
Senior Vice President of Delaware Distributors, L.P.
Marc C. Viani Vice President of Vantage Global Advisors, Inc.
*Dennis A. Blume Director of Vantage Global Advisors, Inc.
Vice President and Director of Lincoln Investment Management, Inc. since 1985,
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
</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. and its Principal
Business Address Affiliates and Other Positions and Offices Held
- ------------------ --------------------------------------------------------------------------
<S> <C>
**Jeffrey J. Nick Director of Vantage Global Advisors, Inc.
Chairman of the Board, President, Chief Executive Officer and Director and/or Trustee
of the Registrant and 33 other investment companies in the Delaware Investments family,
Delaware Management Company, Inc., Delaware Management Business Trust, Delvoy, Inc.,
DMH Corp. and Founders Holdings, Inc.; Chairman of the Board, Chief Executive Officer
and Director of Delaware Distributors, Inc., Delaware International Holdings Ltd.,
Delaware International Advisers Ltd.; Chairman of the Board and Chief Executive Officer
of Delaware Management Company (a series of Delaware Management Business Trust);
Chairman of the Board and Director of Delaware Capital Management, Inc. and Retirement
Financial Services, Inc.; Chairman of Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Distributors, L.P.; President, Chief
Executive Officer and Director of Lincoln National Investment Companies, Inc. and
Delaware Management Holdings, Inc.; Director of Delaware Service Company, Inc.
**Bruce D. Barton(1) Director of Vantage Global Advisors, Inc.
President and Chief Executive Officer of Delaware Distributors, L.P. since 1996,
1818 Market Street, Philadelphia, PA;
</TABLE>
(1) SENIOR VICE PRESIDENT AND DIRECTOR, Lincoln National Investment Companies
February 1996 to October 1996; VICE PRESIDENT, Lincoln National Corporation
May 1992 to October 1996.
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
** Business address is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(continued)
Delaware International Advisers Ltd. ("Delaware International")
serves as investment manager to the International Equity, Global Bond and
Emerging Markets Series of the Registrant. In addition, 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>
*Jeffrey J. Nick Chairman of the Board, President, Chief Executive Officer and Director and/or
Trustee of the Registrant and 33 other investment companies in the Delaware
Investments family, Delaware Management Company, Inc., Delaware
Management Business Trust, Delvoy, Inc., DMH Corp. and Founders Holdings,
Inc.; Chairman of the Board, Chief Executive Officer and Director of Delaware
Distributors, Inc., Delaware International Holdings Ltd., Delaware International
Advisers Ltd.; Chairman of the Board and Chief Executive Officer of Delaware
Management Company (a series of Delaware Management Business Trust);
Chairman of the Board and Director of Delaware Capital Management, Inc. and
Retirement Financial Services, Inc.; Chairman of Delaware Investment Advisers
(a series of Delaware Management Business Trust) and Delaware Distributors,
L.P.; President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. and Delaware Management Holdings, Inc.; Director
of Delaware Service Company, Inc.
**G. Roger H. Kitson Vice Chairman and Director of Delaware International Advisers Ltd.
**Ian G. Sims Deputy Managing Director/ Chief Investment Officer/Global Fixed Income and
Director of Delaware International Advisers Ltd.
**David G. Tilles Managing Director, Chief Investment Officer and Director of Delaware
International Advisers Ltd. and Executive Vice President 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 Senior Portfolio Manager/Director of Delaware International Advisers Ltd.
**Elizabeth A. Desmond Senior Portfolio Manager/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 (a series of Delaware
Management Business Trust) and Delaware Investment Advisers (a series of
Delaware Management Business Trust); Executive Vice President, Chief
Administrative Officer, Chief Financial Officer and 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. Executive Vice President/Chief Investment Officer, Equity of Delaware
Management Company, Inc., the Registrant, each of the other investment
companies in the Delaware Investments family, Delaware Management
Holdings, Inc., Delaware Capital Management, Inc. and Delaware Management
Company (a series of Delaware Management Business Trust); Executive Vice
President and Trustee of Delaware Management Business Trust; Chief
Executive Officer, Chief Investment Officer, Equity of Delaware Investment
Advisers (a series of Delaware Management Business Trust); 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
</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 Executive Vice President and General Counsel of Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware Management Trust Company,
Delaware Capital Management, Inc., Delaware Service Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), Founders CBO
Corporation and Retirement Financial Services, Inc.; Executive Vice
President/General Counsel and Director of Delaware International Holdings Ltd.,
Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice President of the Registrant
and each of the other funds in the Delaware Investments family; 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
*John C. E. Campbell Director of Delaware International Advisers Ltd.; and Executive Vice President
of Delaware Investment Advisers (a series of Delaware Management Business
Trust).
*George E. Deming Director of Delaware International Advisers Ltd. and Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust).
</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>
**Timothy W. Sanderson Chief Investment Officer, Equities and Director of Delaware International
Advisers Ltd.
**Clive A. Gillmore Senior Portfolio Manager and Director of Delaware International Advisers Ltd.
**Hamish O. Parker Senior Portfolio Manager 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.
**Fiona A. Barwick Senior Portfolio Manager of Delaware International Advisers Ltd.
**Joanna Bates Senior Portfolio Manager of Delaware International Advisers Ltd.
**Joshua Brooks Senior Portfolio Manager of Delaware International Advisers Ltd.
**John Kirk Senior Portfolio Manager of Delaware International Advisers Ltd.
**Hywel W. Morgan Senior Portfolio Manager of Delaware International Advisers Ltd.
**Christopher A. Moth Senior Portfolio Manager of Delaware International Advisers Ltd.
**Richard J. Ginty Portfolio Manager of Delaware International Advisers Ltd.
**R. Emma Lewis Portfolio Manager of Delaware International Advisers Ltd.
**Hugh A. Sergent 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.
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 President & Director of Lincoln Investment Management, Inc., Lincoln
McMeekin 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 Senior Vice President and Director 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 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.
*JoAnn E. Becker Senior Vice President & Director 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
</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,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------------------------
<S> <C>
*Karen L. Bobilier Senior Account Executive of Lincoln Investment Management, Inc.
*Kathy E. Bowman Vice President of Lincoln Investment Management, 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.
*Robert C. Franzino Vice President of Lincoln Investment Management, Inc.
*Luc N. Girard Vice President of Lincoln Investment Management, Inc. and The Lincoln
National Life Insurance Company
*Jennifer C. Hom Vice President of Lincoln Investment Management, Inc.
*James M. Keefer Vice President and Associate General Counsel of Lincoln Investment
Management, Inc.
*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
*Howard R. Lodge Vice President of Lincoln Investment Management, Inc.
*David J. Miller Vice President of Lincoln Investment Management, Inc.
*David C. Patch Vice President of Lincoln Investment Management, Inc.
*Regina N. Rohrbacher Compliance Officer of Lincoln Investment Management, Inc.
*Barbara A. Short Investment Fund Analyst of Lincoln Investment Management, Inc.
*Ann L. Warner Vice President of Lincoln Investment Management, Inc.
</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,
Business Address Inc. and its Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------------------------
<S> <C>
*Janet C. Whitney Corporate 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
*Jay M. Yentis Second Vice President of Lincoln Investment Management, Inc.
</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,
Business Address Inc. 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.
** Business address is 1300 S. Clinton Street, Fort Wayne, IN 46802.
<PAGE>
PART C - Other Information
(continued)
Item 27. 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
Jeffrey J. Nick Chairman Chairman, President, Chief
Executive Officer and
Director/Trustee
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice President, Chief
Chief Operating Officer Operating Officer and Chief
and Chief Financial Officer Financial Officer
Richard J. Flannery Executive Vice President/ Executive Vice President
General Counsel
George M. Chamberlain, Jr. Senior Vice President/Secretary Senior Vice President/
Secretary/General Counsel
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
</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/Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
J. Chris Meyer Senior Vice President/ None
Director Product Management
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
T. Scott Wittman Senior Vice President None
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Eric E. Miller Senior Vice President/ Senior Vice President/
Assistant Secretary/ Assistant Secretary/
Deputy General Counsel Deputy General
Counsel
Richelle S. Maestro Senior Vice President/ Senior Vice President/
Assistant Secretary/ Assistant Secretary/
Deputy General Counsel Deputy General
Counsel
Lisa O. Brinkley Vice President/Compliance Vice President/Compliance
Daniel H. Carlson Vice President/Strategic 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>
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Lori M. Burgess Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Scott Metzger Vice President/Business Development Vice President/Business
Development
Larry Carr Vice President/Sales Manager None
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/ National Accounts None
Holly W. Reimel Senior Vice President/Manager, None
National Accounts
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Senior Vice President, National None
Director/Manager Account Services
</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>
Andrew W. Whitaker Vice President/Financial Institutions None
Jesse Emery Vice President/ Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler None
Larry D. Birdwell 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
Joseph Gallagher Vice President/Wholesaler None
Thomas C. Gallagher 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>
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Edward J. Hecker 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
Theodore T. Malone 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
Andrew Morris Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Scott Naughton 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
</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>
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 None
Technology
Scott Whitehouse Vice President/Wholesaler None
Theodore V. Wood Vice President/Technical Systems None
Officer
Michael J. Woods Vice President/National Sales Manager None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Inapplicable.
Item 28. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103, 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 29. Management Services. None.
Item 30. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(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) Not Applicable.
<PAGE>
PART C - Other Information
(continued)
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 25th day of
January, 1999.
DELAWARE GROUP PREMIUM FUND, INC.
By /s/Jeffrey J. Nick
-------------------
Jeffrey J. Nick
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/ Jeffrey J. Nick President, Chief Executive Officer
- --------------------------------------- Chairman of the Board and Director January 25, 1999
Jeffrey J. Nick
Executive Vice President/Chief Operating
Officer/Chief Financial Officer (Principal
Financial Officer and Principal Accounting
/s/David K. Downes Officer) January 25, 1999
- ---------------------------------------
David K. Downes
/s/Walter P. Babich * Director January 25, 1999
- ---------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director January 25, 1999
- ---------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director January 25, 1999
- ---------------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director January 25, 1999
- ---------------------------------------
W. Thacher Longstreth
/s/ Thomas F. Madison * Director January 25, 1999
- ---------------------------------------
Thomas F. Madison
/s/Charles E. Peck * Director January 25, 1999
- ---------------------------------------
Charles E. Peck
/s/Wayne A. Stork * Director January 25, 1999
- ---------------------------------------
Wayne A. Stork
/s/John H. Durham * Director January 25, 1999
- ---------------------------------------
John H. Durham
*By/s/Jeffrey J. Nick
------------------
Jeffrey J. Nick
as Attorney-in-Fact
for each of the persons indicated
</TABLE>
<PAGE>
PART C - Other Information
(continued)
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.D13 Executed Investment Management Agreement (April 30, 1998)
between Delaware Management Company and the Registrant on
behalf of REIT Series
EX-99.D18 Form of Investment Management Agreement (1999) between Delaware Management
Company and the Registrant on behalf of Aggressive Growth Series
EX-99.E9 Executed Distribution Agreement (April 30, 1998) between Delaware Distributors,L.P. and
the Registrant on behalf of REIT Series
EX-99.E10 Form of Distribution Agreement (April 30, 1998) between Delaware Distributors,L.P. and
the Registrant on behalf of Aggressive Growth Series
EX-99.G4 Letter of notice (April 30, 1998) to add the REIT Series
to the Custodian Agreement between The Chase Manhattan
Bank and the Registrant
EX-99.G5 Form of Letter of notice (1999) to add the Aggressive Growth
Series to the Custodian Agreement between The Chase
Manhattan Bank and the Registrant
EX-99.H3 Executed Amended and Restated Shareholders Services Agreement (April 30, 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 (renamed Small
Cap Value Series), Emerging Growth Series (renamed Trend Series), Global Bond Series,
Strategic Income Series, Devon Series, Emerging Markets Series, Convertible Securities
Series, Quantum Series (renamed Social Awareness Series) and REIT Series
EX-99.H4 Form of Amended and Restated Shareholders Services Agreement (1999) 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 (renamed Small Cap
Value Series), Emerging Growth Series (renamed Trend Series), Global Bond Series,
Strategic Income Series, Devon Series, Emerging Markets Series, Convertible Securities
Series, Quantum Series (renamed Social Awareness Series), REIT Series and Aggressive
Growth Series
EX-99.H5i Executed Amendment No. 9 (March 31, 1998) to Delaware Group of Funds Fund
Accounting Agreement
</TABLE>
<PAGE>
INDEX TO EXHIBITS
(Continued)
<TABLE>
<CAPTION>
<S> <C>
EX-99.H5ii Executed Amendment No. 10 (August 31, 1998) to Delaware Group of Funds Fund
Accounting Agreement
EX-99.H5iii Executed Amendment No. 11 (September 14, 1998) to Delaware Group of Funds
Fund Accounting Agreement
EX-99.H5iv Executed Amendment No. 12 (1998) to Delaware Group of Funds Fund Accounting
Agreement
EX-99.H5v Executed Amendment No. 13 (1998) to Delaware Group of Funds Fund Accounting
Agreement
EX-99.Hvi Form of Amendment No. 14 (1999) to Delaware Group of Funds Fund Accounting
Agreement
EX-99.I Opinion of Counsel
EX-99.PB Power of Attorney for John H. Durham
</TABLE>
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
REIT SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP PREMIUM FUND, INC.,
Maryland corporation ("Fund") on behalf of the REIT SERIES ("Series"), and
DELAWARE MANAGEMENT COMPANY, a series of Delaware Management Business Trust, a
Delaware business trust ("Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and is currently
comprised of 16 series, including the Series; as a separate series of the Fund,
each series engages in the business of investing and reinvesting its assets in
securities, and
WHEREAS, the Investment Manager is a registered investment adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, in connection with the changes in investment manager, the
Fund on behalf of the Series and the Investment Manager desire to enter into
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
<PAGE>
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its affairs,
subject to the direction of the Fund's Board of Directors and officers of the
Fund for the period and on the terms hereinafter set forth. The Investment
Manager hereby accepts such employment and agrees during such period to render
the services and assume the obligations herein set forth for the compensation
herein provided. The Investment Manager shall for all purposes herein be deemed
to be an independent contractor, and shall, unless otherwise expressly provided
and authorized, have no authority to act for or represent the Fund in any way,
or in any way be deemed an agent of the Fund. The Investment Manager shall
regularly make decisions as to what securities and other instruments to purchase
and sell on behalf of the Series and shall effect the purchase and sale of such
investments in furtherance of the Series' objectives and policies and shall
furnish the Board of Directors of the Fund with such information and reports
regarding the Series' investments as the Investment Manager deems appropriate or
as the Directors of the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. Directors, officers and employees of the Investment Manager
may be directors, officers and employees of any of the funds (including the
Fund) of which Delaware Management Company is investment manager. Directors,
officers and employees of the Investment Manager who are directors, officers
and/or
-2-
<PAGE>
employees of these funds shall not receive any compensation from the funds for
acting in such dual capacity.
In the conduct of the respective businesses of the parties
hereto and in the performance of this Agreement, the Fund and Investment Manager
may share facilities common to each, with appropriate proration of expenses
between them.
3. (a) Subject to the primary objective of obtaining the best
available prices and execution, the Investment Manager will place orders for the
purchase and sale of portfolio securities and other instruments with such
broker/dealers selected who provide statistical, factual and financial
information and services to the Fund, to the Investment Manager, to any
Sub-Adviser, as defined in Paragraph 5 hereof, or to any other fund for which
the Investment Manager or any such Sub-Adviser provides investment advisory
services and/or with broker/dealers who sell shares of the Fund or who sell
shares of any other fund for which the Investment Manager or any such
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of the funds of which Delaware Management Company, Inc. is investment
manager, shall only receive orders for the purchase or sale of portfolio
securities to the extent that the placing of such orders is in compliance with
the Rules of the Securities and Exchange Commission and the National Association
of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund and
the Fund may agree to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in
-3-
<PAGE>
such instances where the Fund and the Investment Manager have determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Fund and to other funds
and other advisory accounts for which the Investment Manager or any Sub-Adviser,
as defined in Paragraph 5 hereof, exercises investment discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager monthly from the Series' assets, a fee on the average
daily net assets of the Series during the month. Such fee shall be calculated in
accordance with the following schedule:
<TABLE>
<CAPTION>
Monthly Annual Rate Average Daily Net Assets
------- ----------- ------------------------
<S> <C> <C> <C>
7.50/12 of 1% 0.750% on the first $500 million of average daily net assets
7.00/12 of 1% 0.700% on the next $500 million of average daily net assets
6.50/12 of 1% 0.650% on the next $1.5 billion of average daily net assets
6.00/12 of 1% 0.600% on the average daily net assets in excess of $2.5 billion
</TABLE>
If this Agreement is terminated prior to the end of any
calendar month, the management fee shall be prorated for the portion of any
month in which this Agreement is in effect according to the proportion which the
number of calendar days, during which the Agreement is in effect, bears to the
number of calendar days in the month, and shall be payable within 10 days after
the date of termination.
-4-
<PAGE>
5. The Investment Manager may, at its expense, select and contract
with one or more investment advisers registered under the Investment Advisers
Act of 1940 (the "Sub-Adviser") to perform some or all of the services for the
Series for which it is responsible under this Agreement. The Investment Manager
will compensate any Sub-Adviser for its services to the Series. The Investment
Manager may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected and the
requisite approval of the Series' shareholders is obtained. The Investment
Manager will continue to have responsibility for all advisory services furnished
by any Sub-Adviser.
6. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different services to
others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
8. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of its duties as the
Investment Manager to the Fund, the Investment Manager shall not be subject to
liability to the Fund or to any shareholder of the Fund for any action or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security, or otherwise.
-5-
<PAGE>
9. This Agreement shall be executed and become effective as of the
date written below if approved by the vote of a majority of the outstanding
voting securities of the Series. It shall continue in effect for a period of two
years and may be renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by the Board of Directors or by the
vote of a majority of the outstanding voting securities of the Series and only
if the terms and the renewal hereof have been approved by the vote of a majority
of the Directors of the Fund who are not parties hereto or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. Notwithstanding the foregoing, this Agreement may be terminated
by the Fund at any time, without the payment of a penalty, on sixty days'
written notice to the Investment Manager of the Fund's intention to do so,
pursuant to action by the Board of Directors of the Fund or pursuant to the vote
of a majority of the outstanding voting securities of the Series. The Investment
Manager may terminate this Agreement at any time, without the payment of a
penalty, on sixty days' written notice to the Fund of its intention to do so.
Upon termination of this Agreement, the obligations of all the parties hereunder
shall cease and terminate as of the date of such termination, except for any
obligation to respond for a breach of this Agreement committed prior to such
termination, and except for the obligation of the Fund to pay to the Investment
Manager the fee provided in Paragraph 4 hereof, prorated to the date of
termination. This Agreement shall automatically terminate in the event of its
assignment.
10. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
11. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested persons"; and "assignment"
shall have the meaning defined in the Investment Company Act of 1940.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their corporate
seals to be affixed and duly attested and their presents to be signed by their
duly authorized officers as of the 30th day of April, 1998.
DELAWARE GROUP PREMIUM FUND, INC.
for the REIT SERIES
By: /s/Wayne A. Stork
--------------------------
Wayne A. Stork
Attest:
By: /s/Michael T. Pellegrino
--------------------------
Michael T. Pellegrino
Assistant Vice President/
Assistant Secretary/
Senior Counsel
DELAWARE MANAGEMENT COMPANY, a
series of DELAWARE MANAGEMENT BUSINESS TRUST
By: /s/David K. Downes
--------------------------
David K. Downes
Executive Vice President
Chief Operating Officer
Chief Financial Officer
Attest:
By: /s/Michael D.Mabry
---------------------------
Michael D.Mabry
Assistant Vice President/
Assistant Secretary/
Senior Counsel
-7-
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
AGGRESSIVE GROWTH SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP PREMIUM FUND, INC., a Maryland
corporation ("Fund") on behalf of AGGRESSIVE GROWTH SERIES and DELAWARE
MANAGEMENT COMPANY, a series of Delaware Management Business Trust, a Delaware
business trust ("Investment Manager").
WITNESSETH:
WHEREAS, the Fund has been organized and operates as an investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
and engages in the business of investing and reinvesting its assets in
securities, and
WHEREAS, the Investment Manager is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") and engages in
the business of providing investment management services; and
WHEREAS, the Fund and the Investment Manager desire to enter into this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
each of the parties hereto intending to be legally bound, it is agreed as
follows:
1. The Fund hereby employs the Investment Manager to manage the investment
and reinvestment of its assets and to administer its affairs, subject to
the direction of the Fund's Board of Directors and officers of the Fund for
the period and on the terms hereinafter set forth. The Investment Manager
hereby accepts such employment and agrees during such period to render the
services and assume the obligations herein set forth for the compensation
herein provided. The Investment Manager shall for all purposes herein be
deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or
represent the Fund in any way, or in any way be deemed an agent of the
Fund. The Investment Manager shall regularly make decisions as to what
securities and other instruments to purchase and sell on behalf of the Fund
and shall effect the purchase and sale of such investments in furtherance
of the Fund's objectives and policies and shall furnish the Board of
Directors of the Fund with such information and reports regarding the
Fund's investments as the Investment Manager deems appropriate or as the
Directors of the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall bear the
expenses and salaries necessary and incidental thereto including, but not
in limitation of the foregoing, the costs incurred in: the maintenance of
its corporate existence; the maintenance of its own books, records and
procedures; dealing with its own shareholders; the payment of dividends;
transfer of stock, including issuance, redemption and repurchase of shares;
1
<PAGE>
preparation of share certificates; reports and notices to shareholders;
calling and holding of shareholders' meetings; miscellaneous office
expenses; brokerage commissions; custodian fees; legal and accounting fees;
taxes; and federal and state registration fees. Directors, officers and
employees of the Investment Manager may be directors, officers and
employees of any of the investment companies within the Delaware
Investments family (including the Fund). Directors, officers and employees
of the Investment Manager who are directors, officers and/or employees of
these investment companies shall not receive any compensation from such
companies for acting in such dual capacity.
In the conduct of the respective businesses of the parties hereto and in
the performance of this Agreement, the Fund and Investment Manager may
share facilities common to each, which may include legal and accounting
personnel, with appropriate proration of expenses between them.
3. (a) Subject to the primary objective of obtaining the best available
prices and execution, the Investment Manager may place orders for the
purchase and sale of portfolio securities and other instruments with such
broker/dealers selected who provide statistical, factual and financial
information and services to the Fund, to the Investment Manager, to any
Sub-Adviser, as defined in Paragraph 5 hereof, or to any other fund for
which the Investment Manager or any such Sub-Adviser provides investment
advisory services and/or with broker/dealers who sell shares of the Fund or
who sell shares of any other fund for which the Investment Manager or any
such Sub-Adviser provides investment advisory services. Broker/dealers who
sell shares of the funds of which the Investment Manager or Sub-Adviser
provide investment advisory services, shall only receive orders for the
purchase or sale of portfolio securities to the extent that the placing of
such orders is in compliance with the Rules of the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and subject to
such policies and procedures as may be adopted by the Board of Directors
and officers of the Fund, the Investment Manager may ask the Fund and the
Fund may agree to pay a member of an exchange, broker or dealer an amount
of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would
have charged for effecting that transaction, in such instances where the
Fund and the Investment Manager have determined in good faith that such
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Fund and to other
funds and other advisory accounts for which the Investment Manager or any
Sub-Adviser, as defined in Paragraph 5 hereof, exercises investment
discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall
pay to the Investment Manager monthly from the Fund's assets, a fee (at an
annual rate) equal to ______% of the Fund's average weekly net assets. For
purposes of calculating such fee, the Fund's average weekly net assets will
be deemed to be the average weekly value of the Fund's total assets minus
the sum of the Fund's liabilities (which liabilities exclude the aggregate
liquidation preference of any outstanding preferred stock or the
outstanding amount of any borrowing or short-term debt securities).
2
<PAGE>
If this Agreement is terminated prior to the end of any calendar month, the
management fee shall be prorated for the portion of any month in which this
Agreement is in effect according to the proportion which the number of
calendar days, during which the Agreement is in effect, bears to the number
of calendar days in the month, and shall be payable within 10 days after
the date of termination.
5. The Investment Manager may, at its expense, select and contract with one
or more investment advisers registered under the Advisers Act
("Sub-Advisers") to perform some or all of the services for the Fund for
which it is responsible under this Agreement. The Investment Manager will
compensate any Sub-Adviser for its services to the Fund. The Investment
Manager may terminate the services of any Sub-Adviser at any time in its
sole discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected and the
requisite approval of the Fund's shareholders is obtained. The Investment
Manager will continue to have responsibility for all advisory services
furnished by any Sub-Adviser.
6. The services to be rendered by the Investment Manager to the Fund under
the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different
services to others so long as its ability to render the services provided
for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees, agents and
shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to
the Fund or to any other investment company, corporation, association, firm
or individual.
8. It is understood and agreed that so long as the Investment Manager
and/or its advisory affiliates shall continue to serve as the Fund's
investment adviser, other mutual funds as may be sponsored or advised by
the Investment Manager or its affiliates shall have the right permanently
to adopt and to use the words "Delaware," "Delaware Investments" or
"Delaware Group" in their names and in the names of any series or class of
shares of such funds.
9. In the absence of willful misfeasance, bad faith, gross negligence, or a
reckless disregard of the performance of its duties as the Investment
Manager to the Fund, the Investment Manager shall not be subject to
liability to the Fund or to any shareholder of the Fund for any action or
omission in the course of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of
any security, or otherwise.
10. This Agreement shall be executed and become effective as of the date
written below if approved by the vote of a majority of the outstanding
voting securities of the Fund. It shall continue in effect for a period of
3
<PAGE>
two years and may be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of
Directors or by the vote of a majority of the outstanding voting securities
of the Fund and only if the terms and the renewal hereof have been approved
by the vote of a majority of the Directors of the Fund who are not parties
hereto or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Fund at any time,
without the payment of a penalty, on sixty days' written notice to the
Investment Manager of the Fund's intention to do so, pursuant to action by
the Board of Directors of the Fund or pursuant to the vote of a majority of
the outstanding voting securities of the Fund. The Investment Manager may
terminate this Agreement at any time, without the payment of a penalty, on
sixty days' written notice to the Fund of its intention to do so. Upon
termination of this Agreement, the obligations of all the parties hereunder
shall cease and terminate as of the date of such termination, except for
any obligation to respond for a breach of this Agreement committed prior to
such termination, and except for the obligation of the Fund to pay to the
Investment Manager the fee provided in Paragraph 4 hereof, prorated to the
date of termination. This Agreement shall automatically terminate in the
event of its assignment.
11. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
12. For the purposes of this Agreement, the terms "vote of a majority of
the outstanding voting securities"; "interested persons"; and "assignment"
shall have the meaning defined in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused their corporate seals to be
affixed and duly attested and their presents to be signed by their duly
authorized officers as of the day of , 19 .
DELAWARE MANAGEMENT COMPANY, DELAWARE GROUP PREMIUM
FUND, INC. on behalf of AGGRESSIVE
A SERIES OF DELAWARE MANAGEMENT GROWTH SERIES
BUSINESS TRUST
By:__________________________________ By:_______________________________
Name: David K. Downes Name: Jeffrey J. Nick
Title:_______________________________ Title:____________________________
Attest:______________________________
Name:________________________________
Title:_______________________________
4
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
REIT SERIES
DISTRIBUTION AGREEMENT
Distribution Agreement made as of this 30th day of April, 1998 by and
between DELAWARE GROUP PREMIUM FUND, INC., a Maryland corporation (the "Fund"),
on behalf of its REIT SERIES (the "Series") and DELAWARE DISTRIBUTORS, L.P. (the
"Distributor"), a Delaware limited partnership.
W I T N E S S E T H:
WHEREAS, the Fund is an investment company regulated by Federal and
State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of the securities of investment companies and, in connection
therewith and acting solely as agent for such investment companies and not as
principal, advertising, promoting, offering and selling their securities to the
public, and
WHEREAS, the Fund desires to appoint the Distributor as distributor for
the shares of the Series and the Distributor wishes to accept such appointment
on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the distribution
of the Series' shares and, in connection therewith and as agent for
the Fund and not as principal, to advertise, promote, offer and sell
the Series' shares to the public.
2. The Distributor agrees to serve as distributor of the Series' shares
and, as agent for the Fund and not as principal, to advertise,
promote and use its best efforts to sell the Series' shares wherever
their sale is legal, either through dealers or otherwise, in such
places and
<PAGE>
in such manner, not inconsistent with the law and the provisions of
this Agreement and the Fund's Registration Statement under the
Securities Act of 1933 including the Prospectus contained therein
and the Statement of Additional Information contained therein, as
may be mutually determined by the Fund and the Distributor from time
to time. The Distributor will bear all costs of financing any
activity which is primarily intended to result in the sale of the
Series' shares, including, but not necessarily limited to,
advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of sales literature and
distribution of the Series' shares.
3. (a) The Fund agrees to make available for sale by the Fund through
the Distributor all or such part of the authorized but unissued
Series' shares as the Distributor shall require from time to
time, all subject to the further provisions of this contract,
and except with the Distributor's written consent or as provided
in Paragraph 3(b) hereof, the Fund will not sell Series shares
other than through the efforts of the Distributor.
(b) The Fund reserves the right from time to time (l) to sell and
issue shares other than for cash; (2) to issue shares in
exchange for substantially all of the assets of any corporation
or trust, or in exchange for shares of any corporation or trust;
(3) to pay stock dividends to its shareholder, or to pay
dividends in cash or stock at the option of its stockholders, or
to sell stock to existing stockholders to the extent of
dividends payable from time to time in cash, or to split up or
combine its outstanding shares of Common Stock; (4) to offer
shares for cash to its stockholders as a whole, by the use of
transferable rights or otherwise, and to sell
-2-
<PAGE>
and issue shares pursuant to such offers; and (5) to act as its
own distributor in any jurisdiction where the Distributor is not
registered as a broker dealer.
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered
investment company, and any and all shares which it
will sell through the Distributor are, or will be,
properly registered with the Securities and Exchange
Commission.
(b) The provisions of this contract do not violate the
terms of any instrument by which the Fund is bound,
nor do they violate any law or regulation of any body
having jurisdiction over the Fund or its property.
5. (a) The Fund will supply to the Distributor a conformed
copy of the Registration Statement, all amendments
thereto, all exhibits, and each Prospectus and
Statement of Additional Information.
(b) The Fund will register or qualify the Series' shares
for sale in such states as is deemed desirable.
(c) The Fund, without expense to the Distributor:
(1) will give and continue to give such
financial statements and other information
as may be required by the SEC or the proper
public bodies of the states in which the
shares may be qualified;
(2) from time to time, will furnish the
Distributor as soon as reasonably
practicable the following information: (a)
true copies of its periodic reports to
stockholders, and unaudited quarterly
balance sheets and income statements for the
period from the beginning of the then
current fiscal year to such balance sheet
dates; and (b) a profit and loss statement
and a balance sheet at the end of each
fiscal half year accompanied by a copy of
the certificate or report thereon of an
independent public accountant (who may be
the regular accountant for the Fund),
provided that in lieu of furnishing at the
end of any fiscal half year a statement of
profit and loss and a balance sheet
certified by an independent public
-3-
<PAGE>
accountant as above required, the Fund may
furnish a true copy of its detailed
semi-annual report to its stockholders;
(3) will promptly advise the Distributor in
person or by telephone or telegraph, and
promptly confirm such advice in writing, (a)
when any amendment or supplement to the
Registration Statement becomes effective,
(b)of any request by the SEC for amendments
or supplements to the Registration Statement
or the Prospectus or for additional
information, and (c) of the issuance by the
SEC of any Stop Order suspending the
effectiveness of the Registration Statement,
or the initiation of any proceedings for
that purpose;
(4) if at any time the SEC shall issue any Stop
Order suspending the effectiveness of the
Registration Statement, will make every
reasonable effort to obtain the lifting of
such order at the earliest possible moment;
(5) will from time to time, use its best effort
to keep a sufficient supply of shares
authorized, any increases being subject to
approval of the Fund's shareholders as may
be required;
(6) before filing any further amendment to the
Registration Statement or to the Prospectus,
will furnish the Distributor copies of the
proposed amendment and will not, at any
time, whether before or after the effective
date of the Registration Statement, file any
amendment to the Registration Statement or
supplement to the Prospectus of which the
Distributor shall not previously have been
advised or to which the Distributor shall
reasonably object (based upon the accuracy
or completeness thereof) in writing;
(7) will continue to make available to its
stockholders (and forward copies to the
Distributor) of such periodic, interim and
any other reports as are now, or as
hereafter may be, required by the provisions
of the Investment Company Act of 1940; and
(8) will, for the purpose of computing the
offering price of its Series' shares, advise
the Distributor within one hour after the
close of regular trading on the New York
Stock Exchange (or as soon as practicable
thereafter) on each business day upon which
the New York Stock Exchange may be open of
the net asset value per share of the Series'
shares of common stock outstanding,
determined in accordance with any applicable
provisions of law and the provisions of the
Articles of Incorporation, as amended, of
the Company as of the close of business on
such business day. In the event that prices
are to be calculated more than once daily,
the Fund will promptly advise the
Distributor of the time of each calculation
and the price computed at each such time.
-4-
<PAGE>
6. The Distributor agrees to submit to the Fund, prior to its use, the
form of all sales literature proposed to be generally disseminated
by or for the Distributor on behalf of the Fund all advertisements
proposed to be used by the Distributor, and all sales literature or
advertisements prepared by or for the Distributor for such
dissemination or for use by others in connection with the sale of
the Series' shares. The Distributor also agrees that the Distributor
will submit such sales literature and advertisements to the NASD,
SEC or other regulatory agency as from time to time may be
appropriate, considering practices then current in the industry. The
Distributor agrees not to use or to permit others to use such sales
literature or advertisements without the written consent of the Fund
if any regulatory agency expresses objection thereto or if the Fund
delivers to the Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the
offering price per share mutually agreed upon by the parties hereto,
and as described in the Fund's prospectus, as amended from time to
time, determined in accordance with applicable provisions of law,
the provisions of its Articles of Incorporation and the Conduct
Rules of the National Association of Securities Dealers, Inc.
8. The responsibility of the Distributor hereunder shall be limited to
the promotion of sales of Series' shares. The Distributor shall
undertake to promote such sales solely as agent of the Fund, and
shall not purchase or sell such shares as principal. Orders for
Series' shares and payment for such orders shall be directed to the
Fund's agent, Delaware Service Company, Inc. for acceptance on
behalf of the Fund. The Distributor is not empowered to approve
orders for sales of Series' shares or accept payment for such
-5-
<PAGE>
orders. Sales of Series' shares shall be deemed to be made when and
where accepted by Delaware Service Company, Inc.
9. With respect to the apportionment of costs between the Fund and the
Distributor of activities with which both are concerned, the
following will apply:
(a) The Fund and the Distributor will cooperate in
preparing the Registration
Statements, the Prospectus, and all amendments,
supplements and replacements thereto. The Fund will
pay all costs incurred in the preparation of the
Fund's registration statement, including typesetting,
the costs incurred in printing and mailing
prospectuses to its own shareholders and fees and
expenses of counsel and accountants.
(b) The Distributor will pay the costs incurred in
printing and mailing copies of prospectuses to
prospective investors.
(c) The Distributor will pay advertising and promotional
expenses, including the costs of literature sent to
prospective investors.
(d) The Fund will pay the costs and fees incurred in
registering the Series' shares with the various
states and with the Securities and Exchange
Commission.
(e) The Distributor will pay the costs of any additional
copies of the Fund reports and other Fund literature
supplied to the Distributor by the Fund for sales
promotion purposes.
10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor
of its obligations under this Agreement.
-6-
<PAGE>
11. The Fund agrees to indemnify, defend and hold harmless from the
assets of the Series, the Distributor and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
Securities Act of 1933, from and against any and all losses,
damages, or liabilities to which, jointly or severally, the
Distributor or such controlling person may become subject, insofar
as the losses, damages or liabilities arise out of the performance
of its duties hereunder, except that the Fund shall not be liable
for indemnification of the Distributor or any controlling person
thereof for any liability to the Fund or its security holders to
which they would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
their duties hereunder or by reason of their reckless disregard of
their obligations and duties under this Agreement.
12. Copies of financial reports, registration statements and
prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish to
the other will be duly delivered or furnished, if delivered to such
party at its address shown below during regular business hours, or
if sent to that party by registered mail or by prepaid telegram
filed with an office or with an agent of Western Union, in all
cases within the time or times herein prescribed, addressed to the
recipient at 1818 Market Street, Philadelphia, Pennsylvania 19103,
or at such other address as the Fund or the Distributor may
designate in writing and furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in
the Investment Company Act of 1940, by the Distributor and shall
terminate automatically in the event of its attempted assignment by
the Distributor. This Agreement shall not be assigned by the Fund
without the written consent of the Distributor signed by its duly
authorized officers
-7-
<PAGE>
and delivered to the Fund. Except as specifically provided in the
indemnification provisions contained in Paragraph 11 hereof, this
contract and all conditions and provisions hereof are for the sole
and exclusive benefit of the parties hereto and their legal
successors and no express or implied provisions of this Agreement
are intended or shall be construed to give any person other than
the parties hereto and their legal successors any legal or
equitable right, remedy or claim under or in respect of this
Agreement or any provisions herein contained. The Distributor shall
look only to the assets of the Fund to meet the obligations of, or
claims against, the Fund under this Agreement and not to the holder
of any share of the Fund.
14. (a) This contract shall remain in force for a period of
two years from the date of execution of this
Agreement and from year to year thereafter, but only
so long as such continuance is specifically approved
at least annually by the Board of Directors or by
vote of a majority of the outstanding voting
securities of the Series and only if the terms and
the renewal thereof have been approved by the vote of
a majority of the Directors of the Fund, who are not
parties hereto or interested persons of any such
party, cast in person at a meeting called for the
purpose of voting on such approval.
(b) The Distributor may terminate this contract on
written notice to the Fund at any time in case the
effectiveness of the Registration Statement shall be
suspended, or in case Stop Order proceedings are
initiated by the U. S. Securities and Exchange
Commission in respect of the Registration Statement
and such proceedings are not withdrawn or terminated
within thirty days. The Distributor may also
terminate this contract at any time by giving the
Fund written notice of
-8-
<PAGE>
its intention to terminate the contract at the
expiration of three months from the date of delivery
of such written notice of intention to the Fund.
(c) The Fund may terminate this contract at any time on
at least thirty days prior written notice to the
Distributor (1) if proceedings are commenced by the
Distributor or any of its stockholders for the
Distributor's liquidation or dissolution or the
winding up of the Distributor's affairs; (2) if a
receiver or trustee of the Distributor or any of its
property is appointed and such appointment is not
vacated within thirty days thereafter; (3) if, due to
any action by or before any court or any federal or
state commission, regulatory body, or administrative
agency or other governmental body, the Distributor
shall be prevented from selling securities in the
United States or because of any action or conduct on
the Distributor's part, sales of the shares are not
qualified for sale. The Fund may also terminate this
contract at any time upon prior written notice to the
Distributor of its intention to so terminate at the
expiration of three months from the date of the
delivery of such written notice to the Distributor.
15. The validity, interpretation and construction of this contract, and
of each part hereof, will be governed by the laws of the
Commonwealth of Pennsylvania.
-9-
<PAGE>
16. In the event any provision of this contract is determined to be
void or unenforceable, such determination shall, not affect the
remainder of the contract, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
Attest: General Partner
/s/Michael D.Mabry By: /s/David K. Downes
- ------------------ ------------------
Michael D.Mabry David K. Downes
Assistant Vice President/ Executive Vice President
Assistant Secretary/ Chief Operating Officer
Senior Counsel Chief Financial Officer
DELAWARE GROUP PREMIUM FUND, INC.
Attest: For the REIT SERIES
/s/Michael T. Pellegrino By: /s/Wayne A. Stork
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Michael T. Pellegrino Wayne A. Stork
Assistant Vice President/ Chairman
Assistant Secretary/
Senior Counsel
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DELAWARE GROUP PREMIUM FUND, INC.
AGGRESSIVE GROWTH SERIES
DISTRIBUTION AGREEMENT
Distribution Agreement made as of this day of , 1999 by and between
DELAWARE GROUP PREMIUM FUND, INC., a Maryland corporation (the "Fund"), on
behalf of its AGGRESSIVE GROWTH SERIES (the "Series") and DELAWARE DISTRIBUTORS,
L.P. (the "Distributor"), a Delaware limited partnership.
W I T N E S S E T H:
WHEREAS, the Fund is an investment company regulated by Federal and
State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of the securities of investment companies and, in connection
therewith and acting solely as agent for such investment companies and not as
principal, advertising, promoting, offering and selling their securities to the
public, and
WHEREAS, the Fund desires to appoint the Distributor as distributor for
the shares of the Series and the Distributor wishes to accept such appointment
on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the
distribution of the Series' shares and, in connection
therewith and as agent for the Fund and not as principal, to
advertise, promote, offer and sell the Series' shares to the
public.
<PAGE>
2. The Distributor agrees to serve as distributor of the Series'
shares and, as agent for the Fund and not as principal, to
advertise, promote and use its best efforts to sell the
Series' shares wherever their sale is legal, either through
dealers or otherwise, in such places and in such manner, not
inconsistent with the law and the provisions of this Agreement
and the Fund's Registration Statement under the Securities Act
of 1933 including the Prospectus contained therein and the
Statement of Additional Information contained therein, as may
be mutually determined by the Fund and the Distributor from
time to time. The Distributor will bear all costs of financing
any activity which is primarily intended to result in the sale
of the Series' shares, including, but not necessarily limited
to, advertising, compensation of underwriters, dealers and
sales personnel, the printing and mailing of sales literature
and distribution of the Series' shares.
3. (a) The Fund agrees to make available for sale by the
Fund through the Distributor all or such part of the
authorized but unissued Series' shares as the
Distributor shall require from time to time, all
subject to the further provisions of this contract,
and except with the Distributor's written consent or
as provided in Paragraph 3(b) hereof, the Fund will
not sell Series shares other than through the efforts
of the Distributor.
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(b) The Fund reserves the right from time to time (l) to
sell and issue shares other than for cash; (2) to
issue shares in exchange for substantially all of the
assets of any corporation or trust, or in exchange
for shares of any corporation or trust; (3) to pay
stock dividends to its shareholder, or to pay
dividends in cash or stock at the option of its
stockholders, or to sell stock to existing
stockholders to the extent of dividends payable from
time to time in cash, or to split up or combine its
outstanding shares of Common Stock; (4) to offer
shares for cash to its stockholders as a whole, by
the use of transferable rights or otherwise, and to
sell and issue shares pursuant to such offers; and
(5) to act as its own distributor in any jurisdiction
where the Distributor is not registered as a broker
dealer.
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered
investment company, and any and all shares which it
will sell through the Distributor are, or will be,
properly registered with the Securities and Exchange
Commission.
(b) The provisions of this contract do not violate the
terms of any instrument by which the Fund is bound,
nor do they violate any law or regulation of any body
having jurisdiction over the Fund or its property.
5. (a) The Fund will supply to the Distributor a conformed
copy of the Registration Statement, all amendments
thereto, all exhibits, and each Prospectus and
Statement of Additional Information.
(b) The Fund will register or qualify the Series' shares
for sale in such states as is deemed desirable.
(c) The Fund, without expense to the Distributor:
(1) will give and continue to give such
financial statements and other information
as may be required by the SEC or the proper
public bodies of the states in which the
shares may be qualified;
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(2) from time to time, will furnish the
Distributor as soon as reasonably
practicable the following information: (a)
true copies of its periodic reports to
stockholders, and unaudited quarterly
balance sheets and income statements for the
period from the beginning of the then
current fiscal year to such balance sheet
dates; and (b) a profit and loss statement
and a balance sheet at the end of each
fiscal half year accompanied by a copy of
the certificate or report thereon of an
independent public accountant (who may be
the regular accountant for the Fund),
provided that in lieu of furnishing at the
end of any fiscal half year a statement of
profit and loss and a balance sheet
certified by an independent public
accountant as above required, the Fund may
furnish a true copy of its detailed
semi-annual report to its stockholders;
(3) will promptly advise the Distributor in
person or by telephone or telegraph, and
promptly confirm such advice in writing, (a)
when any amendment or supplement to the
Registration Statement becomes effective,
(b)of any request by the SEC for amendments
or supplements to the Registration Statement
or the Prospectus or for additional
information, and (c) of the issuance by the
SEC of any Stop Order suspending the
effectiveness of the Registration Statement,
or the initiation of any proceedings for
that purpose;
(4) if at any time the SEC shall issue any Stop
Order suspending the effectiveness of the
Registration Statement, will make every
reasonable effort to obtain the lifting of
such order at the earliest possible moment;
(5) will from time to time, use its best effort
to keep a sufficient supply of shares
authorized, any increases being subject to
approval of the Fund's shareholders as may
be required;
(6) before filing any further amendment to the
Registration Statement or to the Prospectus,
will furnish the Distributor copies of the
proposed amendment and will not, at any
time, whether before or after the effective
date of the Registration Statement, file any
amendment to the Registration Statement or
supplement to the Prospectus of which the
Distributor shall not previously have been
advised or to which the Distributor shall
reasonably object (based upon the accuracy
or completeness thereof) in writing;
(7) will continue to make available to its
stockholders (and forward copies to the
Distributor) of such periodic, interim and
any other reports as are now, or as
hereafter may be, required by the provisions
of the Investment Company Act of 1940; and
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(8) will, for the purpose of computing the
offering price of its Series' shares, advise
the Distributor within one hour after the
close of regular trading on the New York
Stock Exchange (or as soon as practicable
thereafter) on each business day upon which
the New York Stock Exchange may be open of
the net asset value per share of the Series'
shares of common stock outstanding,
determined in accordance with any applicable
provisions of law and the provisions of the
Articles of Incorporation, as amended, of
the Company as of the close of business on
such business day. In the event that prices
are to be calculated more than once daily,
the Fund will promptly advise the
Distributor of the time of each calculation
and the price computed at each such time.
6. The Distributor agrees to submit to the Fund, prior to its
use, the form of all sales literature proposed to be generally
disseminated by or for the Distributor on behalf of the Fund
all advertisements proposed to be used by the Distributor, and
all sales literature or advertisements prepared by or for the
Distributor for such dissemination or for use by others in
connection with the sale of the Series' shares. The
Distributor also agrees that the Distributor will submit such
sales literature and advertisements to the NASD, SEC or other
regulatory agency as from time to time may be appropriate,
considering practices then current in the industry. The
Distributor agrees not to use or to permit others to use such
sales literature or advertisements without the written consent
of the Fund if any regulatory agency expresses objection
thereto or if the Fund delivers to the Distributor a written
objection thereto.
7. The purchase price of each share sold hereunder shall be the
offering price per share mutually agreed upon by the parties
hereto, and as described in the Fund's prospectus, as amended
from time to time, determined in accordance with applicable
provisions of law, the provisions of its Articles of
Incorporation and the Conduct Rules of the National
Association of Securities Dealers, Inc.
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8. The responsibility of the Distributor hereunder shall be
limited to the promotion of sales of Series' shares. The
Distributor shall undertake to promote such sales solely as
agent of the Fund, and shall not purchase or sell such shares
as principal. Orders for Series' shares and payment for such
orders shall be directed to the Fund's agent, Delaware Service
Company, Inc. for acceptance on behalf of the Fund. The
Distributor is not empowered to approve orders for sales of
Series' shares or accept payment for such orders. Sales of
Series' shares shall be deemed to be made when and where
accepted by Delaware Service Company, Inc.
9. With respect to the apportionment of costs between the Fund
and the Distributor of activities with which both are
concerned, the following will apply:
(a) The Fund and the Distributor will cooperate in
preparing the Registration Statements, the
Prospectus, and all amendments, supplements and
replacements thereto. The Fund will pay all costs
incurred in the preparation of the Fund's
registration statement, including typesetting, the
costs incurred in printing and mailing prospectuses
to its own shareholders and fees and expenses of
counsel and accountants.
(b) The Distributor will pay the costs incurred in
printing and mailing copies of prospectuses to
prospective investors.
(c) The Distributor will pay advertising and promotional
expenses, including the costs of literature sent to
prospective investors.
(d) The Fund will pay the costs and fees incurred in
registering the Series' shares with the various
states and with the Securities and Exchange
Commission.
(e) The Distributor will pay the costs of any additional
copies of the Fund reports and other Fund literature
supplied to the Distributor by the Fund for sales
promotion purposes.
10. The Distributor may engage in other business, provided such
other business does not interfere with the performance by the
Distributor of its obligations under this Agreement.
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11. The Fund agrees to indemnify, defend and hold harmless from
the assets of the Series, the Distributor and each person, if
any, who controls the Distributor within the meaning of
Section 15 of the Securities Act of 1933, from and against any
and all losses, damages, or liabilities to which, jointly or
severally, the Distributor or such controlling person may
become subject, insofar as the losses, damages or liabilities
arise out of the performance of its duties hereunder, except
that the Fund shall not be liable for indemnification of the
Distributor or any controlling person thereof for any
liability to the Fund or its security holders to which they
would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of their
duties hereunder or by reason of their reckless disregard of
their obligations and duties under this Agreement.
12. Copies of financial reports, registration statements and
prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish
to the other will be duly delivered or furnished, if delivered
to such party at its address shown below during regular
business hours, or if sent to that party by registered mail or
by prepaid telegram filed with an office or with an agent of
Western Union, in all cases within the time or times herein
prescribed, addressed to the recipient at 1818 Market Street,
Philadelphia, Pennsylvania 19103, or at such other address as
the Fund or the Distributor may designate in writing and
furnish to the other.
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<PAGE>
13. This Agreement shall not be assigned, as that term is defined
in the Investment Company Act of 1940, by the Distributor and
shall terminate automatically in the event of its attempted
assignment by the Distributor. This Agreement shall not be
assigned by the Fund without the written consent of the
Distributor signed by its duly authorized officers and
delivered to the Fund. Except as specifically provided in the
indemnification provisions contained in Paragraph 11 hereof,
this contract and all conditions and provisions hereof are for
the sole and exclusive benefit of the parties hereto and their
legal successors and no express or implied provisions of this
Agreement are intended or shall be construed to give any
person other than the parties hereto and their legal
successors any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provisions herein
contained. The Distributor shall look only to the assets of
the Fund to meet the obligations of, or claims against, the
Fund under this Agreement and not to the holder of any share
of the Fund.
14. (a) This contract shall remain in force for a period of
two years from the date of execution of this
Agreement and from year to year thereafter, but only
so long as such continuance is specifically approved
at least annually by the Board of Directors or by
vote of a majority of the outstanding voting
securities of the Series and only if the terms and
the renewal thereof have been approved by the vote of
a majority of the Directors of the Fund, who are not
parties hereto or interested persons of any such
party, cast in person at a meeting called for the
purpose of voting on such approval.
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(b) The Distributor may terminate this contract on
written notice to the Fund at any time in case the
effectiveness of the Registration Statement shall be
suspended, or in case Stop Order proceedings are
initiated by the U. S. Securities and Exchange
Commission in respect of the Registration Statement
and such proceedings are not withdrawn or terminated
within thirty days. The Distributor may also
terminate this contract at any time by giving the
Fund written notice of its intention to terminate the
contract at the expiration of three months from the
date of delivery of such written notice of intention
to the Fund.
(c) The Fund may terminate this contract at any time on
at least thirty days prior written notice to the
Distributor (1) if proceedings are commenced by the
Distributor or any of its stockholders for the
Distributor's liquidation or dissolution or the
winding up of the Distributor's affairs; (2) if a
receiver or trustee of the Distributor or any of its
property is appointed and such appointment is not
vacated within thirty days thereafter; (3) if, due to
any action by or before any court or any federal or
state commission, regulatory body, or administrative
agency or other governmental body, the Distributor
shall be prevented from selling securities in the
United States or because of any action or conduct on
the Distributor's part, sales of the shares are not
qualified for sale. The Fund may also terminate this
contract at any time upon prior written notice to the
Distributor of its intention to so terminate at the
expiration of three months from the date of the
delivery of such written notice to the Distributor.
15. The validity, interpretation and construction of this
contract, and of each part hereof, will be governed by the
laws of the Commonwealth of Pennsylvania.
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16. In the event any provision of this contract is determined to
be void or unenforceable, such determination shall, not affect
the remainder of the contract, which shall continue to be in
force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
Attest: General Partner
By:
Assistant Vice President/ Executive Vice President
Assistant Secretary/ Chief Operating Officer
Senior Counsel Chief Financial Officer
DELAWARE GROUP PREMIUM FUND, INC.
Attest: For the AGGRESSIVE GROWTH SERIES
Assistant Vice President/ Chairman
Assistant Secretary/
Senior Counsel
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As of April 30, 1998
VIA UPS OVERNIGHT
- -----------------
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996, as amended November
20, 1997 between The Chase Manhattan Bank and those registered
investment companies (and on behalf of certain series thereof), listed
on Schedule A and Appendix A, respectively, attached thereto
("Agreement")
----------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Group Premium Fund, Inc. for the benefit of the REIT Series
(the "Series") hereby appoints The Chase Manhattan Bank to provide custodial
services for the Series under and in accordance with the terms of the Agreement
and accordingly, requests that the Series be added to Schedule A and Appendix A,
respectively, to the Agreement effective April 30, 1998. Kindly acknowledge your
agreement to provide such services and to add the Series to Schedule A and
Appendix A, respectively, to the Agreement by signing in the space provided
below.
DELAWARE GROUP PREMIUM FUND, INC.
on behalf of REIT SERIES
By: /s/David K. Downes
----------------------
David K. Downes
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
By: /s/Rosemary M. Stidmon
----------------------
Rosemary M. Stidmon
Its: Vice President
--------------
<PAGE>
As of
VIA UPS OVERNIGHT
- -----------------
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996, as amended November
20, 1997 between The Chase Manhattan Bank and those registered
investment companies (and on behalf of certain series thereof), listed
on Schedule A and Appendix A, respectively, attached thereto
("Agreement")
----------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Group Premium Fund, Inc. for the benefit of the Aggressive
Growth Series (the "Series") hereby appoints The Chase Manhattan Bank to provide
custodial services for the Series under and in accordance with the terms of the
Agreement and accordingly, requests that the Series be added to Schedule A and
Appendix A, respectively, to the Agreement effective . Kindly acknowledge your
agreement to provide such services and to add the Series to Schedule A and
Appendix A, respectively, to the Agreement by signing in the space provided
below.
DELAWARE GROUP PREMIUM FUND, INC.
on behalf of Aggressive Growth Series
By
--
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
By
Its: Vice President
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<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
AMENDED AND RESTATED SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 1st day of May, 1998 by and between
DELAWARE GROUP PREMIUM FUND, INC. (the "Fund"), a Maryland Corporation, for the
DECATUR TOTAL RETURN SERIES, the DELCHESTER SERIES, the CAPITAL RESERVES SERIES,
the DELAWARE SERIES, the DELCAP SERIES, the INTERNATIONAL EQUITY SERIES, the
VALUE SERIES, the TREND SERIES, the GLOBAL BOND SERIES, the CONVERTIBLE
SECURITIES SERIES, the DEVON SERIES, the EMERGING MARKETS SERIES, the QUANTUM
SERIES, the STRATEGIC INCOME SERIES and the REIT SERIES (collectively "the
Series"), and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware Corporation,
each having its principal office and place of business at 1818 Market Street,
Philadelphia, Pennsylvania 19103.
WITNESSETH:
WHEREAS, the Investment Management Agreements between the Fund and
Delaware Management Company, Inc. provide that the Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the costs
incurred in: the maintenance of its corporate existence; the maintenance of its
own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfers of stock, including issuance and redemption of
shares; reports and notices to stockholders; calling and holding of stockholder
meetings; miscellaneous office expenses; brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, the Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
and
WHEREAS, the Fund and DSC previously entered into an Amended and
Restated Shareholder Services Agreement dated May 1, 1997; and
WHEREAS, the Fund and DSC desire to amend and restate their Amended and
Restated Shareholder Services Agreement dated as of May 1, 1997 to include the
Fund's new series.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and intending legally to be bound, it is agreed:
<PAGE>
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
(a) The Articles of Incorporation or other documents evidencing the
Fund's form of organization and any current amendments or supplements thereto.
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Series or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of Directors of
the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The forms of share certificates of the Series in the forms
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other documents
relating to stockholder accounts in the Series;
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
2
<PAGE>
(i) Any opinion of counsel to the Fund relating to the authorization
and validity of the shares of the Series issued or proposed to be issued under
the law of the State of the Fund's organization, including the status thereof
under any applicable securities laws;
(j) A certified copy of any resolution of the Board of Directors of
the Fund authorizing any person to give instructions to DSC under this Agreement
(with a specimen signature of such person if not already provided), setting
forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering, adding,
qualifying or repealing any document or authority called for under this Section
2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Series or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting such
change;
(b) Written instructions from an authorized officer implementing
such change; and
(c) An opinion of counsel to the Fund as to the validity of such
action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series' shares
which it issues will be properly registered and lawfully issued under applicable
federal and state laws.
(b) The provisions of this contract do not violate the terms of any
instrument by which the Fund is bound; nor do they violate any law or regulation
of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent under
the Securities Exchange Act of 1934 and is duly authorized to serve, and may
lawfully serve as such.
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(b) The provisions of this contract do not violate the terms of any
instrument by which DSC is bound; nor do they violate any law or regulation of
any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and transfer
shares of the Series, and, in connection therewith but not in limitation
thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the total
shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by debiting
transferor-stockholder accounts and crediting such shares to accounts created
and/or maintained for transferee-stockholders; if applicable, issue and/or
cancel stock certificates.
(c) Upon proper redemption authorization, determine the total shares
redeemed and to be redeemed; determine the total redemption payments made and to
be made; redeem shares by debiting stockholder accounts; as applicable receive
and cancel stock certificates for shares redeemed; and remit or cause to be
remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash due and
paid, shares issued and to be issued, cash remitted and to be remitted and
shares debited and credited to accounts; provide such notices, instructions or
authorizations as the Fund may require.
4
<PAGE>
4.2 DSC shall not be required to issue, transfer or redeem Series'
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Fund, DSC shall disburse and
cause to be disbursed to stockholders of each Series dividends, capital gains
distributions or any payments from other sources as directed by the Fund. In
connection therewith, but not in the limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of each
Series, as aforesaid, for which Series' shares are to be issued and authorized
and instruct the issuance of Series' shares therefor in accordance with Section
IV hereof.
(d) Prepare and mail or deliver such forms and notices pertaining to
disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control disbursements
to be made and made, both as to cash and shares, as aforesaid; provide such
notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Fund, DSC shall provide those
services ancillary to, but in implementation of, the services provided under
Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
(a) Except where instructed in writing by the Fund not to do so, and
where in compliance with applicable law, accept orders on behalf of the Fund;
receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of stockholders
and their agents.
(c) As instructed by the Fund, prepare and mail stockholder account
information, mail Series stockholder reports and Series prospectuses.
5
<PAGE>
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to investors and
stockholders of each Series, including retirement plans, including activities
not otherwise provided in Sections I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), advantages and benefits to the Fund in the employment of DSC
hereunder can be available which may not generally be available to it from
others providing similar services.
6
<PAGE>
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested persons of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Series and their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
10.3 This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the 1st day of May, 1998.
DELAWARE SERVICE COMPANY, INC.
ATTEST: /s/ Michael D. Mabry By: /s/ David K. Downes
-------------------- ---------------------
Michael D. Mabry David K. Downes
Assistant Vice President, President, Chief Executive Officer,
Assistant Secretary and and Chief Financial Officer
Senior Counsel
DELAWARE GROUP PREMIUM FUND, INC.
for its DECATUR TOTAL RETURN SERIES,
DELCHESTER SERIES, CAPITAL RESERVES
SERIES, DELAWARE SERIES, DELCAP
SERIES, INTERNATIONAL EQUITY SERIES,
VALUE SERIES, TREND SERIES, GLOBAL
BOND SERIES, CONVERTIBLE SECURITIES
SERIES, DEVON SERIES, EMERGING
MARKETS SERIES, QUANTUM SERIES,
STRATEGIC INCOME SERIES and REIT
SERIES
ATTEST: /s/ David P. O'Connor By: /s/Wayne A. Stork
--------------------- -----------------
David P. O'Connor Wayne A. Stork
Assistant Vice President, Chairman
Assistant Secretary and
Senior Counsel
8
<PAGE>
FORM OF SCHEDULE
SUBJECT TO BOARD APPROVAL
SCHEDULE A
----------
DELAWARE GROUP PREMIUM FUND, INC.
(THE "FUND")
AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
1. Delaware Service Company, Inc. ("DSC") will determine and report to the Fund,
at least annually, the compensation for services to be provided to the Fund
for DSC's forthcoming fiscal year or period.
2. In determining such compensation, DSC will fix and report a fee to be charged
per account and/or transaction, as may be applicable, for services provided.
DSC will bill, and the Fund will pay, such compensation monthly.
3. For the period commencing on January 1, 1998, the charge will consist of two
charges for all the Funds in the Delaware Group, except the Delaware Group
Premium Fund, Inc. and the Delaware Pooled Trust, Inc. (other than with
respect to The Real Estate Investment Trust Portfolio), an annual charge and
a per transaction charge for each account on the transfer agent's records and
each account on an automated retirement processing system. These charges are
as follows:
A. ANNUAL CHARGE
-------------
Daily Dividend Funds $11.00 Per Annum
Other Funds $ 5.50 Per Annum
Merrill Lynch - Omnibus Accounts
Regular Accounts $16.00 Per Annum
Accounts with a Contingent
Deferred Sales Charge $19.00 Per Annum
Networked Accounts $3.00 - 6.00 Per Annum
<PAGE>
SCHEDULE A
DELAWARE GROUP PREMIUM FUND, INC.
(THE "FUND")
AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
CONTINUED
B. TRANSACTION CHARGE
------------------
Transaction Charge
1. Dividend Payment $0.25
2. New Account $6.00
3. Purchase:
a. Wire $8.00
b. Automated $1.50
c. Other $2.60
4. Transfer $8.00
5. Certificate Issuance $4.00
6. Liquidations
a. Wires $12.25
b. Drafts $0.75
c. Money Market Regular $4.50
d. Other Regular $4.50
7. Exchanges
a. Dividend Exchanges $3.00
b. Other $10.00
<PAGE>
SCHEDULE A
DELAWARE GROUP PREMIUM FUND, INC.
(THE "FUND")
AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
CONTINUED
4. For the period commencing January 1, 1998, DSC's compensation for providing
services to the Delaware Group Premium Fund, Inc. (the "Premium Fund") will
be $50,000 annually. DSC will bill, and the Premium Fund will pay, such
compensation monthly, allocated among the current Series of the Premium Fund
based on the relative percentage of assets of each Series at the time of
billing and adjusted appropriately to reflect the length of time a particular
Series is in operation during any billing period.
5. For the period commencing January 1, 1998, DSC's compensation for providing
services to the Portfolios (other than The Real Estate Investment Trust
Portfolio) of Delaware Pooled Trust, Inc. (the "Trust") will be $25,000
annually. DSC will bill, and the Trust will pay, such compensation monthly
allocated among the current Portfolios (other than The Real Estate Investment
Trust Portfolio) of the Trust based on the relative percentage of assets of
each Portfolio at the time of billing and adjusted appropriately to reflect
the length of time a particular Portfolio is in operation during any billing
period.
<PAGE>
DELAWARE GROUP PREMIUM FUND, INC.
AMENDED AND RESTATED SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this day of by and
between DELAWARE GROUP PREMIUM FUND, INC. (the "Fund"), a Maryland Corporation,
for the DECATUR TOTAL RETURN SERIES, the DELCHESTER SERIES, the CAPITAL RESERVES
SERIES, the DELAWARE SERIES, the DELCAP SERIES, the INTERNATIONAL EQUITY SERIES,
the VALUE SERIES, the TREND SERIES, the GLOBAL BOND SERIES, the CONVERTIBLE
SECURITIES SERIES, the DEVON SERIES, the EMERGING MARKETS SERIES, the QUANTUM
SERIES, the STRATEGIC INCOME SERIES, the REIT SERIES and the AGGRESSIVE GROWTH
SERIES (collectively "the Series"), and DELAWARE SERVICE COMPANY, INC. ("DSC"),
a Delaware Corporation, each having its principal office and place of business
at 1818 Market Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Fund and
Delaware Management Company, Inc. provide that the Fund shall conduct its own
business and affairs and shall bear the expenses and salaries necessary and
incidental thereto including, but not in limitation of the foregoing, the costs
incurred in: the maintenance of its corporate existence; the maintenance of its
own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfers of stock, including issuance and redemption of
shares; reports and notices to stockholders; calling and holding of stockholder
meetings; miscellaneous office expenses; brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
<PAGE>
WHEREAS, the Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
and
WHEREAS, the Fund and DSC previously entered into an Amended and
Restated Shareholder Services Agreement dated May 1, 1997; and
WHEREAS, the Fund and DSC desired to amend and restate their Amended
and Restated Shareholder Services Agreement dated as of May 1, 1997 to include
the Fund's new series.
WHEREAS, the Fund and DSC previously entered into an Amended and
Restated Shareholder Services Agreement dated May 1, 1998 and
WHEREAS, the Fund and DSC desire to amend and restate their Amended and
Restated Shareholder Services Agreement dated as of to include the Fund's new
series.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
2
<PAGE>
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto.
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Series or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The forms of share certificates of the Series in the forms
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
3
<PAGE>
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
(j) A certified copy of any resolution of the Board of
Directors of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Series or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting
such change;
4
<PAGE>
(b) Written instructions from an authorized officer
implementing such change; and
(c) An opinion of counsel to the Fund as to the validity of
such action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series' shares
which it issues will be properly registered and lawfully issued under applicable
federal and state laws.
(b) The provisions of this contract do not violate the terms
of any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of 1934 and is duly authorized to serve, and
may lawfully serve as such.
(b) The provisions of this contract do not violate the terms
of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
5
<PAGE>
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by
debiting transferor-stockholder accounts and crediting such shares to accounts
created and/or maintained for transferee-stockholders; if applicable, issue
and/or cancel stock certificates.
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
6
<PAGE>
(d) Create and maintain accounts; reconcile and control cash
due and paid, shares issued and to be issued, cash remitted and to be remitted
and shares debited and credited to accounts; provide such notices, instructions
or authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem Series'
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Fund, DSC shall disburse and
cause to be disbursed to stockholders of each Series dividends, capital gains
distributions or any payments from other sources as directed by the Fund. In
connection therewith, but not in the limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of
each Series, as aforesaid, for which Series' shares are to be issued and
authorized and instruct the issuance of Series' shares therefor in accordance
with Section IV hereof.
7
<PAGE>
(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Fund, DSC shall provide
those services ancillary to, but in implementation of, the services provided
under Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
(a) Except where instructed in writing by the Fund not to do
so, and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of
stockholders and their agents.
(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.
8
<PAGE>
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to
investors and stockholders of each Series, including retirement plans, including
activities not otherwise provided in Sections I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
9
<PAGE>
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), advantages and benefits to the Fund in the employment of DSC
hereunder can be available which may not generally be available to it from
others providing similar services.
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested persons of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Series and their stockholders.
10
<PAGE>
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
11
<PAGE>
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the 1st day of May, 1998.
DELAWARE SERVICE COMPANY, INC.
ATTEST: By:
------------------------------- -------------------------------------
Michael D. Mabry David K. Downes
Assistant Vice President, President, Chief Executive Officer,
Assistant Secretary and and Chief Financial Officer
Senior Counsel
DELAWARE GROUP PREMIUM FUND, INC.
for its DECATUR TOTAL RETURN SERIES,
DELCHESTER SERIES, CAPITAL RESERVES
SERIES, DELAWARE SERIES, DELCAP
SERIES, INTERNATIONAL EQUITY SERIES,
VALUE SERIES, TREND SERIES, GLOBAL
BOND SERIES, CONVERTIBLE SECURITIES
SERIES, DEVON SERIES, EMERGING
MARKETS SERIES, QUANTUM SERIES,
STRATEGIC INCOME SERIES, REIT SERIES
and AGGRESSIVE GROWTH SERIES
ATTEST: By:
------------------------------- -------------------------------------
David P. O'Connor Jeffrey J. Nick
Assistant Vice President, Chairman
Assistant Secretary and
Senior Counsel
13
<PAGE>
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.
1
<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 March 31, 1998
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>
AMENDMENT NO. 10
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
Social Awareness Fund (formerly 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.
1
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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 August 31, 1998
DELAWARE SERVICE COMPANY, INC.
/s/David K. Downes
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.
/s/Wayne A. Stork
By: ______________________________________________________________
Wayne A. Stork
Chairman
5
<PAGE>
AMENDMENT NO. 11
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
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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)
The Asset Allocation 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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 September 14, 1998
DELAWARE SERVICE COMPANY, INC.
/s/David K. Downes
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.
/s/Wayne A. Stork
By: ______________________________________________________________
Wayne A. Stork
Chairman
5
<PAGE>
AMENDMENT NO. 12
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
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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)
The Asset Allocation 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)
Corporate Bond Fund (New)
Extended Duration Bond 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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 September 14, 1998
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>
AMENDMENT NO. 13
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
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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)
Mid-Cap Value Fund (New)
Small Cap Contrarian 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)
The Asset Allocation 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)
New Europe Fund (New)
Latin America Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Mid-Cap Growth Equity Portfolio (formerly 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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)
4
<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)
(liquidated November 18, 1998)
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)
5
<PAGE>
Dated as of December 18, 1998
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
6
<PAGE>
AMENDMENT NO. 14
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 Balanced Fund (formerly Delaware Fund)
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Equity Income Fund (formerly Decatur Income Fund)
Growth and Income Fund (formerly Decatur Total Return Fund)
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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)
Mid-Cap Value Fund (New)
Small Cap Contrarian 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)
The Asset Allocation 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 Equity Fund (formerly Global Assets Fund)
Global Bond Fund
International Equity Fund
Global Opportunities Fund (formerly Global Equity Fund) (New)
International Small Cap Fund (New)
New Europe Fund (New)
Latin America Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund (liquidated December 18, 1998)
Delaware Pooled Trust, Inc.
The Mid-Cap Growth Equity Portfolio (formerly The Aggressive Growth
Portfolio)
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Mid-Cap Value Equity Portfolio (formerly The Small/Mid-Cap Value
Equity Portfolio and The Defensive Equity Small/Mid-Cap
Portfolio)(New)
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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
The Small Cap Value Equity 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)
Aggressive Growth Series (New)
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 US 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)
(liquidated November 18, 1998)
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 March 1, 1999
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:
-----------------------------------------------------------------
Jeffrey J. Nick
Chairman
<PAGE>
Law Office
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
January 18, 1999
Delaware Group Premium Fund, Inc.
1818 Market Street
Philadelphia, PA 19103
Re: Legal Opinion-Securities Act of 1933
Ladies and Gentlemen:
We have examined the Articles of Incorporation, as amended and
supplemented (the "Articles"), of Delaware Group Premium Fund, Inc. (the
"Fund"), a series corporation organized under Maryland law, the By-Laws of the
Fund, and its proposed form of Share Certificates (if any), 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 as amended, (the "Investment
Company Act") and the Securities Act of 1933 as amended, (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 to issue one billion
(1,000,000,000) shares of common stock at a par value of $0.01 and currently
issues shares of the Capital Reserves Series, Cash Reserve Series, Convertible
Securities Series, Decatur Total Return Series, Delaware Series, Delcap Series,
Delchester Series, Devon Series, Emerging Markets Series, Global Bond Series,
International Equity Series, REIT Series, Small Cap Value Series, Social
Awareness Series, Strategic Income Series, and Trend Series series of shares.
The Articles 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 Section 24(f) of 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 under the Investment
Company Act 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.
You have also informed us that the shares of the Fund have
been, and will continue to 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.
<PAGE>
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, 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 and the laws of
the State of Maryland.
We hereby consent to the use of this opinion, in lieu of any
other, 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: /s/ Bruce G. Leto
--------------------------------------
Bruce G. Leto
<PAGE>
POWER OF ATTORNEY
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 16th day of April, 1998.
/s/ John H. Durham
- --------------------
John H. Durham
<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
