DELAWARE GROUP PREMIUM FUND, 485BPOS, 2000-04-28

DELAWARE GROUP PREMIUM FUND
485BPOS, 2000-04-28

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
File No. 33-14363
File No. 811-5162

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 31 /X/
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AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31 /X/
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DELAWARE GROUP PREMIUM FUND
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(Exact Name of Registrant as Specified in Charter)

1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (215) 255-1255
--------------

Eric E. Miller, Esquire, 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)

Approximate Date of Public Offering: May 1, 2000
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It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
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X on May 1, 2000 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate:

_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment

<PAGE>

--- C O N T E N T S ---

This Post-Effective Amendment No. 31 to Registration File No. 33-14363 includes
the following:

1. Facing Page

2. Contents Page

3. Part A - Prospectus

4. Part B - Statement of Additional Information

5. Part C - Other Information

6. Signatures

7. Exhibits

<PAGE>
DELAWARE(SM)
INVESTMENTS
---------------------
Philadelphia o London

Delaware Group
Premium Fund
Standard Class
1818 Market Street,
Philadelphia, PA 19103
Prospectus May 1, 2000

This Prospectus offers 18 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.

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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.
- --------------------------------------------------------------------------------

Balanced Series (formerly Delaware Balanced Series) - seeks a balance of capital
appreciation, income and preservation of capital. As a "balanced" fund, the
Series invests at least 25% of its assets in fixed-income securities and the
remainder primarily in equity securities. This Series has the same objective and
investment disciplines as Delaware Balanced Fund, 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 Cash Reserve Fund, 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.

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. This Series has
the same objective and investment disciplines as Delaware Devon Fund, 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. This Series
has the same objective and investment disciplines as Delaware Emerging Markets
Fund, a separate fund in the Delaware Investments family.

<PAGE>

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. The Series will invest in
fixed-income securities of issuers from at least three different countries, one
of which may be the United States. This Series has the same objective and
investment disciplines as Delaware Global Bond Fund, a separate fund in the
Delaware Investments family.

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. This Series has the same
objective and investment disciplines as Delaware Growth and Income Fund, a
separate fund in the Delaware Investments family.

Growth Opportunities Series (formerly 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 Delaware Growth Opportunities Fund, a
separate fund in the Delaware Investments family.

High Yield Series (formerly Delchester Series) - seeks total return and, as a
secondary objective, high current income. It seeks to achieve its objective by
investing primarily in high-yield corporate bonds. These are commonly known as
junk bonds. An investment in this Series may involve greater risks than an
investment in a portfolio comprised primarily of investment grade bonds.

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 Delaware International Equity Fund,
a separate fund in the Delaware Investments family.

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
Delaware REIT Fund, a separate fund in the Delaware Investments family.

Select Growth Series (formerly Aggressive Growth Series) - seeks long-term
capital appreciation. The Series attempts to achieve its investment objective by
investing primarily in equity securities of companies of all sizes which the
manager believes have the potential for high earnings growth. This Series has
the same objective and investment discipline as Delaware Select Growth Fund, a
separate fund in the Delaware Investments family.

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. This Series has the
same objective and investment disciplines as Delaware Small Cap Value Fund, a
separate fund in the Delaware Investments family.

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 has the same objective
and investment disciplines as Delaware Social Awareness Fund, 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. This Series
has the same objective and investment disciplines as Delaware Strategic Income
Fund, 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. This Series has the same objective and investment
disciplines as Delaware Trend Fund, a separate fund in the Delaware Investments
family.

U.S. Growth Series - seeks to maximize capital appreciation. The Series seeks to
achieve its objective by investing primarily in stocks of companies of all
sizes. We look for stocks with low dividend yields, strong balance sheets and
high expected earnings growth rates as compared to other companies in the same
industry. This Series has the same objective and investment disciplines as
Delaware U.S. Growth Fund, a separate fund in the Delaware Investments family.

The Global Bond Series and the Convertible Securities Series are not available
in the Group Flexible Premium Variable Life Insurance product.
<PAGE>

Table of contents
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- --------------------------------------------------------------
Profiles Information about individual Series
(Strategies, Risks, Portfolio managers, Financial highlights)

<S> <C> <C>
Balanced Series Page 2 Page 26

Capital Reserves Series 3 31

Cash Reserve Series 4 36

Convertible Securities Series 5 39

Devon Series 6 45

Emerging Markets Series 7 50

Global Bond Series 9 57

Growth and Income Series 11 64

Growth Opportunities Series 12 68

High Yield Series 13 74

International Equity Series 14 80

REIT Series 16 85

Select Growth Series 18 90

Small Cap Value Series 19 94

Social Awareness Series 20 98

Strategic Income Series 22 102

Trend Series 24 109

U.S. Growth Series 25 113

Important Information about all Series

Fund administration (Who's who) Page 117

Share classes 118

Purchase and redemption of shares 118

Valuation of shares 118

Dividends, distributions and taxes 119
</TABLE>
1
<PAGE>
Profile: Balanced Series (formerly Delaware Balanced Series)

What are the Series' goals?
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.

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.

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.

How has Balanced Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the
risks of investing in Balanced Series. We show how returns for the Standard
Class of Balanced 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 applicable voluntary expense caps. The returns would be lower
without the voluntary caps. Moreover, the performance presented does not reflect
any separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Balanced Series had a year-to-date
return of -3.11%. During the periods illustrated in this bar chart, the Class'
highest quarterly return was 17.54% for the quarter ended March 31, 1991 and its
lowest quarterly return was -12.93% for the quarter ended September 30, 1990.

Year-by-year total return

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------ ------ ------ ----- ------ ------ ------ ------ ------ ------
- -0.18% 26.59% 13.85% 8.18% -0.15% 26.58% 15.91% 26.40% 18.62% -7.85%

Average annual returns for periods ending 12/31/99

Balanced S&P 500
Series Composite Stock Lehman Brothers
Standard Class Price Index Aggregate Bond Index
-------------- --------------- --------------------
1 year -7.85% 21.03% -0.82%
5 years 15.18% 28.54% 7.73%
10 years 12.16% 18.19% 7.70%

The Series returns are compared to the performance of the S&P 500 Composite
Stock Price Index and the Lehman Brothers Aggregate Bond Index. The S&P 500
Composite Stock Price Index is an unmanaged index of 500 widely held common
stocks that is often used to represent performance of the U.S. stock market. The
Lehman Brothers Aggregate Bond Index is an index that measures the performance
of about 5,500 publically traded bonds, including U.S. government,
mortgage-backed, corporate and Yankee bonds. Neither index is a perfect
comparison to Balanced Series since the S&P 500 Composite Stock Price Index does
not include fixed-income securities and the Lehman Brothers Aggregate Bond Index
does not include stocks. 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.

2
<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.

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.

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?
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This bar chart and table can help you evaluate the risks of investing in Capital
Reserves Series. We show how returns for the Standard Class of Capital Reserves
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
applicable voluntary expense caps. The returns would be lower without the
voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Capital Reserves Series had a
year-to-date return of 1.12%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 4.35% for the quarter ended June 30,
1995 and its lowest quarterly return was -2.21% for the quarter ended March 31,
1994.

Year-by-year total return

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ----- ----- ----- ----- ------ ------ ----- ----- ----- -----
8.23% 8.84% 7.20% 7.85% -2.68% 14.08% 4.05% 7.60% 6.78% 0.28%

Average annual returns for periods ending 12/31/99

Capital Reserves
Series Lehman Brothers Intermediate
Standard Class Government Corporate Bond Index
---------------- -------------------------------
1 year 0.28% 0.39%
5 years 6.46% 7.10%
10 years 6.13% 7.26%

The Series returns are compared to the performance of the Lehman Brothers
Intermediate Government Corporate Bond Index. Lehman Brothers Intermediate
Government Corporate Bond Index is based on all publicly issued intermediate
government and corporate debt securities with an average maturity of 4 to 5
years. 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.

3
<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 maintain an average maturity of 90 days or less. Also, we do not purchase any
instruments with an effective remaining maturity of more than 397 days
(approximately 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 Cash Reserve 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 do not want an investment whose value may fluctuate 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.

How has Cash Reserve Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in Cash
Reserve Series. We show how returns for the Standard Class of 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
applicable voluntary expense caps. The returns would be lower without the
voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Cash Reserve Series had a
year-to-date return of 1.35%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 1.88% for the quarter ended June 30,
1990 and its lowest quarterly return was 0.58% for the quarter ended June 30,
1993.

Year-by-year total return

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
7.56% 5.58% 3.25% 2.48% 3.68% 5.48% 4.93% 5.10% 5.08% 4.81%

Average annual returns for periods ending 12/31/99

Cash Reserve
Series Standard Class
---------------------
1 year 4.81%
5 years 5.08%
10 years 4.79%

4
<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 capital appreciation and current income.
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. Convertible securities are often rated below investment grade and, as
a result, are subject to a higher credit risk that the issuer will be unable to
meet payments of interest and principal, particularly under adverse economic
conditions. For a more complete discussion of risk, please turn to "The risks of
investing in Convertible Securities 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.

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.

How has Convertible Securities Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in
Convertible Securities Series. We show how returns for the Standard Class of
Convertible Securities Series have varied over the past two calendar years, as
well as average annual returns for one year and since inception. The Series'
past performance does not necessarily indicate how it will perform in the
future. The returns reflect applicable voluntary expense caps. The returns would
be lower without the voluntary caps. Moreover, the performance presented does
not reflect any separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Convertible Securities Series had a
year-to-date return of 6.94%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 8.70% for the quarter ended December 31,
1999 and its lowest quarterly return was -10.65% for the quarter ended September
30, 1998.

Year-by-year total return

1998 1999
- ------ -----
- -1.17% 6.97%

Average annual returns for periods ending 12/31/99

Convertible Securities Merrill Lynch Convertible
Series Standard Class Securities Index
---------------------- -------------------------
1 year 6.97% 44.32%
Since Inception (5/1/97) 8.18% 25.36%

The Series returns are compared to the performance of the Merrill Lynch
Convertible Securities Index. The Merrill Lynch Convertible Securities Index is
an unmanaged index representative of the convertible securities market. 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.

5
<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. 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 "The risks of investing in Devon 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.

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.

How has Devon Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in Devon
Series. We show how returns for the Standard Class of Devon Series have varied
over the past two calendar years as well as average annual returns for one year
and since inception. The Series' past performance does not necessarily indicate
how it will perform in the future. The returns reflect applicable voluntary
expense caps. The returns would be lower without the voluntary caps. Moreover,
the performance presented does not reflect any separate account fees, which
would reduce the returns.

As of March 31, 2000, the Standard Class of Devon Series had a year-to-date
return of -3.14%. During the periods illustrated in this bar chart, the Class'
highest quarterly return was 20.81% for the quarter ended December 31, 1998 and
its lowest quarterly return was -12.09% for the quarter ended September 30,
1999.

Year-by-year total return

1998 1999
- ------ -------
24.05% -10.13%
Average annual returns for periods ending 12/31/99

Devon S&P 500
Series Composite Stock
Standard Class Price Index
-------------- ---------------
1 year -10.13% 21.03%
Since Inception (5/1/97) 14.00% 25.50%

The Series returns are compared to the performance of the S&P 500 Composite
Stock Price Index. The S&P 500 Composite Stock Price Index is an unmanaged index
of 500 widely held common stocks that is often used to represent performance of
the U.S. stock market. 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.

6
<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 from emerging foreign countries. Under normal
market conditions, at least 65% of the Series' total assets will be invested in
equity securities of issuers from at least three different countries whose
economies are considered to be emerging or developing.

We may invest up to 35% of the Series' net assets in fixed-income securities
issued by companies in emerging countries or by foreign governments, their
agents, instrumentalities or political sub-divisions. We may invest in
fixed-income securities that are denominated in the currencies of emerging
market countries. All of these may be high-yield, high risk fixed-income
securities.

In selecting investments for the Series,

o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.

o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower than,
or in line with the level of inflation. We then estimate what we think the
value of those anticipated future dividends would be worth if they were being
paid today. We believe this gives us an estimate of the stock's true value.
Because many of the countries in which the Series invests are emerging
countries, there may be less information available for us to use in making
this analysis than is available for more developed countries.

o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine whether
a particular currency is overvalued or undervalued by comparing the amount of
goods and services that a dollar will buy in the United States to the amount
of foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued, and when the dollar buys more, the foreign currency may be
undervalued.

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. These fluctuations can be even more pronounced for funds like
Emerging Markets Series, which invests in emerging countries. 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. The value of the Series' investments and, therefore, the price of the
Series' shares may be more volatile than investments in more developed markets.
Because the Series invests in international securities in developing countries
as well as established countries, it will be affected by international
investment risks related to currency valuations, political instability, economic
instability, or lax accounting and regulatory standards.
<PAGE>

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 rules that
regulate mutual funds. This means that the Series may allocate more of its net
assets to investments in single securities than a "diversified" fund. 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.

For a more complete discussion of risk, please turn to "The risks of investing
in Emerging Markets 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.

Who should invest in the Series

o Investors with long-term financial goals.

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 or are unwilling to accept the significant
risks associated with investing in emerging markets.

7
<PAGE>

Emerging Markets Series (continued)

How has Emerging Markets Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in
Emerging Markets Series. We show how returns for the Standard Class of Emerging
Markets Series have varied over the past two calendar years, as well as average
annual returns for one year and since inception. The Series' past performance
does not necessarily indicate how it will perform in the future. The returns
reflect applicable voluntary expense caps. The returns would be lower without
the voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Emerging Markets Series had a
year-to-date return of -1.45%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 22.99% for the quarter ended December
31, 1999 and its lowest quarterly return was -22.25% for the quarter ended June
30, 1998.

Year-by-year total return

1998 1999
- ------- ------
- -32.48% 48.28%
Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
Emerging Markets Morgan Stanley Capital International
Series Standard Class Emerging Markets Free Index
--------------------- ------------------------------------
<S> <C> <C>
1 year 48.28% 66.41%
Since inception (5/1/97) -4.31% 0.41%
</TABLE>

The Series returns are compared to the performance of the Morgan Stanley Capital
International Emerging Markets Free Index. The Morgan Stanley Capital
International Emerging Markets Free Index is a U.S. dollar denominated index
comprised of stocks of countries with below average per capita GDP as defined by
the World Bank, foreign ownership restrictions, a lax regulatory environment,
and greater perceived market risk than in the developed countries. Within this
index, Morgan Stanley Capital International aims to capture an aggregate of 60%
of local market capitalization. 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.

<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 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.

In selecting investments for the Series,

o We strive to identify fixed-income securities that provide high income
potential.

o In order to compare the value of different fixed-income securities, even
those issued in different countries, we look at the value of anticipated
future interest and principal payments, taking into consideration what we
think the inflation rate in that country will be. We then estimate what we
think the value of those anticipated future payments would be worth if they
were being paid today. We believe this gives us an estimate of a bond's true
value.

o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine
whether a particular currency is overvalued or undervalued by comparing the
amount of goods and services that a dollar will buy in the United States to
the amount of foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less, the foreign currency
may be overvalued, and when the dollar buys more, the foreign currency may be
undervalued.

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. These fluctuations can be even more pronounced for funds like Global
Bond Series, which invests in developing countries. The Series' investments
normally decrease when there are declines in bond prices, which can be caused by
a drop in the bond market, an adverse change in interest rates or an adverse
situation affecting the issuer of the bond. Because the Series invests in
international securities in both established and developing countries, it will
be affected by international investment risks related to currency valuations,
political instability, economic instability, or lax accounting and 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.

For a more complete discussion of risk, please turn to "The risks of investing
in Global Bond 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.

Who should invest in the Series

o Investors with long-term financial goals.

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.

9
<PAGE>

Global Bond Series (continued)

How has Global Bond Series performed?

This bar chart and table can help you evaluate the risks of investing in Global
Bond Series. We show how returns for the Standard Class of Global Bond Series
have varied over the past three calendar years, as well as average annual
returns for one year and since inception. The Series' past performance does not
necessarily indicate how it will perform in the future. The returns reflect
applicable voluntary expense caps. The returns would be lower without the
voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Global Bond Series had a
year-to-date return of -1.74%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 4.25% for the quarter ended September
30, 1998 and its lowest quarterly return was -3.07% for the quarter ended March
31, 1997.

Year-by-year total return

1997 1998 1998
---- ---- ----
0.88% 7.82% -3.60%

Average annual returns for periods ending 12/31/99

Global Bond Salomon Smith Barney World
Series Standard Class Government Bond Index
--------------------- --------------------------

1 year -3.60% -5.07%
Since inception (5/2/96) 4.43% 4.45%

The Series returns are compared to the performance of the Salomon Smith Barney
World Government Bond Index. Salomon Smith Barney World Government Bond Index is
a market-capitalization weighted benchmark that tracks the performance of the 18
Government bond markets of Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Portugal,
Spain, Sweden, Switzerland, the United Kingdom, and the United States. 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.

10
<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 Composite Stock Price 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 in the portfolio falls below the average of the S&P 500 Index, we
generally sell that stock.

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.

How has Growth and Income Series performed?

This bar chart and table can help you evaluate the risks of investing in Growth
and Income Series. We show how returns for the Standard Class of Growth and
Income 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
applicable voluntary expense caps. The returns would be lower without the
voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Growth and Income Series had a
year-to-date return of -5.97%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 15.29% for the quarter ended June 30,
1997 and its lowest quarterly return was -15.79% for the quarter ended September
30, 1990.

Year-by-year total return

Average annual returns for periods ending 12/31/99

Growth and Income S&P 500 Composite
Series Standard Class Stock Price Index
--------------------- -----------------

1 year -2.98% 21.03%
5 years 18.39% 28.54%
10 years 11.95% 18.19%

The Series returns are compared to the performance of the S&P 500 Composite
Stock Price Index. The S&P 500 Composite Stock Price Index is an unmanaged index
of 500 widely held common stocks that is often used to represent performance of
the U.S. stock market.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.

11
<PAGE>
Profile: Growth Opportunities Series (formerly DelCap Series)

What are the Series' goals?
Growth Opportunities 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 medium-size companies. These are generally considered to be stocks
with market capitalizations between $2 billion and $10 billion. We may also
invest in securities that are convertible into common stock. In selecting stocks
for the portfolio, we typically look for companies that have established
themselves within their industry, but still have growth potential.

We use a bottom-up approach to select stocks, evaluating individual companies
rather than trends in the economy or the investment markets. Researching each
company, its products, services, competitors and management team helps us to
select stocks of companies that we think will provide high and consistent
earnings growth with a reasonable level of risk.

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 Growth Opportunities
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 industries. In addition, the Series invests in
medium-size or small companies. These companies may involve greater risk due to
their relatively smaller size, narrow product lines and limited financial
resources. For a more complete discussion of risk, please turn to "The risks of
investing in Growth Opportunities 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.

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, growth oriented 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.

How has Growth Opportunities Series performed?

This bar chart and table can help you evaluate the risks of investing in Growth
Opportunities Series. We show how returns for the Standard Class of Growth
Opportunities Series have varied over the past eight calendar years, as well as
average annual returns for one and five years and since inception. The Series'
past performance does not necessarily indicate how it will perform in the
future. The returns reflect applicable voluntary expense caps. The returns would
be lower without the voluntary caps. Moreover, the performance presented does
not reflect any separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Growth Opportunities Series had a
year-to-date return of 22.52%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 46.48% for the quarter ended December
31, 1999 and its lowest quarterly return was -16.07% for the quarter ended
September 30, 1998.

<PAGE>

Year-by-year total return

1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ----
1.99% 11.56% -3.54% 29.53% 14.46% 14.90% 18.81% 62.94%

Growth Russell
Opportunities Midcap Growth
Series Standard Class Index
--------------------- -------------

1 year 62.94% 51.29%
5 years 26.95% 28.02%
Since Inception (7/12/91) 17.75% 20.18%

The Series returns are compared to the performance of the Russell Midcap Growth
Index. Russell Midcap Growth Index measures the performance of those Russell
Midcap companies with higher price-to-book and higher forecasted growth values.
These stocks are also members of the Russell 1000 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.

<PAGE>

Profile: High Yield Series (formerly Delchester Series)

What are the Series' goals?
High Yield Series seeks total return and, as a secondary objective, high
current income. 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
corporate bonds rated BB or lower by S&P or similarly rated by another NRSRO.
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
we judge to be of comparable quality. Unrated bonds may be more speculative in
nature than rated bonds. The Series may also invest in U.S. and foreign
government securities and corporate bonds of foreign issuers. In selecting bonds
for the portfolio, we evaluate the income provided by the bond and the bond's
appreciation potential as well as the issuer's ability to make income and
principal payments.

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 bond prices, which can be
caused by adverse changes in interest rates, adverse economic conditions or poor
performance from specific industries or bond issuers. High-yield bonds are rated
below investment grade and are subject to greater risk that the issuer will be
unable to make payments on interest and principal. Bonds of foreign issuers are
also subject to certain risks such as political and economic instability,
currency fluctuations and less stringent regulatory standards. For a more
complete discussion of risk, please turn to "The risks of investing in High
Yield 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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking a fixed-income investment that offers a combination of
total return with high current income.

o Investors who want a total return-oriented income investment as a
diversification tool for long-term, equity-oriented portfolios.

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.

How has High Yield Series performed?

This bar chart and table can help you evaluate the risks of investing in High
Yield Series. We show how returns for the Standard Class of High Yield 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 applicable
voluntary expense caps. The returns would be lower without the voluntary caps.
Moreover, the performance presented does not reflect any separate account fees,
which would reduce the returns. On May 1, 2000, the Series' name was changed
from Delchester Series to High Yield Series and the Series' investment objective
changed from high current income to total return and, as a secondary objective,
high current income.

As of March 31, 2000, the Standard Class of High Yield Series had a year-to-date
return of -5.12%. During the periods illustrated in this bar chart, the Class'
highest quarterly return was 15.95% for the quarter ended March 31, 1991 and its
lowest quarterly return was -7.20% for the quarter ended September 30, 1998.

Year-by-year total return
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-7.13% 37.54% 13.44% 16.36% -2.87% 15.50% 12.79% 13.63% -1.83% -2.64%
</TABLE>
<PAGE>

Average annual returns for periods ending 12/31/99

High Yield Salomon Smith
Series Barney Cash Pay
Standard Class High-Yield Index
-------------- ----------------

1 year -2.64% 0.84%
5 years 7.19% 9.49%
10 years 8.77% 10.46%

The Series returns are compared to the performance of the Salomon Smith Barney
Cash Pay High-Yield Index. The Salomon Smith Barney Cash Pay High-Yield Index
includes a mix of non-investment grade corporate bonds that pay cash interest,
it excludes both corporate bonds that pay deferred-interest and bankrupt bonds.
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.

13
<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
foreign equity securities that provide the potential for capital appreciation
and income. At least 65% of the Series' total assets will be invested in equity
securities of issuers from at least three foreign countries. An issuer is
considered to be from the country where it is located, where the majority of its
assets are located or where it generates the majority of its operating income.

In selecting investments for the Series,

o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.

o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine
whether a particular currency is overvalued or undervalued by comparing the
amount of goods and services that a dollar will buy in the United States to
the amount of foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less, the foreign currency
may be overvalued, and when the dollar buys more, the foreign currency may be
undervalued.

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 currency valuations, political
instability, economic instability, and lax accounting and regulatory standards.
For a more complete discussion of risk, please turn to "The risks of investing
in International Equity 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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking for a portfolio of equity securities from foreign
countries.

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
securities.

o Investors looking for an investment that provides a high level of income.

14
<PAGE>

International Equity Series (continued)

How has International Equity Series performed?

This bar chart and table can help you evaluate the risks of investing in
International Equity Series. We show how returns for the Standard Class of
International Equity Series have varied over the past seven calendar years, as
well as average annual returns for one and five years and since inception. The
Series' past performance does not necessarily indicate how it will perform in
the future. The returns reflect applicable voluntary expense caps. The returns
would be lower without the voluntary caps. Moreover, the performance presented
does not reflect any separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of International Equity Series had a
year-to-date return of -5.52%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 14.44% for the quarter ended December
31, 1998 and its lowest quarterly return was -14.24% for the quarter ended
September 30, 1998.
Year-by-year total return

1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ----
15.97% 2.57% 13.98% 20.03% 6.60% 10.33% 15.76%

Average annual returns for periods ending 12/31/99

International Equity Morgan Stanley Capital
Series Standard Class International EAFE Index
--------------------- ------------------------

1 year 15.76% 27.30%
5 years 13.24% 13.15%
Since inception (10/29/92) 11.77% 14.90%

The Series returns are compared to the performance of the Morgan Stanley Capital
International EAFE (Europe, Australia, Far East) Index. Morgan Stanley Capital
International EAFE (Europe, Australia, Far East) Index is an international index
including stocks traded on 20 exchanges in Europe, Australia and the Far East,
weighted by capitalization. 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.

15
<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? REIT Series invests in
securities of companies that are 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 (REITs).

In managing the REIT Series portfolio, we strive to include REITs that represent
a variety of different sectors in the real estate industry. As we consider
individual REITs for the portfolio, we carefully evaluate each REIT's management
team. We generally look for those that:

o retain a substantial portion of the properties' cashflow;

o effectively use capital to expand;

o have a strong ability to raise rents; and,

o can create a franchise value for the REIT.

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. Its investments may tend to
fluctuate more in value than a portfolio that invests in a broader range of
industries. If the Series holds real estate directly as a result of defaults or
receives rental income from its real estate holdings, its tax status as a
regulated investment company could be jeopardized. The Series is also affected
by interest rate changes, particularly if the real estate investment trusts we
are holding use floating rate debt to finance their ongoing operations.

REIT Series is considered "non-diversified" under federal laws and rules that
regulate mutual funds. That means the Series may allocate more of its net assets
to investments in single securities than a "diversified" fund. 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.

For a more complete discussion of risk, please turn to "The risks of investing
in REIT 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.

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 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.

16
<PAGE>

REIT Series (continued)

How has REIT Series performed?

This bar chart and table can help you evaluate the risks of investing in REIT
Series. We show returns for the Standard Class of REIT Series for the past
calendar year, as well as average annual returns for one year and since
inception. The Series' past performance does not necessarily indicate how it
will perform in the future. The returns reflect applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

As of March 31, 2000, the Standard Class of REIT Series had a year-to-date
return of 2.85%. During the periods illustrated in this bar chart, the Class'
highest quarterly return was 11.55% for the quarter ended June 30, 1999 and its
lowest quarterly return was -7.47% for the quarter ended September 30, 1999.

Year-by-year total return

1999
----
-2.61%

Average annual return for periods ending 12/31/99

REIT Series NAREIT Equity
Standard Class REIT Index
-------------- ----------

1 year -2.61% -4.62%
Since inception (5/4/98) -7.00% -11.41%

The Series returns are compared to the performance of the NAREIT Equity REIT
Index. The NAREIT Equity REIT Index is a benchmark of real estate investment
trusts that invest in many types of U.S. property. 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.

17
<PAGE>

Profile: Select Growth Series (formerly Aggressive Growth Series)

What are the Series' goals?
Select 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
based on our analysis of their historic or projected earnings growth rate, price
to earnings ratio and cash flows. 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.

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.

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.

18
<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.

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.

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.

How has Small Cap Value Series performed?

This bar chart and table can help you evaluate the risks of investing in Small
Cap Value Series. We show how returns for the Standard Class of Small Cap Value
Series have varied over the past six calendar years, as well as average annual
returns for one and five years and since inception. The Series' past performance
does not necessarily indicate how it will perform in the future. The returns
reflect applicable voluntary expense caps. The returns would be lower without
the voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Small Cap Value Series had a
year-to-date return of 0.84%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 15.29% for the quarter ended June 30,
1997 and its lowest quarterly return was -16.13% for the quarter ended September
30, 1998.

<PAGE>

Year-by-year total return

1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
0.78% 23.85% 22.55% 32.91% -4.79% -4.86%

Average annual returns for periods ending 12/31/99

Small Cap Value Russell 2000 Russell 2000
Series Standard Class Value Index Index
--------------------- ----------- -----

1 year -4.86% -1.49% 21.26%
5 years 12.81% 13.14% 16.69%
Since inception (12/27/93) 11.07% 10.60% 13.38%

We show both the Russell 2000 Index, the Series' current benchmark index, and
the Russell 2000 Value Index because, going forward, we will use the Russell
2000 Value Index as our benchmark. This Index more closely represents the
universe of stocks we select from - those stocks of small companies whose prices
appear low relative to their underlying value or future potential. Russell 2000
Value Index measures the performance of those Russell 2000 companies that have
lower price-to-book ratios and lower forecasted growth values. The Russell 2000
Index measures the performance of the 2000 smallest companies in the Russell
3000 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.

19
<PAGE>

Profile: Social Awareness Series

What are the Series' goals?
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 excludes 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; and

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 turn to "The risks of investing in
Social Awareness 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.

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.

20
<PAGE>

Social Awareness Series (continued)

How has Social Awareness Series performed?

This bar chart and table can help you evaluate the risks of investing in Social
Awareness Series. We show how returns for the Standard Class of Social Awareness
Series have varied over the past two calendar years, as well as average annual
returns for one year and since inception. The Series' past performance does not
necessarily indicate how it will perform in the future. The returns reflect
applicable voluntary expense caps. The returns would be lower without the
voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Social Awareness Series had a
year-to-date return of 4.60%. During the periods illustrated in this bar chart,
the Class' highest return was 21.45% for the quarter ended December 31, 1998 and
its lowest quarterly return was -17.21% for the quarter ended September 30,
1998.

Year-by-year total return

1998 1999
---- ----
15.45% 12.91%

Average annual returns for periods ending 12/31/99

Social Awareness S&P 500
Series Composite Stock
Standard Class Price Index
-------------- -----------

1 year 12.91% 21.03%
Since Inception (5/1/97) 21.27% 25.50%

<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 the High-Yield Sector, consisting of high-yielding, higher risk,
lower-rated or unrated fixed-income securities that we believe to be
similarly rated issued by U.S. companies. (These involve higher risks and
are commonly known as junk bonds).

o the Investment Grade Sector, consisting of investment grade debt
obligations of U.S. companies and those issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or by U.S. companies.

o the 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 sectors 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.

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 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. In particular, high-yield bonds are rated below investment
grade and are subject to a higher risk that issuers will be unable to make
interest or principal payments, particularly under adverse economic conditions.
Foreign investing involves risks related to currency valuations, political
instability, economic instability or lax accounting and regulatory standards.
For a more complete discussion of risk, please turn to "The risks of investing
in Strategic Income 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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking for an investment that offers professional allocation
among key types of fixed-income securities.

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>

Strategic Income Series (continued)

How has Strategic Income Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in
Strategic Income Series. We show how returns for the Standard Class of Strategic
Income Series have varied over the past two calendar years, as well as average
annual returns for one year and since inception. The Series' past performance
does not necessarily indicate how it will perform in the future. The returns
reflect applicable voluntary expense caps. The returns would be lower without
the voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Strategic Income Series had a
year-to-date return of -2.40%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 2.05% for the quarter ended March 31,
1998 and its lowest quarterly return was -2.59% for the quarter ended June 30,
1999.

[BAR CHART]

Year-by-year total return

1998 1999
- ---- ----
2.63% -3.25%

Average annual returns for periods ending 12/31/99

Strategic Income Lehman Brothers
Series Aggregate Bond
Standard Class Index

1 year -3.29% -0.82%
Since Inception (5/1/97) 1.99% 6.10%

The Series returns are compared to the performance of the Lehman Brothers
Aggregate Bond Index. Lehman Brothers Aggregate Bond Index is an index that
measures the performance of about 5,500 publicly traded bonds including U.S.
government, mortgage-backed, corporate and Yankee bonds. 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.

<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 or emerging companies that we believe are responsive
to changes within the marketplace and which we believe have the fundamental
characteristics to support continued growth.

The Fund uses a bottom-up approach to stock selection that seeks market leaders,
strong product cycles, innovative concepts and industry trends. We look at
price-to-earnings ratios, estimated growth rates, market capitalization and
cashflow as we strive to determine how attractive a company is relative to other
companies.

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.

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, growth-oriented 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 risks of investing in Trend
Series. We show how returns for the Standard Class of Trend Series have varied
over the past six calendar years, as well as average annual returns for one and
five years and since inception. The Series' past performance does not
necessarily indicate how it will perform in the future. The returns reflect
applicable voluntary expense caps. The returns would be lower without the
voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

As of March 31, 2000, the Standard Class of Trend Series had a
year-to-date return of 22.27%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 34.16% for the quarter ended December
31, 1999 and its lowest quarterly return was -15.51% for the quarter ended
September 30, 1998.

[BAR CHART]

Year-by-year total return

1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ----
- -0.39% 39.21% 11.00% 21.37% 16.04% 70.45%

Average annual returns for periods ending 12/31/99

Trend Series Russell 2000
Standard Class Growth Index

1 year 70.45% 43.09%
5 years 29.97% 18.99%
Since inception (12/27/93) 24.68% 15.12%

The Series returns are compared to the performance of the Russell 2000 Growth
Index. The Russell 2000 Growth Index measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth
values. 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.

<PAGE>

Profile: U.S. Growth Series

What are the Series' goals?
U.S. Growth Series seeks to maximize capital appreciation. Although the
Series will strive to achieve its investment goal, there is no assurance
that it will.

What are the Series' main investment strategies? We invest primarily in stocks
of companies of all sizes. We look for stocks with low dividend yields, strong
balance sheets and high expected earnings growth rates as compared to other
companies in the same industry. Our strategy is to identify companies whose
earnings are expected to grow faster than the U.S. economy in general. Whether
companies provide dividend income and how much income they provide will not be a
primary factor in the Series' selection decisions.

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 price of Series shares will increase and decrease according to
changes in the value of the Series' investments. This Series will be
particularly affected by changes in stock prices, which tend to fluctuate more
than bond prices. Stock prices may be negatively affected by declines in the
stock market or poor performance in specific industries or companies. Stocks of
companies with high growth expectations may be more susceptible to price
declines if they do not meet those high expectations. For a more complete
discussion of risk, please turn to "The risks of investing in U.S. Growth
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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking for capital growth potential.

o Investors looking for a fund that can be a complement to income-producing
or value-oriented investments.

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>

Information about individual Series

Balanced Series

Our investment strategies

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 common stocks of
companies we believe have:

o reasonably priced equity securities with strong, consistent and predictable
earnings growth rates;

o strong, capable management teams and competitive products or services;

o an attractive debt to capitalization ratio or strong cash flow.

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.
Each bond in the portfolio will typically 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.

Balanced Series uses the same investment strategy as Delaware Balanced Fund, a
separate fund in the Delaware Investments family, although performance may
differ depending on such factors as the size of the funds and the timing of
investments and redemptions.

The Series' investment objective is non-fundamental. This means that the Board
of Trustees may change the objective without obtaining shareholder approval. If
the objective were changed, we would notify shareholders before the change in
the objective became effective.

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.

<PAGE>

Convertible securities: Usually preferred stocks or The Series may invest in convertible securities; however,
corporate bonds that can be exchanged for a set number of we will not invest more than 10% of the net assets of the
shares of common stock at a predetermined price. These Series in convertible securities that are rated below
securities offer higher appreciation potential than investment grade by a nationally recognized statistical
nonconvertible bonds and greater income potential than rating organization (NRSRO) or in securities that are
nonconvertible preferred stocks. unrated but deemed equivalent to non-investment grade.

Mortgage-backed securities: Fixed-income securities that There is no limit on government-related mortgage-backed
represent pools of mortgages, with investors receiving securities or on privately issued mortgage-backed securities
principal and interest payments as the underlying mortgage that are fully collateralized by government 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
instrumentalities, such as the Federal Home Loan Mortgage securities issued by private companies if the securities are
Corporation, Fannie Mae and the Government National Mortgage not collateralized by the U.S. government, or its agencies
Association. Others are issued by private financial or instrumentalities. However, these securities must be
institutions, with some fully collateralized by certificates rated at the time of purchase in one of the four highest
issued or guaranteed by the U.S. government or its agencies categories by an NRSRO such as S&P or Moody's. They must
or instrumentalities. also represent interests in whole-loan mortgages,
multi-family mortgages, commercial mortgages and other
mortgage collateral supported by a first mortgage lien on
real estate. The privately issued securities we invest in
are either CMOs or REMICs (see below).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

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
receivables including home equity, automobile or credit one of the four highest categories by an NRSRO.
loans.

Corporate bonds: Debt obligations issued by a corporation. We focus on bonds rated in one of the four highest
categories by an NRSRO (or, if unrated, deemed equivalent),
with maturities typically between five and 30 years.

American Depositary Receipts (ADRs): Certificates issued by We may invest without limitation in ADRs.
a U.S. bank that represent the bank's 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. ADRs are bought and sold the same
as U.S. securities.

Interest rate swap and index swap agreements: In an interest We may use interest rate swaps to adjust the Series'
rate swap, a series receives payments from another party sensitivity to interest rates, or to hedge against changes
based on a floating interest rate in return for making in interest rates.
payments based on a fixed interest rate. An interest rate
swap can also work in reverse, with a series receiving Index swaps may be used to gain exposure to markets that the
payments based on a fixed interest rate and making payments Series invests in or as a substitute for futures options or
based on a floating interest rate. In an index swap, a forward contracts if such contracts are not directly
series receives gains or incurs losses based on the total available to the Series on favorable terms.
return of an index, in exchange for making fixed or floating
interest rate payments to another party. Interest rate swaps and index swaps will be considered
illiquid securities (see below).

<PAGE>

Balanced Series (continued)

The Series may also invest in other securities including real estate investment
trusts, options, U.S. Treasury securities and foreign securities. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.

Lending securities Balanced Series may lend up to 25% of its assets to qualified
brokers, dealers and institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

Purchasing securities on a when-issued or delayed delivery basis Consistent with
its investment objective, the Series may invest in U.S. government securities
and corporate debt obligations on a when-issued or delayed delivery basis; that
is, paying for securities before delivery or taking delivery at a later date.
These transactions involve commitments to buy a new issue with settlement up to
60 days later. During the time between the commitment and settlement, the Series
does not accrue interest, but the market value of the bonds may fluctuate. This
can result in the Series' share value increasing or decreasing. The Series will
designate cash or securities in amounts sufficient to cover its obligations, and
will value the designated assets daily.

Borrowing from banks Balanced Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. To the extent that it does
so, the Series may be unable to meet its investment objective. The Series will
not borrow money in excess of one-third of the value of its net assets.

Temporary defensive positions For temporary defensive purposes, Balanced Series
may hold a substantial portion of its assets in cash or cash equivalents. To the
extent it holds cash or cash equivalents, the Series may be unable to achieve
its investment objective.

Portfolio turnover The Series modified its investment strategy in April 2000 to
become more growth-oriented. As a result, portfolio turnover may be relatively
higher than in past years, and may exceed 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. High turnover can result in increased transaction costs
and tax liability.

The risks of investing
in Balanced 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. Following are the chief risks you
assume when investing in Balanced Series. Please see the Statement of Additional
Information for further discussion of these risks and other risks not discussed
here.

<PAGE>

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.

In evaluating the use of an index swap, we carefully
consider how market changes could affect the swap and how
that compares to us investing directly in the market the
swap is intended to represent.

Industry and security risk is the risk that the value of We limit the amount of Balanced Series' assets invested in
securities in a particular industry or the value of an any one industry and in any individual security. We also
individual stock or bond will decline because of changing follow a rigorous selection process before choosing
expectations for the performance of that industry or for the securities for the portfolio.
individual company issuing the stock or bond.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Interest rate risk is the risk that securities, particularly We do not try to increase return by predicting and
bonds with longer maturities, will decrease in value if aggressively capitalizing on interest rate moves. Instead,
interest rates rise. we aim to keep the interest rate risk similar to the Lehman
Brothers Aggregate Bond Index.
Swaps may be particularly sensitive to interest rate
changes. Depending on the actual movements of interest rates We will not invest in swaps with maturities of more than two
and how well the portfolio manager anticipates them, a years. Each business day we calculate the amount the Series
series could experience a higher or lower return than must pay for swaps it holds and will segregate cash or other
anticipated. liquid securities to cover that amount.

Foreign risk is the risk that foreign securities may be We typically invest only a small portion of the Series'
adversely affected by political instability (including portfolio in foreign securities. When we do purchase foreign
governmental seizures or nationalization of assets), changes securities, they are often denominated in U.S. dollars. We
in currency exchange rates, foreign economic conditions or also tend to avoid markets where we believe accounting
inadequate regulatory and accounting standards. Foreign principles or the regulatory structure are underdeveloped.
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities. Swap agreements
readily sold within seven days at approximately the price will be treated as illiquid securities, but most swap
that the Series values them. dealers will be willing to repurchase interest rate swaps.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager

The Series is managed by Delaware Management Company. Delaware Management
Company makes investment decisions for the Series, manages the Series' business
affairs and provides daily administrative services. For its services to the
Series, the manager was paid 0.63% of average daily net assets for the last
fiscal year.

Portfolio managers

John Jares and Gary A. Reed have primary responsibility for making day-to-day
investment decisions for the Balanced Series.

John Jares, Vice President/Senior Portfolio Manager, holds a BS degree in
finance and an MBA from the University of Colorado. He joined Delaware
Investments in March 2000. Mr. Jares came to Delaware from Berger Funds, where
he served as a portfolio manager and securities analyst specializing in the
consumer and technology sectors. Prior to joining Berger, Mr. Jares was a senior
equity analyst at Founders Asset Management, with responsibility for large
capitalization companies. He began his career at Lipper Analytical Services,
Inc. in 1992. Mr. Jares is a CFA charterholder. He has been managing the
Balanced Series since March 2000.

Gary A. Reed, Vice President/Senior Portfolio Manager, 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 Balanced
Series' senior portfolio manager for fixed-income since 1989.

29
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Balanced Series
(formerly Delaware Balanced Series)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The financial highlights table Year Ended 12/31
is intended to help you 1999 1998 1997 1996 1995
understand the Series' -----------------------------------------------------------------------------------------------
financial performance. The Net asset value, beginning of year $20.040 $19.050 $16.640 $15.500 $12.680
total returns in the table
represent the rate that an Income (loss) from investment operations
investor would have earned or
lost on an investment in the Net investment income 0.408 0.349 0.435 0.530 0.509
Series (assuming reinvestment
of all dividends and Net realized and unrealized gain (loss)
distributions). All "per on investments (1.958) 2.831 3.575 1.765 2.761
share" information reflects -------- -------- -------- ------- -------
financial results for a single Total from investment operations (1.550) 3.180 4.010 2.295 3.270
Series share. This information -------- -------- -------- ------- -------
has been audited by Ernst & Less dividends and distributions
Young LLP, whose report, along
with the Series' financial Dividends from net investment income (0.380) (0.420) (0.530) (0.500) (0.450)
statements, is included in the
Series' annual report, which Distributions from net realized
is available upon request by gain on investments (0.770) (1.770) (1.070) (0.655) none
calling 800.523.1918. -------- -------- -------- ------- -------
Total dividends and distributions (1.150) (2.190) (1.600) (1.155) (0.450)
-------- -------- -------- ------- -------
Net asset value, end of year $17.340 $20.040 $19.050 $16.640 $15.500
======== ======== ======== ======= =======
Total return(1) (7.85%) 18.62% 26.40% 15.91% 26.58%

Ratios and supplemental data

Net assets, end of period (000 omitted) $172,002 $201,856 $127,675 $75,402 $63,215

Ratio of expenses to average net assets 0.74% 0.70% 0.67% 0.68% 0.69%

Ratio of net investment income to average
net assets 2.17% 2.20% 2.85% 3.56% 3.75%

Portfolio turnover 107% 94% 67% 92% 106%
-----------------------------------------------------------------------------------------------
(1) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for all
periods shown.
</TABLE>

30
<PAGE>

Capital Reserves Series

Our investment strategies

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.

The securities we Fixed-income securities offer the potential for greater
typically invest in income payments than stocks, and also may provide
capital appreciation.

<PAGE>

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.

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

31
<PAGE>
Capital Reserves Series (continued)

Corporate debt: Debt obligations issued by a corporation, We focus on corporate debt with investment grade ratings,
including corporate notes, bonds and other debt securities. that is bonds rated BBB or better by S&P or Baa or better by
Moody's. We may invest in debt that is unrated, if we
believe the quality of the securities is comparable to the
ratings above.

Certificates of deposit and obligations of both U.S. and We may invest in certificates of deposit from banks that
foreign banks: Debt instruments issued by a bank that pay have assets of at least one billion dollars.
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 obligations with We may invest in commercial paper that is rated P-1 or P-2
maturities ranging from 2 to 270 days, issued by companies. by Moody's and/or A-1 or A-2 by S&P.

Interest rate swap agreements: In an interest rate swap, a We may use interest rate swaps to adjust the Series'
series receives payments from another party based on a sensitivity to interest rates by changing its duration, or
floating interest rate in return for making payments based to hedge against changes in interest rates.
on a fixed interest rate. An interest rate swap can also
work in reverse, with a series receiving payments based on a Interest rate swaps will be considered illiquid securities
fixed interest rate and making payments based on a floating (see below).
interest rate.

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

The Series may also enter into options and purchase depositary receipts. 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 institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

Borrowing from banks Capital Reserves Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. It
will not borrow money in excess of one-third of the value of its net assets.

Portfolio turnover We anticipate that Capital Reserves Series' annual portfolio
turnover will be greater 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. High turnover can result in increased transaction costs and tax liability.

32
<PAGE>

Industry and security risk is the risk that the value of We diversify the Series' portfolio. We also follow a
securities in a particular industry or the value of an rigorous selection process before choosing securities for
individual stock or bond will decline because of changing the portfolio.
expectations for the performance of that industry or for the
individual company issuing the stock or bond.

Swaps may be particularly sensitive to interest rate We will not invest in interest rate swaps with maturities of
changes. Depending on the actual movements of interest rates more than two years. Each business day we calculate the
and how well the portfolio manager anticipates them, a amount the Series must pay for swaps it holds and will
series could experience a higher or lower return than segregate cash or other liquid securities to cover that
anticipated. amount.

Credit risk is the risk that there is the possibility that a We may hold securities rated in the fourth category of
bond's issuer (or an entity that insures the bond) will be investment grade; however, we carefully evaluate their
unable to make timely payments of interest and principal. creditworthiness before purchasing the security.

Debt securities rated in the fourth category of investment If the rating of a corporate debt security held by the
grade (e.g., BBB by S&P or Baa by Moody's) may have Series falls below the fourth rating grade or if we
speculative characteristics. Changes in economic conditions determine that an unrated security is no longer of
or other circumstances are more likely to affect issuers comparable quality, we will dispose of the security as soon
ability to make principal and interest payments. as practical, unless we think that would be detrimental in
light of market conditions.

Prepayment risk is the risk that homeowners will prepay We take into consideration the likelihood of prepayment when
mortgages during periods of low interest rates, forcing an we select mortgages. We may look for mortgage securities
investor to reinvest their money at interest rates that that have characteristics that make them less likely to be
might be lower than those on the prepaid mortgage. prepaid, such as low outstanding loan balance or
below-market interest rates.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities. Swap agreements
readily sold within seven days at approximately the price will be treated as illiquid securities, but most swap
that a series values them. dealers will be willing to repurchase interest rate swaps.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

33
<PAGE>

Capital Reserves Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. For its
services to the Series, the manager was paid 0.53% of
average daily net assets for the last fiscal year.

Portfolio manager Gary A. Reed has primary responsibility for making
day-to-day investment decisions for the Capital
Reserves Series.

Gary A. Reed, Vice President/Senior Portfolio Manager,
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.

<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Capital Reserves Series
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Year Ended 12/31
highlights table 1999 1998 1997 1996 1995
is intended to help you ----------------------------------------------------------------------------------------------
understand the Series' Net asset value, beginning of year $9.880 $9.790 $9.690 $9.930 $9.300
financial performance.
The total returns in the Income (loss) from investment operations
table represent the rate
that an investor would Net investment income 0.546 0.556 0.613 0.623 0.643
have earned or lost on
an investment in the Net realized and unrealized gain (loss)
Series (assuming on investments (0.520) 0.090 0.100 (0.240) 0.630
reinvestment of all -------- -------- -------- ------- -------
dividends and Total from investment operations 0.026 0.646 0.713 0.383 1.273
distributions). All "per -------- -------- -------- ------- -------
share" information Less dividends
reflects financial results
for a single Series Dividends from net investment income (0.546) (0.556) (0.613) (0.623) (0.643
share. This information
has been audited Total dividends (0.546) (0.556) (0.613) (0.623) (0.643
by Ernst & Young LLP, -------- -------- -------- ------- -------
whose report, along Net asset value, end of year $9.360 $9.880 $9.790 $9.690 $9.930
with the Series' ======== ======== ======== ======= =======
financial statements, is Total return(1) 0.28% 6.78% 7.60% 4.05% 14.08%
included in the Series'
annual report, which is Ratios and supplemental data
available upon request
by calling Net assets, end of period (000 omitted) $36,701 $41,711 $29,177 $27,768 $27,935
800.523.1918.
Ratio of expenses to average net assets 0.79% 0.79% 0.75% 0.72% 0.71%

Ratio of net investment income to average
net assets 5.68% 5.62% 6.31% 6.43% 6.64%

Portfolio turnover 129% 166% 120% 122% 145%
----------------------------------------------------------------------------------------------
(1) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for al
periods shown.
</TABLE>
35

<PAGE>

Cash Reserve Series

Our investment strategies

We invest 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.

We maintain an average maturity of 90 days or less. Also, we do not purchase any
securities with an effective remaining maturity of more than 397 days
(approximately 13 months). We may shorten or lengthen the Series' average
maturity based on our analysis of interest rate trends.

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.

Cash Reserve Series uses the same investment strategy as Delaware Cash Reserve
Fund, a separate fund in the Delaware Investments family, although performance
may differ depending on such factors as the size of the funds and the timing of
investments and redemptions.

The securities we
typically invest in

<PAGE>

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 and other corporate obligations: We may invest in commercial paper and other corporate
Short-term debt obligations with maturities ranging from 2 obligations rated in one of the two highest ratings
to 270 days, issued by companies. categories by at least two NRSROs. The purchase of a
security that does not possess those ratings must be
approved by the Board of Trustees in accordance with the
maturity, quality and diversification conditions with which
taxable money markets must comply. The Series will not
invest more than 5% of its total assets in securities rated
in the second highest category by an NRSRO.

Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Series, and a seller of securities in which the seller investment for the Series' cash position. In order to enter
agrees to buy the securities back within a specified time at into these repurchase agreements, the Series must have
the same price the buyer paid for them, plus an amount equal collateral of at least 102% of the repurchase price. The
to an agreed upon interest rate. Repurchase agreements are Series will only enter into repurchase agreements in which
often viewed as equivalent to cash. the collateral is U.S. government securities.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Series may also invest in asset-backed securities. Please see the Statement
of Additional Information for additional descriptions on these securities as
well as those listed in the table.

<PAGE>

Borrowing from banks Cash Reserve Series may borrow money as a temporary measure
for extraordinary purposes or to facilitate redemptions. To the extent that it
does so, the Series may be unable to meet its investment objective. The Series
will not borrow money in excess of one-third of the value of its net assets.

The risks of investing Investing in any mutual fund involves risk,
in Cash Reserve including the risk that you may receive little or
Series 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. 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 other risks not discussed here.

Credit risk is the risk that there is the possibility that a Cash Reserve Series holds only high quality short-term
bond's issuer (or an entity that insures the bond) will be securities. Therefore it is generally not subject to
unable to make timely payments of interest and principal. significant credit risk.

We limit our investments to those which the Board of
Trustees 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.

Inflation risk is the risk that the return from your Cash Reserve Series is designed for short-term investment
investments will be less than the increase in the cost of goals and therefore may not outpace inflation over longer
living due to inflation, thus preventing you from reaching time periods. For this reason, Cash Reserve Series is not
your financial goals. recommended as a primary investment for people with
long-term goals.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. For its
services to the Series, the manager was paid 0.46% of
average daily net assets for the last fiscal year.

37
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Cash Reserve Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Year Ended 12/31
highlights table 1999 1998 1997 1996 1995
is intended to help you ----------------------------------------------------------------------------------------------
understand the Series' Net asset value, beginning of year $10.000 $10.000 $10.000 $10.000 $10.000
financial performance. Income from investment operations
The total returns in the Net investment income 0.471 0.497 0.497 0.482 0.535
table represent the rate -------- -------- -------- ------- -------
that an investor would Total from investment operations 0.471 0.497 0.497 0.482 0.535
have earned or lost on -------- -------- -------- ------- -------
an investment in the Less dividends
Series (assuming
reinvestment of all Dividends from net investment income (0.471) (0.497) (0.497) (0.482) (0.535)
dividends and -------- -------- -------- ------- -------
distributions). All "per Total dividends (0.471) (0.497) (0.497) (0.482) (0.535)
share" information -------- -------- -------- ------- -------
reflects financial results Net asset value, end of year $10.000 $10.000 $10.000 $10.000 $10.000
for a single Series ======== ======== ======== ======= =======
share. This information Total return(1) 4.81% 5.08% 5.10% 4.93% 5.48%
has been audited
by Ernst & Young LLP, Ratios and supplemental data
whose report, along
with the Series' Net assets, end of period (000 omitted) $57,421 $42,893 $30,711 $26,479 $16,338
financial statements, is
included in the Series' Ratio of expenses to average net assets 0.56% 0.59% 0.64% 0.61% 0.62%
annual report, which is
available upon request Ratio of net investment income to average
by calling net assets 4.72% 4.96% 4.98% 4.82% 5.35%
800.523.1918. ----------------------------------------------------------------------------------------------
(1) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for all
periods shown.
</TABLE>

<PAGE>

Convertible Securities Series
Our investment strategies

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. Convertible securities are
typically preferred stocks or corporate bonds that can be exchanged for a set
number of shares of common stock at a predetermined price. They also pay
dividends or interest. 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.

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.

The securities we Stocks offer investors the potential for capital
typically invest in 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.

<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Reserves Series
------------------------------------------------------------------
<S> <C>
Convertible securities: Usually preferred stocks, corporate Under normal conditions, the Series intends to invest at
bonds or equity-linked securities that can be exchanged for least 65% of its total assets in convertible securities,
a set number of shares of common stock at a predetermined which may include privately placed convertible securities.
price. These securities typically offer higher appreciation
potential than nonconvertible bonds and greater income We will invest in convertible debt securities without regard
potential than nonconvertible preferred stocks. to rating categories. To the extent that convertible debt
securities we hold are not investment grade or are not
Convertible bonds are often rated below investment grade, rated, there may be a greater risk as to the timely payment
that is, not rated within the four highest categories by S&P of interest and principal.
and Moody's. Debt securities rated below investment grade
are often referred to as "high-yield bonds" or "junk bonds," If a convertible security held by the Series is called for
although these terms are not generally used in reference to redemption, the Series will be required to redeem the
convertible debt securities. security, convert it into the underlying common stock or
sell it to a third party.
A convertible bond 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 The 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
maturity or a specified date when the securities begin these bonds are generally more volatile than the market
paying current interest. Therefore, they are issued and prices of securities that pay interest periodically and are
traded at a discount from their face amounts or par value. likely to react to changes in interest rates to a greater
Payment-in-kind bonds pay interest or dividends in the form degree than interest-paying bonds having similar maturities
of additional bonds or preferred stock. and credit quality. They may have certain tax consequences
which, under certain conditions, could be adverse to the
Series.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Convertible Securities Series (continued)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------------------------------------------------------------------------
Convertible Securities Series
------------------------------------------------------------------
<S> <C>
Private placements: Private placement securities are What portion of the Series' portfolio is invested in
securities which have not been registered with the SEC and convertible securities purchased in private placements
are usually only sold to large institutional investors. An depends upon the relative attractiveness of those securities
issuer is often willing to provide more attractive features compared to convertible securities that are publicly
in securities issued privately because it has avoided the offered. Ordinarily, the Series expects that 50% of its
expense and delay involved in a public offering. Many portfolio may be invested in convertible securities
private placement securities are subject to the SEC's Rule purchased in private placements, but the percentage may be
144A, which permits them to be freely traded among qualified substantially greater or less than 50%, depending upon
institutional buyers. These securities may therefore have a prevailing market conditions.
liquid secondary market.
We anticipate that substantially all of the private
placements we purchase will be subject to Rule 144A. Subject
to procedures approved by the Series' Board of Trustees, we
may treat Rule 144A securities as liquid and therefore not
subject to the 15% limitation on illiquid securities
described below.

Repurchase agreements:: An agreement between a buyer, such Typically, we use repurchase agreements as a short-term
as the Series, and a seller of securities in which the investment for the Series' cash position. In order to enter
seller agrees to buy the securities back within a specified into these repurchase agreements, the Series must have
time at the same price the buyer paid for them, plus an collateral of at least 102% of the repurchase price. The
amount equal to an agreed upon interest rate. Repurchase Series will only enter into repurchase agreements in which
agreements are often viewed as equivalent to cash. the collateral is U.S. government securities.

Foreign securities, Eurodollar convertible securities and We may use foreign securities, Eurodollar convertible
depositary receipts or notes: Securities of foreign securities and depositary receipts to add diversification to
entities, including issuers located in emerging markets, the portfolio by permitting the Series to make investments
issued directly or, in the case of depositary receipts, outside the U.S. market.
through a bank. Such foreign securities may be traded on a
foreign exchange, or they may be in the form of depositary
receipts or notes, such as American Depositary Receipts
(ADRs), American Depositary Notes (ADNs), European
Depositary Receipts (EDRs), European Depositary Notes
(EDNs), Global Depositary Receipts (GDRs) or Global
Depositary Notes (GDNs). Depositary receipts and notes
represent a bank's holding of a stated number of shares of a
foreign corporation, which entitles the holder to all
dividends and capital gains earned by the underlying foreign
shares.

The Series may also invest in Eurodollar convertible
securities. Eurodollar convertible securities are
fixed-income securities that are denominated in U.S. dollars
and which are convertible into equity securities of that
issuer. These Eurodollar securities are payable outside of
the United States.

Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid
market, and cannot be easily sold within seven days at securities, including repurchase agreements with maturities
approximately the price that a series has valued them. of over seven days.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

The Series may also invest in other securities including preferred and common
stock, warrants, U.S. government securities, non-convertible fixed-income
securities, options, futures contracts and options on futures contracts and
money market securities. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the
table.

Lending securities Convertible Securities Series may lend up to 25% of its
assets to qualified brokers, dealers and institutional investors for their use
in security transactions. These transactions will generate additional income for
the Series.

Temporary defensive positions For temporary defensive purposes, Convertible
Securities Series may hold all or a substantial portion of its assets in cash or
cash equivalents, U.S. government securities and investment grade corporate
bonds. To the extent it holds these securities, the Series may be unable to
achieve its investment objective.

Borrowing from banks Convertible Securities Series may borrow money as a
temporary measure for extraordinary purposes or to facilitate redemptions. To
the extent that it does so, the Series may be unable to meet its investment
objective. The 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 owns or has the right to obtain
securities identical to those sold short, at no added cost.

Portfolio turnover We anticipate that Convertible Securities 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>

Convertible Securities Series (continued)

The risks of investing Investing in any mutual fund involves risk,
in Convertible including the risk that you may receive little or
Securities Series 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. Following are the
chief risks you assume when investing in
Convertible Securities Series. Please see the
Statement of Additional Information for further
discussion of these risks and other risks not
discussed here.

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 This risk may be reduced because of the ability to convert
entity 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 potential
particularly bonds with longer maturities, will decrease in impact on the Series. Though convertible securities may be
value if interest rates rise. sensitive to interest rate movements, an individual
security's link to the underlying common stock may reduce
that sensitivity.

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that a series values them.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. For its
services to the Series, the manager was paid 0.75% of
average daily net assets for the last fiscal year.

Portfolio manager Damon Andres has primary responsibility for making
day-to-day investment decisions for the Convertible
Securities Series.

Damon Andres, Vice President/Portfolio Manager, 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. Mr. Andres has been managing the
Convertible Securities Series since February 1999.

<PAGE>

Financial highlights

Convertible Securities Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Period 5/1/97(1)
The financial Year Ended 12/31 through
highlights table is 1999 1998 12/31/97
intended to help you -------------------------------------------------------------------------------------------------------
understand the Series' Net asset value, beginning of period $11.160 $11.660 $10.000
financial performance.
The total returns in the Income (loss) from investment operations
table represent the rate
that an investor would Net investment income 0.493 0.386 0.318
have earned or lost on
an investment in the Net realized and unrealized gain (loss) on investments 0.247 (0.511) 1.342
Series (assuming ------- ------- -------
reinvestment of all Total from investment operations 0.740 (0.125) 1.660
dividends and ------- ------- -------
distributions). All "per Less dividends and distributions
share" information
reflects financial results Dividends from net investment income (0.410) (0.305) none
for a single Series
share. This information Distributions from net realized gain on investments none (0.070) none
has been audited by ------- ------- -------
Ernst & Young LLP, Total dividends and distributions (0.410) (0.375) none
whose report, along ------- ------- -------
with the Series' Net asset value, end of period $11.490 $11.160 $11.660
financial statements, is ======= ======= =======
included in the Series' Total return(2) 6.97% (1.17%) 16.60%(3)
annual report, which is
available upon request Ratios and supplemental data
by calling
800.523.1918. Net assets, end of period (000 omitted) $9,637 $8,133 $3,921

Ratio of expenses to average net assets 0.83% 0.82% 0.80%

Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.83% 0.82% 2.30%

Ratio of net investment income to average net assets 4.64% 4.78% 5.68%

Ratio of net investment income to average net assets
prior to expense limitation and expenses
paid indirectly 4.64% 4.78% 4.18%

Portfolio turnover 35% 77% 209%
-------------------------------------------------------------------------------------------------------

(1) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.

(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.

(3) Total return reflects expense limitations in effect for the Series.
</TABLE>

<PAGE>

Devon Series
Our investment strategies

Devon Series is a total return fund but it 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 fluctuations 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.

Devon Series uses the same investment strategy as Delaware Devon Fund, a
separate fund in the Delaware Investments family, although performance may
differ depending on such factors as the size of the funds and the timing of
investments and redemptions.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

Convertible securities: Usually preferred stocks or Devon Series may invest in convertible securities; however, we will
corporate bonds that can be exchanged for a set number of not invest more than 5% of net assets in convertible debt
shares of common stock at a predetermined price. These securities that are rated below investment grade by an NRSRO or in
securities offer higher appreciation potential than securities that are unrated but deemed equivalent to non-investment
nonconvertible bonds and greater income potential than grade.
nonconvertible preferred stocks.

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 Series' cash position. In order to enter into these
agrees to buy the securities back within a specified time at repurchase agreements, the Series must have collateral of at least
the same price the buyer paid for them, plus an amount equal 102% of the repurchase price. The Series will only enter into
to an agreed upon interest rate. Repurchase agreements are repurchase agreements in which the collateral is U.S. government
often viewed as equivalent to cash. securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Devon Series (continued)

Restricted and illiquid securities: Restricted securities We may invest up to 10% of net assets in illiquid securities. For
are privately placed securities whose resale is restricted this Series, the 10% limit includes restricted securities such as
under securities law. privately placed securities that are eligible for resale only among
certain institutional buyers without registration, which are
Illiquid securities are securities that do not have a ready commonly known as "Rule 144A Securities" and repurchase agreements
market, and cannot be easily sold within seven days at with maturities of over seven days.
approximately the price that a 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, fixed-income
securities, futures contracts and options. The Series may also invest directly
in foreign securities. 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 institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

Borrowing from banks Devon Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. To the extent that it does
so, the Series may be unable to meet its investment objective. The Series will
not borrow money in excess of one-third of the value of its net assets.

Temporary defensive positions For temporary defensive purposes, Devon Series may
hold a substantial portion of its assets in cash or cash equivalents. To the
extent it holds cash or cash equivalents, the Series may be unable to achieve
its investment objective.

Portfolio turnover We anticipate that Devon Series' annual portfolio turnover
will be greater 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.
High turnover can result in increased transaction costs and tax liability.

<PAGE>

Industry and security risk is the risk that the value of We limit the amount of Devon Series' assets invested in any one
securities in a particular industry or the value of an industry and in any individual security. We also follow a rigorous
individual stock or bond will decline because of changing selection process before choosing securities for the portfolio.
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 be We typically invest only a small portion of Devon Series' portfolio
adversely affected by political instability (including in foreign securities. When we do purchase foreign securities, they
governmental seizures or nationalization of assets), changes are often denominated in U.S. dollars. We also tend to avoid
in currency exchange rates, foreign economic conditions or markets where we believe accounting principles or the regulatory
inadequate regulatory and accounting standards. Foreign structure are underdeveloped.
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

47
<PAGE>

Devon Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.63% of average
daily net assets for the last fiscal year.

Portfolio managers Frank X. Morris has primary responsibility for making
day-to-day investment decisions for the Devon Series. In
making investment decisions for the Series, Mr. Morris
regularly consults with Michael S. Morris.

Frank X. Morris, Vice President/Senior Portfolio
Manager, holds a bachelor's degree in finance from
Providence College in Rhode Island and an MBA from
Widener University in Pennsylvania. Mr. Morris has been
managing institutional equity portfolios at Delaware
Investments since 1997. He has 17 years of investment
management experience. He came to Delaware Investments
from PNC Asset Management where he served as a
securities analyst from 1983 to 1991 and portfolio
manager from 1991 to 1994. He was subsequently named
Director of Equity Research at PNC. He is a past
president of the Philadelphia Society of Financial
Analysts. Mr. Morris has been a member of Devon Series'
management team since March 1999.

Michael S. Morris, Assistant Vice President/Equity
Analyst, holds a BS from Indiana University with a major
in finance. Previously he served as equity analyst at
Walnut Asset Management where he covered a variety of
industries. He has also worked at Pilgrim Baxter as a
Senior Research Analyst covering financials and began
his career at The State Teachers Retirement System of
Ohio. Mr. Morris is a CFA charterholder.

<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Devon Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Period 5/1/97(1)
The financial Year Ended 12/31 through
highlights table is 1999 1998 12/31/97
intended to help you -------------------------------------------------------------------------------------------------------
understand the Series' Net asset value, beginning of period $15.440 $12.730 $10.000
financial performance.
The total returns in the Income (loss) from investment operations
table represent the rate
that an investor would Net investment income 0.113 0.106 0.080
have earned or lost on
an investment in the Net realized and unrealized gain (loss) on investments (1.669) 2.889 2.650
Series (assuming ------- ------- -------
reinvestment of all Total from investment operations (1.556) 2.995 2.730
dividends and ------- ------- -------
distributions). All "per Less dividends and distributions
share" information
reflects financial results Dividends from net investment income (0.090) (0.080) none
for a single Series
share. This information Distributions from net realized gain on investments (0.174) (0.205) none
has been audited by ------- ------- -------
Ernst & Young LLP, Total dividends and distributions (0.264) (0.285) none
whose report, along ------- ------- -------
with the Series' Net asset value, end of period $13.620 $15.440 $12.730
financial statements, is ======= ======= =======
included in the Series' Total return(2) (10.13%) 24.05% 27.30%(3)
annual report, which is
available upon request Ratios and supplemental data
by calling
800.523.1918. Net assets, end of period (000 omitted) $77,929 $68,714 $16,653

Ratio of expenses to average net assets 0.75% 0.66% 0.80%

Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.75% 0.66% 0.91%

Ratio of net investment income to average net assets 0.90% 1.30% 2.01%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.90% 1.30% 1.90%

Portfolio turnover 101% 34% 80%
-------------------------------------------------------------------------------------------------------

(1) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.

(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.

(3) Total return reflects expense limitations in effect for the Series.

</TABLE>

<PAGE>

Emerging Markets Series
Our investment strategies

Emerging Markets Series seeks long-term capital appreciation. The Series may
invest in a broad range of equity securities, including common stocks. Our
primary emphasis will be on the stocks of companies located in or having their
principal business in an emerging country.

We consider an "emerging country" to be any country that is:

o generally recognized to be an emerging or developing country by the
international financial community, including the World Bank and the
International Finance Corporation;

o any country that is classified by the United Nations as developing; or

o any country that is included in the International Finance Corporation Free
Index or the Morgan Stanley Capital International Emerging Markets Free Index.

Developing or emerging countries include almost every nation in the world except
the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western and Northern Europe. A representative list of the countries
where we may invest includes: 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. We may invest in other countries, particularly
as markets in other emerging countries develop. More than 25% of the Series'
total assets may be invested in the securities of issuers located in the same
country.

In deciding whether a company is from an emerging country, we evaluate publicly
available information and question individual companies to determine if the
company meets one of the following criteria:

o the principal trading market for the company's securities is in a country that
is emerging;

o the company generates 50% or more of its annual revenue from operations in
emerging countries, even though the company's securities are traded in an
established market or in a combination of emerging and established markets;

<PAGE>

o the company is organized under the laws of an emerging market country and has
a principal office in an emerging country.

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. 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. We believe investment
opportunities may result from an evolving long-term trend favoring
market-oriented economies, a trend that may particularly benefit countries
having developing markets.

When we evaluate individual companies we strive to apply a value-oriented
selection process, similar to what we use for International Equity Series.
However, in emerging markets, more of the return is expected to come from
capital appreciation rather than income. Thus, there is greater emphasis on the
manager's assessment of the company's future growth potential.

The Series may invest up to 35% of its net assets in high-yield, high risk
foreign fixed-income securities. This typically includes so-called Brady Bonds.

Emerging Markets Series uses the same investment strategy as Delaware Emerging
Markets Fund, a separate fund in the Delaware Investments family, although
performance may differ depending on such factors as the size of the funds and
the timing of investments and redemptions.

<PAGE>

Corporate bonds: Debt obligations issued by U.S. or foreign Emerging Markets Series may invest in corporate obligations issued
corporations. by emerging country companies. These bonds may be high risk,
fixed-income securities.

Foreign government securities: Debt obligations issued by a We may invest a portion of Emerging Markets Series' assets in
government other than the United States or by an agency, foreign governmental securities issued by emerging or developing
instrumentality or political subdivision of such countries, which may be lower rated, including securities rated
governments. below investment grade.

Investment company securities: In some countries, The Series may hold open-end and closed-end investment company
investments by U.S. mutual funds are generally made by securities if we believe the country offers good investment
purchasing shares of investment companies that in turn opportunities. These investments involve an indirect payment of a
invest in the securities of such countries. portion of the expenses of the other investment companies,
including their advisory fees.

Foreign currency transactions: A forward foreign currency The Series may invest in securities issued in any currency and hold
exchange contract involves an obligation to purchase or sell foreign currency. Securities of issuers within a given country may
a specific currency on a fixed future date at a price that be denominated in the currency of another country or in
is set at the time of the contract. The future date may be multinational currency units such as the Euro.
any number of days from the date of the contract as agreed
by the parties involved. Although the Series values its assets daily in U.S. dollars, it
does not intend to convert its holdings of foreign currencies into
U.S. dollars on a daily basis. The Series will, however, from time
to time, purchase or sell foreign currencies and/or engage in
forward foreign currency exchange transactions. The Series may
conduct its foreign currency transactions on a cash basis at the
rate prevailing in the foreign currency exchange market or through
a forward foreign currency exchange contract or forward contract.

The Series may use forward contracts for defensive hedging purposes
to attempt to protect the value of the Series' current security or
currency holdings. It may also use forward contracts if it has
agreed to sell a security and wants to "lock-in" the price of that
security, in terms of U.S. dollars. Investors should be aware of
the costs of currency conversion. The Series will not use forward
contracts for speculative purposes.

American Depositary Receipts (ADRs), European Depositary The Series may invest in sponsored and unsponsored ADRs, EDRs and
Receipts (EDRs), and Global Depositary Receipts (GDRs): ADRs GDRs, generally focusing on those whose underlying securities are
are receipts issued by a U.S. depositary (usually a U.S. issued by foreign entities.
bank) and EDRs and GDRs are receipts issued by a depositary
outside of the U.S. (usually a non-U.S. bank or trust To determine whether to purchase a security in a foreign market or
company or a foreign branch of a U.S. bank). Depositary through depositary receipts, we evaluate the price levels, the
receipts represent an ownership interest in an underlying transaction costs, taxes and administrative costs involved with
security that is held by the depositary. Generally, the each security to identify the most efficient choice.
holder of the depositary receipt is entitled to all payments
of interest, dividends or capital gains that are made on the
underlying security.

Brady Bonds: These are debt securities issued under the The Series may invest in Brady Bonds. We believe that the economic
framework of the Brady Plan, an initiative for debtor reforms undertaken by countries in connection with the issuance of
nations to restructure their outstanding external Brady Bonds can make the debt of countries that have issued or have
indebtedness (generally, commercial bank debt). Brady Bonds announced plans to issue these bonds a viable opportunity for
tend to be of lower quality and more speculative than investment.
securities of developed country issuers.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

51
<PAGE>

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 Series' cash position. In order to enter into these
agrees to buy the securities back within a specified time at repurchase agreements, the Series must have collateral of at least
the same price the buyer paid for them, plus an amount equal 102% of the repurchase price. The Series may enter into repurchase
to an agreed upon interest rate. Repurchase agreements are agreements in which the collateral is any security in which it may
often viewed as equivalent to cash. invest, but normally uses U.S. government securities as collateral.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including those that
resale is restricted under securities law. are eligible for resale only among certain institutional buyers
without registration which 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.

The Series may also invest in other securities including preferred stocks,
convertible securities, zero coupon bonds, warrants, futures 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 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.

Borrowing from banks Emerging Markets Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. The
Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, Emerging Markets
Series may hold all or a substantial portion of its assets in high quality debt
instruments issued by foreign governments, their agencies, instrumentalities or
political subdivisions, the U.S. government, its agencies or instrumentalities
and which are backed by the full faith and credit of the U.S. government. The
Series may also invest all or a substantial portion of its assets in high
quality debt instruments issued by foreign or U.S. companies. Any corporate debt
obligations will be rated AA or better by S&P, or Aa or better by Moody's or, if
unrated, will be determined to be of comparable quality. To the extent it holds
these securities, the Series may be unable to achieve its investment objective.

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.

<PAGE>

Industry and security risk is the risk that the value of We typically hold a number of different securities in a variety of
securities in a particular industry or the value of an sectors in order to minimize the impact that a poorly performing
individual stock or bond will decline because of changing security would have on the Series. This risk is more significant
expectations for the performance of that industry or for the for the Series, which is a non-diversified fund.
individual company issuing the stock or bond.

Foreign risk is the risk that foreign securities may be We carefully evaluate the overall situations in the countries where
adversely affected by political instability (including we invest in an attempt to reduce these risks. We also tend to
governmental seizures or nationalization of assets), changes avoid markets where we believe accounting principles or the
in currency exchange rates, foreign economic conditions or regulatory structure are too underdeveloped.
inadequate regulatory and accounting standards. Foreign
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

Currency risk is the risk that the value of the Series' The Series may try to hedge its currency risk by purchasing foreign
investments may be negatively affected by changes in foreign currency exchange contracts. If the Series agrees to purchase or
currency exchange rates. Adverse changes in exchange rates sell foreign securities at a pre-set price on a future date, the
may reduce or eliminate any gains produced by investments Series attempts to protect the value of a security it owns from
that are denominated in foreign currencies and may increase future changes in currency rates. If the Series has agreed to
any losses. purchase or sell a security, it may also use foreign currency
exchange contracts to "lock-in" the security's price in terms of
U.S. dollars or another applicable currency. The Series may use
forward currency exchange contracts only for defensive or
protective measures, not to enhance portfolio returns. However,
there is no assurance that such a strategy will be successful.

Another way in which we can protect against this risk is by holding
stocks whose earnings are from exports or priced in U.S. dollars,
so that a devaluation means unchanged U.S. dollar earnings (and
higher local currency earnings).

Small company risk is the risk that prices of smaller The Series may invest in small companies and would be subject to
companies may be more volatile than larger companies because this risk. We typically hold a number of different stocks in order
of limited financial resources or dependence on narrow to reduce the impact that one small company stock would have on the
product lines. Small company risk also comes from lower Series. This risk is more significant for the Series, which is a
liquidity typically associated with small company stocks, non-diversified fund.
which means the price may be affected by poorly executed
trades, even if the underlying business of the company is
unchanged.

Political risk is the risk that countries or the entire We carefully evaluate the political situations in the countries
region where we invest may experience political instability, where we invest and take into account any potential risks before we
which may cause greater fluctuation in the value and select securities for the portfolio. We can also somewhat reduce
liquidity of our investments due to changes in currency political risk by holding a diversified portfolio. However, there
exchange rates, governmental seizures or nationalization of is no way to eliminate political risk when investing
assets. internationally.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

53
<PAGE>

Emerging Markets Series (continued)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Series
-------------------------------------------------------------------
<S> <C>
Emerging markets risk is the possibility that the risks Striving to manage this risk, the portfolio managers carefully
associated with international investing will be greater in screen securities within emerging markets and attempt to consider
emerging markets than in more developed foreign markets material risks associated with an individual company or bond
because, among other things, emerging markets may have less issuer. We cannot eliminate emerging market risk and consequently
stable political and economic environments. encourage shareholders to invest in this Series only if they have a
long-term time horizon, over which the potential of individual
securities is more likely to be realized.

Inefficient market risk is the risk that foreign markets may The Series will attempt to reduce these risks by investing in a
be less liquid, have greater price volatility, less number of different countries, and noting trends in the economy,
regulation and higher transaction costs than U.S. markets. industries and financial markets.

Information risk is the possibility that foreign companies The Series conducts a great deal of fundamental research on the
are subject to different accounting, auditing and financial companies that it invests in rather than relying solely on
reporting standards than U.S. companies. There may be less information available through financial reporting. We believe this
information available about foreign issuers than domestic will help us to better uncover any potential weaknesses in
issuers. Furthermore, regulatory oversight of foreign individual companies.
issuers may be less stringent or less consistently applied
than in the United States.

Non-diversified funds risk: Non-diversified investment The Series is a non-diversified fund as defined by the Investment
companies have the flexibility to invest as much as 50% of Company Act of 1940. Neverless, we typically hold securities from a
their assets in as few as two issuers with no single issuer variety of different issuers representing a number of different
accounting for more than 25% of the portfolio. The remaining countries. We also perform extensive analysis on all securities,
50% of the portfolio must be diversified so that no more particularly those that represent a larger percentage of portfolio
than 5% of a fund's assets is invested in the securities of assets.
a single issuer. Because a non-diversified fund may invest
its assets in fewer issuers, the value of fund shares may
increase or decrease more rapidly than if the fund were
fully diversified.

Foreign government securities risks relate to the ability of The Series attempts to limit this risk by performing credit
a foreign government or government related issuer to make analysis on the issuer of each security purchased. In addition, the
timely payments on its external debt obligations. Series attempts to reduce this risk by limiting the portion of net
assets that may be invested in these securities.

The Series also compares the risk-reward potential of foreign
government securities being considered to that offered by equity
securities to determine whether to allocate assets to equity or
fixed-income investments.

Credit risk of high-yield, high risk fixed-income The Series may invest up to 35% of its net assets in high-yield,
securities: Securities rated lower than BBB by S&P and Baa high risk foreign fixed-income securities.
by Moody's are considered to be of poor standing and
predominantly speculative as to the issuer's ability to We intend to limit our investment in any single lower rated bond,
repay interest and principal. which can help to reduce the effect of an individual default on the
Series. We also intend to limit our overall holdings of bonds in
These bonds are often issued by less creditworthy companies this category. Such limitations may not protect the Series from
or by highly leveraged (indebted) firms, which are generally widespread bond defaults brought about by a sustained economic
less able than more financially stable firms to make downturn or from price declines that might result from changes in
scheduled payments of interest and principal. The risks the quality ratings of individual bonds.
posed by bonds issued under such circumstances are
substantial.

If there were a national credit crisis or an issuer were to
become insolvent, principal values could be adversely
affected.

Transaction costs risk: Costs of buying, selling and holding We strive to monitor transaction costs and to choose an efficient
foreign securities, including brokerage, tax and custody trading strategy for the Series.
costs, may be higher than those involved in domestic
transactions.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Investment manager The Series is managed by Delaware International Advisers
Ltd. Delaware International Advisers makes investment
decisions for the Series, manages the Series' business
affairs and provides daily administrative services. For
its services to the Series, the manager was paid 1.19%
of average daily net assets for the last fiscal year,
reflecting a waiver of fees by the manager.

Portfolio managers Clive A. Gillmore has primary responsibility for making
day-to-day investment decisions for Emerging Markets
Series. In making investment decisions for the Series,
Mr. Gillmore regularly consults with an international
equity team of 14 members, including co-managers, Robert
Akester and Joshua H. Brooks.

Clive A. Gillmore, Director, Deputy Managing Director,
Senior Portfolio Manager of Delaware International
Advisers Ltd., is a graduate of the University of
Warwick. He 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 Advisers in 1990 after eight
years of investment experience. His most recent position
prior to joining Delaware International Advisers 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 Emerging Markets Series
since its inception.

Robert Akester, Senior Portfolio Manager of Delaware
International Advisers Ltd., joined Delaware
International Advisers in 1996. Mr. Akester, who began
his investment career in 1969, was most recently a
Director of Hill Samuel Investment Management 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 H. Brooks, Senior Portfolio Manager of Delaware
International Advisers Ltd., holds a bachelor's degree
from Yale University and holds an MBA from The London
Business School. He began his investment career with
Delaware Investments in 1991. Prior to joining the
investment team in London, he was based in Philadelphia
with responsibilities that included equity market
analysis and acting as liaison with Delaware
International Advisers.

55
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Emerging Markets Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Period 5/1/97(1)
The financial Year Ended 12/31 through
highlights table is 1999 1998 12/31/97
intended to help you -------------------------------------------------------------------------------------------------------
understand the Series' Net asset value, beginning of period $5.810 $8.880 $10.000
financial performance.
The total returns in the Income (loss) from investment operations
table represent the rate
that an investor would Net investment income(2) 0.126 0.171 0.060
have earned or lost on
an investment in the Net realized and unrealized gain (loss) on investments
Series (assuming and foreign currencies 2.597 (2.991) (1.180)
------- ------- -------
reinvestment of all
dividends and Total from investment operations 2.723 (2.820) (1.120)
distributions). All "per ------- ------- -------
share" information Less dividends and distributions
reflects financial results
for a single Series Dividends from net investment income (0.133) (0.030) none
share. This information
has been audited by Distributions from net realized gain on investments none (0.220) none
------- ------- -------
Ernst & Young LLP,
whose report, along Total dividends and distributions (0.133) (0.250) none
------- ------- -------
with the Series'
financial statements, is Net asset value, end of period $8.400 $5.810 $8.880
======= ======= =======
included in the Series'
annual report, which is Total return(3) 48.28% (32.48%) (11.20%)
available upon request
by calling Ratios and supplemental data
800.523.1918.
Net assets, end of period (000 omitted) $13,349 $5,356 $5,776

Ratio of expenses to average net assets 1.47% 1.50% 1.50%

Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.53% 1.67% 2.45%

Ratio of net investment income to average net assets 1.88% 2.34% 0.89%

Ratio of net investment income (loss) to average net assets
prior to expense limitation and expenses paid indirectly 1.82% 2.17% (0.06%)

Portfolio turnover 20% 38% 48%
- ------------------------------------------------------------------------------------------------------------------------------------

(1) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.

(2) Per share information was based on the average shares outstanding method.

(3) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
Total return reflects expense limitations in effect for the Series.
</TABLE>

<PAGE>

Global Bond Series
Our investment strategies

Global Bond Series seeks current income consistent
with the preservation of principal. We invest primarily in fixed-income
securities that may also provide the potential for capital appreciation.

We may invest in:

o foreign and U.S. government securities;

o debt obligations of foreign and U.S. companies;

o debt securities of supranational entities;

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;

o zero-coupon bonds.

While the Series may purchase securities of issuers in any foreign country,
developed or emerging, we currently anticipate investing in Australia, Austria,
Canada, Germany, Italy, Japan, Korea, the Netherlands, New Zealand, Norway,
Portugal, South Africa, Spain, Sweden and the United Kingdom. This is a
representative list; we may also invest in other countries. More than 25% of the
Series' total assets may be invested in the securities of issuers located in the
same country.

<PAGE>

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 generally keep the
average weighted maturity of the portfolio in the five-to-ten year range. If we
anticipate a declining interest rate environment; however, we may extend the
average weighted maturity past ten years or if we anticipate a rising rate
environment, we may shorten the average weighted maturity to less than five
years.

Global Bond Series uses the same investment strategy as Delaware Global Bond
Fund, a separate fund in the Delaware Investments family, although performance
may differ depending on such factors as the size of the funds and the timing of
investments and redemptions.

The securities we Fixed-income securities offer the potential for greater
typically invest in income payments than stocks, and also may provide
capital appreciation.

Foreign government securities: Debt obligations issued by a The Series will generally invest in securities issued by foreign
government other than the United States or by an agency, governments, their agencies, instrumentalities or political
instrumentality or political subdivision of such subdivisions that are rated AAA or AA by S&P or Aaa or Aa by
governments. Moody's or, if unrated, considered to be of comparable quality. We
may invest a portion of the Series' assets in foreign governmental
securities issued by emerging countries, which may be lower rated,
including securities rated below investment grade.

U.S. government securities: Securities issued or guaranteed The Series may invest a significant portion of its assets in U.S.
by the U.S. government or issued by an agency or government securities. It will invest only in U.S. government
instrumentality of the U.S. government. obligations, including bills, notes and bonds that are issued or
guaranteed as to the payment of principal and interest by the U.S.
government and securities of U.S. government agencies or
instrumentalities that are backed by the full faith and credit of
the United States.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Global Bond Series (continued)

Supranational entities: Debt securities of supranational The Series may invest in a significant portion of its assets in
entities may be denominated in any currency. These debt securities of supranational entities.
securities 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 to promote reconstruction or development. 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 bonds are debt obligations The Series may invest in zero coupon bonds.
that do not entitle the holder to any periodic payments of
interest before maturity or a specified date when the
securities begin paying current interest. Therefore, they
are issued and traded at a discount from their face amounts
or par value. The market prices of zero coupon bonds are
generally more volatile than the market prices of securities
that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do
non-zero coupon securities having similar maturities and
credit quality.

Brady Bonds: These are debt securities issued under the Global Bond Series may invest in Brady Bonds. We believe that the
framework of the Brady Plan, an initiative for debtor economic reforms undertaken by countries in connection with the
nations to restructure their outstanding external issuance of Brady Bonds can make the debt of countries that have
indebtedness (generally, commercial bank debt). Brady Bonds issued or have announced plans to issue these bonds a viable
tend to be of lower quality and more speculative than opportunity for investment.
securities of developed country issuers.

High-yield, high risk fixed-income securities: Securities Global Bond Series may invest a portion of its assets in these
that are rated lower than BBB by S&P or Baa by Moody's, or securities.
if unrated, of equal quality. These securities may be issued
by companies or governments of emerging or developing
countries, which may be less creditworthy. The risk that
these companies or governments may not be able to make
interest or principal payments is substantial.

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 Series' cash position. In order to enter into these
agrees to buy the securities back within a specified time at repurchase agreements, the Series must have collateral of at least
the same price the buyer paid for them, plus an amount equal 102% of the repurchase price. The Series may enter into repurchase
to an agreed upon interest rate. Repurchase agreements are agreements in which the collateral is any security in which it may
often viewed as equivalent to cash. invest, but normally uses U.S. government securities as collateral.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Illiquid securities: Securities that do not have a ready We may invest up to 10% of net assets in illiquid securities,
market, and cannot be easily sold within seven days at including repurchase agreements with maturities of over seven days.
approximately the price that a series has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Series may also invest in other securities including futures contracts and
options and interest rate swaps. Please see the Statement of Additional
Information for additional descriptions on these securities as well as those
listed in the table above.

Lending securities 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.

Borrowing from banks Global Bond Series may borrow money as a temporary measure
for extraordinary purposes or to facilitate redemptions. To the extent that it
does so, the Series may be unable to meet its investment objective. The Series
will not borrow money in excess of one-third of the value of its net assets.

Temporary defensive positions For temporary defensive purposes, Global Bond
Series may hold a substantial portion of its assets in cash or cash equivalents.
To the extent it holds cash or cash equivalents, the Series may be unable to
achieve its investment objective.

Portfolio turnover The Series anticipates that its annual portfolio turnover may
exceed 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. High turnover can
result in increased transaction costs and tax liability.

59
<PAGE>

Global Bond Series (continued)

<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 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 as interim market fluctuations. In deciding what portion of the
economic conditions, future expectations or investor Series' portfolio should be invested in any individual country, we
confidence. evaluate a variety of factors, including opportunities and risks
relative to other countries. As part of the Series' principal
investment strategy, the Series may invest in securities that
generally have relatively less market risk.

Interest rate risk is the risk that securities, particularly Interest rate risk is a significant risk for Global Bond Series. In
bonds with longer maturities, will decrease in value if an attempt to manage interest rate risk, we adjust the Series'
interest rates rise. average weighted maturity based on our view of interest rates. The
Series' average weighted maturity will generally be in the
five-to-ten year range. When we anticipate that interest rates will
decline, we may extend the average maturity beyond ten years and
when we anticipate that interest rates will rise, we may shorten
the average maturity to less than five years.

Currency risk is the risk that the value of a series' The Series may try to hedge its currency risk by purchasing foreign
investments may be negatively affected by changes in foreign currency exchange contracts. If the Series agrees to purchase or
currency exchange rates. Adverse changes in exchange rates sell foreign securities at a pre-set price on a future date, the
may reduce or eliminate any gains produced by investments Series attempts to protect the value of a security it owns from
that are denominated in foreign currencies and may increase future changes in currency rates. If the Series has agreed to
any losses. purchase or sell a security, it may also use foreign currency
exchange contracts to "lock-in" the security's price in terms of
U.S. dollars or another applicable currency. The Series may use
forward currency exchange contracts only for defensive or
protective measures, not to enhance portfolio returns. However,
there is no assurance that such a strategy will be successful.

Political risk is the risk that countries or the entire We evaluate the political situations in the countries where we
region where we invest may experience political instability. invest and take into account any potential risks before we select
This may cause greater fluctuation in the value and securities for the portfolio. However, there is no way to eliminate
liquidity of our investments due to changes in currency political risk when investing internationally.
exchange rates, governmental seizures or nationalization of
assets.

Emerging market risk is the possibility that the risks Striving to manage this risk, the portfolio managers carefully
associated with international investing will be greater in screen securities within emerging markets and attempt to consider
emerging markets than in more developed foreign markets material risks associated with an individual company or bond
because, among other things, emerging markets may have less issuer. We cannot eliminate emerging market risk and consequently
stable political and economic environments. encourage shareholders to invest in the Series only if they have a
long-term time horizon, over which the potential of individual
securities is more likely to be realized.

The Series will also perform credit analysis in an attempt to
reduce these risks.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Non-diversified funds risk: Non-diversified investment Global Bond Series is a non-diversified fund as defined by the
companies have the flexibility to invest as much as 50% of Investment Company Act of 1940. Nevertheless, we typically hold
their assets in as few as two issuers with no single issuer securities from a variety of different issuers, representing a
accounting for more than 25% of the portfolio. The remaining number of different countries. We also perform extensive analysis
50% of the portfolio must be diversified so that no more on all securities, particularly those that represent a larger
than 5% of a fund's assets is invested in the securities of percentage of portfolio assets.
a single issuer. Because a non-diversified fund may invest
its assets in fewer issuers, the value of series shares may
increase or decrease more rapidly than if the series were
fully diversified.

Foreign government and supranational securities risk relates The Series will attempt to limit this risk by performing credit
to the ability of a foreign government or government related analysis on the issuer of each security purchased.
issuer to make timely payments on its external debt
obligations. The Series attempts to reduce the risks associated with investing
in foreign governments by focusing on bonds rated within the two
highest rating categories.

Credit risk of high-yield, high risk fixed-income The Series may invest a portion of its assets in these securities.
securities: Securities rated lower than BBB by S&P and Baa We intend to limit our investment in any single lower rated bond,
by Moody's are considered to be of poor standing and which can help to reduce the effect of an individual default on the
predominantly speculative as to the issuer's ability to Series. We also intend to limit our overall holdings of bonds in
repay interest and principal. this category. Such limitations may not protect the Series from
widespread bond defaults brought about by a sustained economic
These bonds are often issued by less creditworthy companies downturn or from price declines that might result from changes in
or by highly leveraged (indebted) firms, which are generally the quality ratings of individual bonds.
less able than more financially stable firms to make
scheduled payments of interest and principal. The risks
posed by bonds issued under such circumstances are
substantial.

If there were a national credit crisis or an issuer were to
become insolvent, principal values could be adversely
affected.

Transaction cost risk: Costs of buying, selling and holding We strive to monitor transaction costs and to choose an efficient
foreign securities, including brokerage, tax and custody trading strategy for the Series.
costs, may be higher than those involved in domestic
transactions.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Global Bond Series (continued)

Investment manager The Series is managed by Delaware International Advisers
Ltd. Delaware International Advisers makes investment
decisions for the Series, manages the Series' business
affairs and provides daily administrative services. For
its services to the Series, the manager was paid 0.75%
of average daily net assets for the last fiscal year.

Portfolio managers Christopher A. Moth and Joanna Bates have primary
responsibility for making day-to-day investment
decisions for Global Bond Series. In making investment
decisions for the Series, Mr. Moth and Ms. Bates
regularly consult with David G. Tilles and four global
fixed income team members.

Christopher A. Moth, Senior Portfolio Manager, Director
of Investment Strategy, Fixed Income and Currency and
Director of Delaware International Advisers Ltd., is a
graduate of The City University London. He 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 and Investment from
the Institute of Actuaries in London. At Delaware
International Advisers, he has been a key contributor in
developing the fixed-income product and establishing the
in-house systems to control and facilitate the
investment process. He chairs the global fixed-income
and currency meeting. Mr. Moth became Co-Manager of the
Series in January 1997.

Joanna Bates, Senior Portfolio Manager, Credit and
Emerging Markets of Delaware International Advisers
Ltd., is a graduate of London University. She joined the
Fixed Income team at Delaware International in June
1997. Prior to that she was Associate Director, Fixed
Interest at Hill Samuel Investment Management Ltd. which
she joined in 1990. She had previously worked at
Fidelity International and Save & Prosper as a fund
manager and analyst for global bond markets. Ms. Bates
is an associate of the Institute of Investment
Management and Research. Ms. Bates became Co-Manager of
the Series in July 1999.

David G. Tilles, Managing Director and Chief Investment
Officer of Delaware International Advisers Ltd., was
educated at the Sorbonne, Warwick University and
Heidelberg University. Prior to joining Delaware
International Advisers in 1990 as Managing Director and
Chief Investment Officer, he spent 16 years with Hill
Samuel Investment Management Group in London, serving in
a number of investment capacities. His most recent
position prior to joining Delaware International
Advisers was Chief Investment Officer of Hill Samuel
Investment Management Ltd.

<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Global Bond Series
- ---------------------------------------------------------------------------------------------------------------------------------
Period 5/2/96(1)
Year Ended 12/31 through
1999 1998 1997 12/31/96
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The financial Net asset value, beginning of period $10.680 $10.500 $10.960 $10.000
highlights table is
intended to help you Income (loss) from investment operations
understand the
Series' financial Net investment income(2) 0.576 0.608 0.636 0.339
performance. The
total returns in the Net realized and unrealized gain (loss) on investments
table represent the and foreign currencies (0.950) 0.182 (0.551) 0.831
rate that an ------- ------- ------- -------
investor would have Total from investment operations (0.374) 0.790 0.085 1.170
earned or lost on an ------- ------- ------- -------
investment in the Less dividends and distributions
Series (assuming
reinvestment of all Dividends from net investment income (0.514) (0.600) (0.460) (0.210)
dividends and
distributions). All Distributions from net realized gain on investments (0.062) (0.010) (0.085) none
"per share" ------- ------- ------- -------
information reflects Total dividends and distributions (0.576) (0.610) (0.545) (0.210)
financial results ------- ------- ------- -------
for a single Series Net asset value, end of period $9.730 $10.680 $10.500 $10.960
share. This ======= ======= ======= =======
information has been Total return(3) (3.60%) 7.82%(4) 0.88%(4) 11.79%(4)
audited by Ernst &
Young LLP, whose Ratios and supplemental data
report, along with
the Series' Net assets, end of period (000 omitted) $20,231 $21,711 $16,876 $9,471
financial
statements, is Ratio of expenses to average net assets 0.85% 0.83% 0.80% 0.80%
included in the
Series' annual Ratio of expenses to average net assets prior
report, which is to expense limitation and expenses paid indirectly 0.85% 0.92% 1.08% 1.19%
available upon
request by calling Ratio of net investment income to average net assets 5.64% 5.83% 6.03% 6.51%
800.523.1918.
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 5.64% 5.74% 5.75% 6.12%

Portfolio turnover 100% 79% 97% 56%
--------------------------------------------------------------------------------------------------------
(1) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.
(2) Per share information for the years ended December 31, 1997, 1998 and 1999 was based on the average
shares outstanding method.
(3) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
(4) Total return reflects expense limitations in effect for the Series.
</TABLE>
63
<PAGE>
Growth and Income Series

Our investment strategies

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.

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
the Series.

Growth and Income Series uses the same investment strategy as Delaware Growth
and Income Fund, a separate fund in the Delaware Investments family, although
performance may differ depending on such factors as the size of the funds and
the timing of investments and redemptions.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

American Depositary Receipts (ADRs): Certificates issued by We may invest without limitation in ADRs. We use them when
a U.S. bank which represent the bank's holdings of a stated we believe they offer better total return opportunities than
number of shares of a foreign corporation. An ADR entitles U.S. securities.
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.

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 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. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the table
above.

64
<PAGE>

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. These transactions will generate additional income for the Series.

Borrowing from banks Growth and Income Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. The
Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, Growth and
Income Series may hold a substantial portion of its assets in cash or cash
equivalents. To the extent it holds cash or cash equivalents, the Series may be
unable to achieve its investment objective.

Portfolio turnover We anticipate that annual portfolio turnover for the Series
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.

The risks of investing Investing in any mutual fund involves risk, including
in Growth and the risk that you may receive little or no return on
Income Series 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. An investment in
the Series typically provides the best results when held
for a number of years. 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 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 majority of the We maintain a long-term investment approach and focus on
securities in a certain market--like the stock or bond stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall stock market movements and generally do not
confidence. trade for short-term purposes.

Industry and security risk is the risk that the value of We limit the amount of the Series' assets invested in any
securities in a particular industry or the value of an one industry and in any individual security. We also follow
individual stock or bond will decline because of changing a rigorous selection process designed to identify
expectations for the performance of that industry or for the undervalued securities before choosing securities for the
individual company issuing the stock or bond. portfolio.

Foreign risk is the risk that foreign securities may be We typically invest only a small portion of the Series'
adversely affected by political instability (including portfolio in foreign corporations through American
governmental seizures or nationalization of assets), changes Depositary Receipts. We do not presently intend to invest
in currency exchange rates, foreign economic conditions or directly in foreign securities. When we do purchase ADRs,
inadequate regulatory and accounting standards. Foreign they are generally denominated in U.S. dollars and traded on
markets may also be less efficient, less liquid, have a U.S. exchange.
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

65
<PAGE>

Growth and Income Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.60% of average
daily net assets for the last fiscal year.

Portfolio manager John B. Fields has primary responsibility for making
day-to-day investment decisions for Growth and Income
Series.

John B. Fields, Senior Vice President and Senior
Portfolio Manager, joined Delaware Investments in 1992
and has 29 years' experience in investment management.
He earned a bachelor's degree and an MBA from Ohio State
University. Before joining Delaware Investments, he was
Director of Domestic Equity Risk Management at DuPont.
Prior to that time, he was Director of Equity Research
at Comerical Bank. Mr. Fields is a member of the
Financial Analysts Society of Wilmington, Delaware. In
making investment decisions for Growth and Income
Series, Mr. Fields works with a team of Delaware
portfolio managers utilizing the same investment
strategy. He has been managing Growth and Income Series
since 1992.

66
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Growth and Income Series
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Net asset value, beginning of year $ 19.420 $ 18.800 $ 15.980 $ 14.830 $ 11.480
highlights table is
intended to help you Income (loss) from investment operations
understand the
Series' financial Net investment income 0.323 0.361 0.324 0.377 0.416
performance. The
total returns in the Net realized and unrealized gain (loss) on investments (0.882) 1.636 4.216 2.398 3.574
table represent the -------- --------- -------- -------- --------
rate that an Total from investment operations (0.559) 1.997 4.540 2.775 3.990
investor would have -------- --------- -------- -------- --------
earned or lost on an Less dividends and distributions
investment in the
Series (assuming Dividends from net investment income (0.361) (0.327) (0.370) (0.420) (0.430)
reinvestment of all
dividends and Distributions from net realized gain on investments (1.480) (1.050) (1.350) (1.205) (0.210)
distributions). All -------- --------- -------- -------- --------
"per share" Total dividends and distributions (1.841) (1.377) (1.720) (1.625) (0.640)
information reflects -------- --------- -------- -------- --------
financial results Net asset value, end of year $17.020 $ 19.420 $ 18.800 $ 15.980 $ 14.830
for a single Series ======== ========= ======== ======== ========
share. This Total return(1) (2.98%) 11.35% 31.00% 20.72% 36.12%
information has been
audited by Ernst & Ratios and supplemental data
Young LLP, whose
report, along with Net assets, end of period (000 omitted) $501,928 $579,907 $401,402 $166,647 $109,003
the Series'
financial Ratio of expenses to average net assets 0.71% 0.71% 0.71% 0.67% 0.69%
statements, is
included in the Ratio of net investment income to average net assets 1.75% 2.00% 2.02% 2.66% 3.24%
Series' annual
report, which is Portfolio turnover 92% 81% 54% 81% 85%
available upon ------------------------------------------------------------------------------------------------------------
request by calling (1) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
800.523.1918. policies and inclusion of these charges would reduce total return figures for all periods shown.
</TABLE>

67
<PAGE>

Growth Opportunities Series

Our investment strategies

We strive to identify companies of medium market capitalization that offer
above-average opportunities for long-term capital growth because they are poised
to provide high and consistent earnings growth. Medium-size companies are
generally considered to be those with market capitalizations between $2 billion
and $10 billion.

Companies in the early stages of their development often offer the greatest
opportunities for rising share prices. However, the smallest companies generally
involve the most risk because they may have very limited resources, less
management experience and narrower product lines. We believe that medium-size
companies can provide many of the growth opportunities of small companies, but
with less risk. Medium-size companies may be more established in their industry
and have greater financial resources. Yet, they may still have the flexibility
and growth potential of a smaller company.

We use a bottom-up approach to stock selection, carefully evaluating the
characteristics of individual companies. We rely heavily on our own research in
selecting companies for the portfolio. That research might include one-on-one
meetings with executives, company competitors, industry experts and customers.
Our first step in identifying promising companies is to pinpoint stocks that
exhibit one or more of the following characteristics:

o a history of high earnings-per-share growth;

o expectations for future earnings growth that are either high or accelerating;

o a price to earnings ratio that is low relative to other stocks - indicating
that the stock might be undervalued;

o a discounted cash flow that is high relative to other stocks; or

<PAGE>

o a special situation that has caused the stock to fall out of favor, but which
we believe creates potential for even greater long-term price appreciation.

Once we have narrowed our search to companies with these characteristics, we
then conduct even more thorough hands-on research, evaluating a wide variety of
factors, including:

o the financial strength of the company;

o the expertise of its management;

o the growth potential of the company within its industry; and

o the growth potential of the industry.

Our goal is to select companies that are likely to perform well over an extended
time frame.

In order to reduce the inherent risks of equity investing, we maintain a
diversified portfolio, typically holding a mix of different stocks, representing
a wide array of industries.

Growth Opportunities Series uses the same investment strategy as Delaware Growth
Opportunities Fund, a separate fund in the Delaware Investments family, although
performance may differ depending on such factors as the size of the funds and
the timing of investments and redemptions.

68
<PAGE>

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership Generally, we invest 85% to 100% of net assets in common
in a corporation. Stockholders participate in the stock with an emphasis on medium-size companies.
corporation's profits and losses, proportionate to the
number of shares they own.

American Depositary Receipts (ADRs): Certificates issued by We may hold ADRs when we believe they offer greater
a U.S. bank that represent the bank's holdings of a stated appreciation potential than U.S. securities.
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.

Options: Options represent a right to buy or sell a security If we have stocks that appreciated in price, we may want to
or group of securities at an agreed upon price at a future protect those gains when we anticipate adverse conditions.
date. The purchaser of an option may or may not choose to go We might use options to neutralize the effect of any price
through with the transaction. declines, without selling the security. We might also use
options to gain exposure to a particular market segment
Writing a covered call option on a security obligates the without purchasing individual securities in that segment. We
owner of the security to sell it at an agreed upon price on might use this approach if we had excess cash that we wanted
an agreed upon date (usually no more than nine months in the to invest quickly.
future.) The owner of the security receives a premium
payment from the purchaser of the call, but if the security We might use covered call options if we believe that doing
appreciates to a price greater than the agreed upon selling so would help the Series to meet its investment objective.
price, the fund would lose out on those gains.
Use of these strategies can increase the operating costs of
Options are generally considered to be derivative the Series and can lead to loss of principal.
securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

69
<PAGE>

Growth Opportunities Series (continued)

Growth Opportunities Series may also invest in other securities including
convertible securities, warrants, preferred stocks, bonds and foreign
securities. Please see the Statement of Additional Information for additional
descriptions on these securities as well as those listed in the table above.

Lending securities Growth Opportunities Series may lend up to 25% of its assets
to qualified dealers and institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

Borrowing from banks Growth Opportunities Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. The
Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, Growth
Opportunities Series may hold a substantial portion of its assets in
fixed-income obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, and corporate bonds rated BBB or above by an
NRSRO. To the extent it holds these securities, the Series may be unable to
achieve its investment objective.

Portfolio turnover We anticipate that Growth Opportunities Series' annual
portfolio turnover may be greater 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. High turnover can result in increased transaction costs and tax
liability.

The risks of investing Investing in any mutual fund involves risk, including
in Growth the risk that you may receive little or no return on
Opportunities Series 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. Following are
the chief risks you assume when investing in Growth
Opportunities 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
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities 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 stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall stock market movements and though we may
confidence. hold securities for any amount of time, we typically do not
trade for short-term purposes.

Industry and security risk is the risk that the value of We limit the amount of Growth Opportunities Series' assets
securities in a particular industry or the value of an invested in any one industry and in any individual security.
individual stock or bond will decline because of changing We also follow a rigorous selection process before choosing
expectations for the performance of that industry or for the securities and continuously monitor them while they remain
individual company issuing the stock. in the portfolio.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

70
<PAGE>

Small- and medium-size company risk is the risk that prices Though the Series may invest in small companies, our focus
of smaller companies may be more volatile than larger is on medium-size companies. We believe medium-size
companies because of limited financial resources or companies, in general, are more stable than smaller
dependence on narrow product lines. companies and involve less risk due to their larger size,
greater experience and more extensive financial resources.
Nonetheless, medium-size companies have many of the same
risks as small companies and are considered to be riskier,
in general, than large-size companies. To address this risk,
the Series maintains a well-diversified portfolio, selects
stocks carefully and monitors them continuously.

Interest rate risk is the risk that securities will decrease We analyze each company's financial situation and its cash
in value if interest rates rise. The risk is generally flow to determine the company's ability to finance future
associated with bonds; however, because small- and expansion and operations. The potential affect that rising
medium-sized companies often borrow money to finance their interest rates might have on a stock is taken into
operations, they may be adversely affected by rising consideration before the stock is purchased.
interest rates.

Options risk is the possibility that a series may experience We will not use options for speculative reasons. We may use
a loss if it employs an options strategy related to a options to protect gains in the portfolio without actually
security or a market index and that security or index moves selling a security. We may also use options to quickly
in the opposite direction from what the manager anticipated. invest excess cash so that the portfolio is generally fully
Options also involve additional expenses, which could reduce invested.
any benefit or increase any loss that a fund gains from
using the strategy.

Foreign risk is the risk that foreign securities may be We typically invest only a small portion of the Series'
adversely affected by political instability (including portfolio in foreign corporations indirectly through
governmental seizures or nationalization of assets), changes American Depositary Receipts. When we do purchase ADRs, they
in currency exchange rates, foreign economic conditions or are generally denominated in U.S. dollars and traded on a
inadequate regulatory and accounting standards. Foreign U.S. exchange.
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

71
<PAGE>

Growth Opportunities Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.75% of average
daily net assets for the last fiscal year.

Portfolio managers Gerald S. Frey has primary responsibility for making
day-to-day investment decisions for Growth Opportunities
Series. When making investment decisions for the Series,
Mr. Frey regularly consults with Marshall T. Bassett,
John A. Heffern, Jeffrey W. Hynoski, Steven T. Lampe and
Lori P. Wachs.

Gerald S. Frey, Senior Vice President/Senior Portfolio
Manager, has 23 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 for the Series since
March 1997 and was Co-Manager from June 1996 to March
1997.

Marshall T. Bassett, Vice President/Portfolio Manager,
joined Delaware Investments in 1997. Before joining
Delaware Investments, 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 a bachelor's degree and an MBA from Duke
University.

John A. Heffern, Vice President, Portfolio Manager,
earned bachelors and MBA degrees at the University of
North Carolina at Chapel Hill. Prior to joining Delaware
Investments in 1997, he was a Senior Vice President,
Equity Research at NatWest Securities Corporation's
Specialty Financial Services unit. Before that, he was a
Principal and Senior Regional Bank Analyst at Alex.
Brown & Sons.

Jeffrey W. Hynoski, Vice President/Portfolio Manager,
joined Delaware Investments in 1998. Prior to joining
Delaware Investments, 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.

Steven T. Lampe, Vice President, Portfolio Manager,
received a bachelor's degree in Economics and an MBA
degree with a concentration in Finance from the
University of Pennsylvania's Wharton School. He joined
Delaware Investments in 1995 and covers the financial
services and business services sectors for small and
mid-capitalization growth stocks. He previously served
as a tax/audit manager at Price Waterhouse, specializing
in financial services firms. Mr. Lampe is a Certified
Public Accountant.

Lori P. Wachs, Vice President/Portfolio Manager, 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.

72
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Growth Opportunities Series
(formerly DelCap Series)
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Net asset value, beginning of year $ 18.550 $ 17.270 $ 15.890 $15.130 $11.750
highlights table is
intended to help you Income (loss) from investment operations
understand the
Series' financial Net investment income (loss)(1) (0.055) (0.026) (0.010) (0.015) 0.072
performance. The
total returns in the Net realized and unrealized gain on investments 11.055 2.901 2.260 2.030 3.378
table represent the -------- -------- -------- ------- -------
rate that an Total from investment operations 11.000 2.875 2.250 2.015 3.450
investor would have -------- -------- -------- ------- -------
earned or lost on an Less dividends and distributions
investment in the
Series (assuming Dividends from net investment income none none none (0.070) (0.070)
reinvestment of all
dividends and Distributions from net realized gain on investments (1.000) (1.595) (0.870) (1.185) none
distributions). All -------- -------- -------- ------- -------
"per share" Total dividends and distributions (1.000) (1.595) (0.870) (1.255) (0.070)
information reflects -------- -------- -------- ------- -------
financial results
for a single Series Net asset value, end of year $ 28.550 $ 18.550 $ 17.270 $15.890 $15.130
share. This ======== ======== ======== ======= =======
information has been
audited by Ernst & Total return(2) 62.94% 18.81%(3) 14.90%(3 14.46%(3) 29.53%(3)
Young LLP, whose
report, along with Ratios and supplemental data
the Series'
financial Net assets, end of period (000 omitted) $216,062 $130,548 $110,455 $79,900 $58,123
statements, is
included in the Ratio of expenses to average net assets 0.82% 0.80% 0.80% 0.80% 0.80%
Series' annual
report, which is Ratio of expenses to average net assets
available upon prior to expense limitation and expenses
request by calling paid indirectly 0.82% 0.86% 0.87% 0.82% 0.85%
800.523.1918.
Ratio of net investment income (loss) to
average net assets (0.27%) (0.16%) (0.06%) (0.11%) 0.61%

Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly (0.27%) (0.22%) (0.13%) (0.13%) 0.56%

Portfolio turnover 132% 142% 134% 85% 73%
----------------------------------------------------------------------------------------------------------
(1) Per share information for the years ended December 31, 1997, 1998 and 1999 was based on the average
shares outstanding method.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
(3) Total return reflects expense limitations in effect for the Series.
</TABLE>

73
<PAGE>

High Yield Series

Our investment strategies

We invest primarily in fixed-income securities that we believe will have a
liberal and consistent yield and will tend to reduce the risk of market
fluctuations. We expect to invest the majority of the Series' assets primarily
in high-yield bonds or junk bonds, which involve greater risks than investment
grade bonds. The Series may also invest in unrated bonds that we consider to
have comparable credit characteristics. Unrated bonds may be more speculative in
nature than rated bonds.

Before selecting high-yield corporate bonds, we carefully evaluate each
individual bond including its income potential and the size of the bond
issuance. The size of the issuance helps us evaluate how easily we may be able
to buy and sell the bond.

We also do a thorough credit analysis of the issuer to determine whether that
company has the financial ability to meet the bond's payments.

We maintain a well-diversified portfolio of high-yield bonds that represents
many different sectors and industries. Through diversification we can help to
reduce the impact that any individual bond might have on the portfolio should
the issuer have difficulty making payments.

The Series strives to provide total return, with income as a secondary
objective. Before purchasing a bond, we evaluate both the income level and its
potential for price appreciation. At least 65% of the Series' assets will be
invested in corporate bonds rated at the time of purchase as BB or lower by S&P
or similarly rated by another NRSRO or, if unrated, that we judge to be of
comparable quality. The Series also may invest in bonds of foreign issuers in
pursuit of its objective.

The Series' investment objective is non-fundamental. This means that the Board
of Trustees may change the objective without obtaining shareholder approval. The
Board changed the Series' investment objective effective May 1, 2000 from "high
current income" to the current investment objective of the Series "total return,
with high current income as a secondary objective." This change in investment
objective will be implemented over the course of the three to six months
following May 15, 2000.

<PAGE>

The securities we Fixed-income securities offer the potential for greater
typically invest in income payments than stocks, and also may provide
capital appreciation.

U.S. government securities: Direct U.S. obligations The Series may invest without limit in U.S. government
including bills, notes, bonds and other debt securities securities. However, they will typically be a small
issued by the U.S. Treasury or securities of U.S. government percentage of the portfolio because they generally do not
agencies or instrumentalities which are backed by the full offer as high a level of current income as high-yield
faith and credit of the United States. corporate bonds.

Foreign government or corporate securities: Securities The Series may invest up to 15% of its total assets in
issued by foreign governments or supranational entities or securities of issuers domiciled in foreign countries
foreign corporations. including both established countries and those with emerging
markets. When investing in these foreign securities, the
A supranational entity is an entity established or Series may not invest more than two-thirds of that 15%
financially supported by the national governments of one or amount (that is, 10% of total assets) in any combination of
more countries. The International Bank for Reconstruction non-dollar denominated securities and emerging market
and Development (more commonly known as the World Bank) is securities.
one example of a Supranational entity.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

74
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Zero coupon bonds and pay-in-kind bonds: Zero coupon We may invest in zero coupon bonds and payment-in-kind
securities are debt obligations which do not entitle the bonds, though we do not expect this to be a significant
holder to any periodic payments of interest prior to component of our strategy. The market prices of these bonds
maturity or a specified date when the securities begin 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
traded at a price lower than their face amounts or par react to changes in interest rates to a greater degree than
value. Payment-in-kind bonds pay interest or dividends in interest-paying bonds having similar maturities and credit
the form of additional bonds or preferred stock. quality. They may have certain tax consequences which, under
certain conditions, could be adverse to the Series.

Restricted securities that are determined to be illiquid may
not exceed the Series' 15% limit on illiquid securities,
which is described below.

Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid
market, and cannot be easily sold within seven days at securities.
approximately the price that a 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. The Series may also enter into options. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.

Temporary defensive positions For temporary defensive purposes, High Yield
Series may hold a substantial portion of its assets in cash or cash equivalents.
To the extent it holds cash or cash equivalents, the Series may be unable to
achieve its investment objective.

Portfolio turnover We anticipate that the Series' annual portfolio turnover will
exceed 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. High turnover can
result in increased transaction costs and tax liability.

75
<PAGE>

High Yield Series (continued)

The risks of investing Investing in any mutual fund involves risk, including
in High Yield Series 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 High Yield Series typically provides the
best results when held for a number of years. 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
other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield 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 bonds that we believe will continue to pay interest
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall bond market or interest rate movements and
confidence. generally do not trade for short-term purposes.

Industry and security risk is the risk that the value of We limit the amount of the Series' assets invested in any
securities in a particular industry or the value of an one industry and in any individual security. We also follow
individual stock or bond will decline because of changing a rigorous selection process before choosing securities for
expectations for the performance of that industry or for the the portfolio.
individual company issuing the stock or bond.

Interest rate risk is the risk that securities will decrease The Series is subject to interest rate risk. We cannot
in value if interest rates rise. The risk is greater for eliminate that risk, but we do strive to manage it by
bonds with longer maturities than for those with shorter monitoring economic conditions.
maturities.

Credit risk is the risk that there is the possibility that a
bond's issuer will be unable to make timely payments of
interest and principal.

Investing in so-called "junk" or "high-yield" bonds entails Our careful, credit-oriented bond selection and our
the risk of principal loss, which may be greater than the commitment to hold a diversified selection of high-yield
risk involved in investment grade bonds. High-yield bonds bonds are designed to manage this risk.
are sometimes issued by companies whose earnings at the time
of issuance are less than the projected debt service on the We will not purchase more than 15% of total assets in bonds
junk bonds. which, at the time of purchase, are rated CCC by S&P or Caa
by Moody's or, if unrated, are of equivalent quality. If a
If there were a national credit crisis or an issuer were to bond held by the Series drops below this level or goes into
become insolvent, principal values could be adversely default, the Series will begin to sell the security in an
affected. orderly manner, striving to minimize any adverse affect on
the Series.

Recession risk: Although the market for high-yield bonds In striving to manage this risk, we allocate assets across a
existed through periods of economic downturns, the wide range of industry sectors. We may emphasize industries
high-yield market grew rapidly during the long economic that have been less susceptible to economic cycles in the
expansion which took place in the United States during the past, particularly if we believe that the economy may be
1980s. During that economic expansion, the use of high-yield entering into a period of slower growth.
debt securities to finance highly leveraged corporate
acquisitions and restructurings increased dramatically. As a
result, the high-yield market grew substantially. 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.

It is likely that protracted periods of economic uncertainty
would cause increased volatility in the market prices of
high-yield bonds, an increase in the number of high-yield
bond defaults and corresponding volatility in a series' net
asset value. In the past, uncertainty and volatility in the
high-yield market have resulted in volatility in the Series'
net asset value.

Foreign risk is the risk that foreign securities may be We may invest only 15% of total assets in securities of
adversely affected by political instability, changes in issuers domiciled in foreign countries. When investing in
currency exchange rates, foreign economic conditions or these foreign securities, the Series may not invest more
inadequate regulatory and accounting standards. These risks than two-thirds of that 15% amount (that is, 10% of total
are significantly higher for emerging market securities. assets) in any combination of non-dollar denominated
Non-dollar denominated securities also carry the risk of securities and emerging market securities. We carefully
adverse changes in foreign currency exchange rates. evaluate the reward and risk associated with each foreign
security that we consider.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

76
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Liquidity risk is the possibility that securities cannot be A less liquid secondary market may have an adverse effect on
readily sold within seven days at approximately the price the Series' ability to dispose of particular issues, when
that a series values them. necessary, to meet the Series' liquidity needs or in
response to a specific economic event, such as the
There is generally no established retail secondary market deterioration in the creditworthiness of the issuer. In
for high-yield securities. As a result, the secondary market striving to manage this risk, we evaluate the size of a bond
for high-yield securities is more limited and less liquid issuance as a way to anticipate its likely liquidity level.
than other secondary securities markets. The high-yield
secondary market is particularly susceptible to liquidity We may invest only 15% of net assets in illiquid securities.
problems when the institutions, such as mutual funds and
certain financial institutions, which dominate it
temporarily stop buying bonds for regulatory, financial or
other reasons.

Adverse publicity and investor perceptions may also disrupt
the secondary market for high-yield securities.

Valuation risk: A less liquid secondary market as described The Series' privately placed high-yield securities are
above can make it more difficult for a series to obtain particularly susceptible to the liquidity and valuation
precise valuations of the high-yield securities in its risks. We will strive to manage this risk by carefully
portfolio. During periods of reduced liquidity, judgment evaluating individual bonds and by limiting the amount of
plays a greater role in valuing high-yield securities. the portfolio that can be allocated to privately placed
high-yield securities.

Redemption risk: If investors redeem more shares of a series Volatility in the high-yield market could increase
than are purchased for an extended period of time, a series redemption risk. We strive to maintain a cash balance
may be required to sell securities without regard to the sufficient to meet any redemptions. We may also borrow
investment merits of such actions. This could decrease a money, if necessary, to meet redemptions.
series' asset base, potentially resulting in a higher
expense ratio.

Legislative and regulatory risk: The United States Congress We monitor the status of regulatory and legislative
has from time to time taken or considered legislative proposals to evaluate any possible effects they might have
actions that could adversely affect the high-yield bond on the Series' portfolio.
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. 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 a series to attain its investment
objective.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

77
<PAGE>

High Yield Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.63% of average
daily net assets for the last fiscal year.

Portfolio managers Paul A. Matlack and Gerald T. Nichols have primary
responsibility for making day-to-day investment
decisions for High Yield Series.

Paul A. Matlack, Vice President/Senior Portfolio
Manager, 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. He is a CFA charterholder. Mr. Matlack has been a
member of the High Yield Series team since 1990 and has
been co-managing the High Yield Series since January
1993.

Gerald T. Nichols, Vice President/Senior Portfolio
Manager, 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 High Yield Series team
since 1990 and has been co-managing the High Yield
Series since January 1993.

78
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
High Yield Series(1)
(formerly Delchester Series)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Net asset value, beginning of year $ 8.460 $ 9.510 $ 9.170 $ 8.940 $ 8.540
highlights table is
intended to help you Income (loss) from investment operations
understand the
Series' financial Net investment income 0.781 0.906 0.863 0.853 0.872
performance. The
total returns in the Net realized and unrealized gain (loss)
table represent the on investments (0.987) (1.048) 0.332 0.230 0.400
rate that an -------- -------- ------- ------- -------
investor would have Total from investment operations (0.206) (0.142) 1.195 1.083 1.272
earned or lost on an -------- -------- ------- ------- -------
investment in the Less dividends and distributions
Series (assuming
reinvestment of all Dividends from net investment income (0.784) (0.905) (0.855) (0.853) (0.872)
dividends and
distributions). All Distributions from net realized gain
"per share" on investments (0.050) (0.003) none none none
information reflects -------- -------- ------- ------- -------
financial results
for a single Series Total dividends and distributions (0.834) (0.908) (0.855) (0.853) (0.872)
share. This -------- -------- ------- ------- -------
information has been Net asset value, end of year $ 7.420 $ 8.460 $ 9.510 $ 9.170 $ 8.940
audited by Ernst & ======== ======== ======= ======= =======
Young LLP, whose Total return(2) (2.64%) (1.83%) 13.63% 12.79% 15.50%
report, along with
the Series' Ratios and supplemental data
financial
statements, is Net assets, end of period (000 omitted) $102,633 $120,708 $98,875 $67,665 $56,605
included in the
Series' annual Ratio of expenses to average net assets 0.72% 0.70% 0.70% 0.70% 0.69%
report, which is
available upon Ratio of net investment income
request by calling to average net assets 9.75% 9.85% 9.24% 9.54% 9.87%
800.523.1918.
Portfolio turnover 110% 86% 121% 93% 74%
-----------------------------------------------------------------------------------------------------------
(1) Effective May 1, 2000, the Series' investment objective changed from "high current income" to "total
return and, as a secondary objective, high current income."
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
</TABLE>

79
<PAGE>

International Equity Series

Our investment strategies

International Equity Series seeks long-term growth without undue risk to
principal. We invest primarily in equity securities, including common stocks,
which provide the potential for capital appreciation and income. Our strategy
would commonly be described as a value strategy. That is, we strive to purchase
stocks that are selling for less than their true value. In order to estimate
what a security's true value is, we evaluate its future income potential, taking
into account the impact both currency fluctuations and inflation might have on
that income stream. We then determine what that income would be worth if paid
today. That helps us decide what we think the security is worth today. We then
compare our estimate of the security's value to its current price to determine
if it is a good value.

We use income as an indicator of value because we believe it allows us to
compare securities across different sectors and different countries--all using
one measurement standard. We can even use this analysis to compare stocks to
bonds.

We may purchase securities in any foreign country, developed or emerging;
however, we currently anticipate investing in Australia, Belgium, France,
Germany, Hong Kong, Japan, Malaysia, the Netherlands, New Zealand, Spain and the
United Kingdom. This is a representative list; the Series may also invest in
countries not listed here. More than 25% of the Series' total assets may be
invested in the securities of issuers located in the same country.

We generally maintain a long-term focus in the Series, seeking companies that we
believe will perform well over the next three to five years.

International Equity Series uses the same investment strategy as Delaware
International Equity Fund, a separate fund in the Delaware Investments family,
although performance may differ depending on such factors as the size of the
funds and the timing of investments and redemptions.

<PAGE>

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership The Series will invest its assets in common stocks, some of
in a corporation. Stockholders participate in the which will be dividend-paying stocks.
corporation's profits and losses, proportionate to the
number of shares they own.

Investment company securities: In some countries, International Equity Series may hold closed-end investment
investments by U.S. mutual funds are generally made by company securities if we believe the country offers good
purchasing shares of investment companies that in turn investment opportunities. These investments involve an
invest in the securities of such countries. indirect payment of a portion of the expenses of the other
investment companies, including their advisory fees.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

80
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign currency transactions: A forward foreign currency The Series may invest in securities issued in any currency
exchange contract involves an obligation to purchase or sell and hold foreign currency. Securities of issuers within a
a specific currency on a fixed future date at a price that given country may be denominated in the currency of another
is set at the time of the contract. The future date may be country or in multinational currency units such as the Euro.
any number of days from the date of the contract as agreed
by the parties involved. Although the Series values its assets daily in U.S. dollars,
its does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Series
will, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency
exchange transactions. The Series may conduct its foreign
currency transactions on a cash basis at the rate prevailing
in the foreign currency exchange market or through a forward
foreign currency exchange contract or forward contract.

The Series may use forward contracts for defensive hedging
purposes to attempt to protect the value of the Series'
current security or currency holdings. It may also use
forward contracts if it has agreed to sell a security and
wants to "lock-in" the price of that security, in terms of
U.S. dollars. Investors should be aware of the costs of
currency conversion. The Series will not use forward
contracts for speculative purposes.

American Depositary Receipts (ADRs), European Depositary The Series may invest in sponsored and unsponsored ADRs,
Receipts (EDRs), and Global Depositary Receipts (GDRs): ADRs EDRs and GDRs, generally focusing on those whose underlying
are receipts issued by a U.S. depositary (usually a U.S. securities are issued by foreign entities.
bank) and EDRs and GDRs are receipts issued by a depositary
outside of the U.S. (usually a non-U.S. bank or trust To determine whether to purchase a security in a foreign
company or a foreign branch of a U.S. bank). Depositary market or through depositary receipts, we evaluate the price
receipts represent an ownership interest in an underlying levels, the transaction costs, taxes and administrative
security that is held by the depositary. Generally, the costs involved with each security to identify the most
holder of the depositary receipt is entitled to all payments efficient choice.
of interest, dividends or capital gains that are made on the
underlying security.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including
resale is restricted under securities law. those that are eligible for resale only among certain
institutional buyers without registration which 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.

Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Series, and a seller of securities in which the seller investment for the Series' cash position. In order to enter
agrees to buy the securities back within a specified time at into these repurchase agreements, the Series must have
the same price the buyer paid for them, plus an amount equal collateral of at least 102% of the repurchase price. The
to an agreed upon interest rate. Repurchase agreements are Series may enter into repurchase agreements in which the
often viewed as equivalent to cash. collateral is any security in which it may invest, but
normally uses U.S. government securities as collateral.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

81
<PAGE>

International Equity Series (continued)

The Series may also invest in other securities including preferred stocks,
convertible securities, warrants, futures 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 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.

Borrowing from banks International Equity Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. The
Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, International
Equity Series may hold all or a substantial portion of its assets in high
quality debt instruments issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the U.S. government, its agencies
or instrumentalities and which are backed by the full faith and credit of the
U.S. government. The Series may also invest all or a substantial portion of its
assets in high quality debt instruments issued by foreign or U.S. companies. Any
corporate debt obligations will be rated AA or better by S&P, or Aa or better by
Moody's or, if unrated, will be determined to be of comparable quality. To the
extent it holds these securities, the Series may be unable to achieve its
investment objective.

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.

The risks of investing Investing in any mutual fund involves risk, including
in International the risk that you may receive little or no return on
Equity Series 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. Following are
the chief risks you assume when investing in
International Equity Series. Please see the Statement of
Additional Information for further discussion of these
risks and other risks not discussed here.

<PAGE>

Industry and security risk is the risk that the value of We typically hold a number of different securities in a
securities in a particular industry or the value of an variety of sectors in order to minimize the impact that a
individual stock or bond will decline because of changing poorly performing security would have on the Series.
expectations for the performance of that industry or for the
individual company issuing the stock or bond.

Currency risk is the risk that the value of the Series' The Series may try to hedge its currency risk by purchasing
investments may be negatively affected by changes in foreign foreign currency exchange contracts. If the Series agrees to
currency exchange rates. Adverse changes in exchange rates purchase or sell foreign securities at a pre-set price on a
may reduce or eliminate any gains produced by investments future date, the Series attempts to protect the value of a
that are denominated in foreign currencies and may increase security it owns from future changes in currency rates. If
any losses. the Series has agreed to purchase or sell a security, it may
also use foreign currency exchange contracts to "lock-in"
the security's price in terms of U.S. dollars or another
applicable currency. The Series may use forward currency
exchange contracts only for defensive or protective
measures, not to enhance portfolio returns. However, there
is no assurance that such a strategy will be successful.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

82
<PAGE>

Emerging market risk is the possibility that the risks The Series, to the limited extent that it invests in
associated with international investing will be greater in emerging markets, is subject to the risk. If we were to
emerging markets than in more developed foreign markets invest in emerging markets, we would carefully select
because, among other things, emerging markets may have less securities and consider all relevant risks associated with
stable political and economic environments. an individual company.

Inefficient market risk is the risk that foreign markets may The Series will attempt to reduce these risks by investing
be less liquid, have greater price volatility, less in a number of different countries, and noting trends in the
regulation and higher transaction costs than U.S. markets. economy, industries and financial markets.

Information risk is the risk that foreign companies may be We conduct fundamental research on the companies we invest
subject to different accounting, auditing and financial in rather than relying solely on information available
reporting standards than U.S. companies. There may be less through financial reporting. We believe this will help us to
information available about foreign issuers than domestic better uncover any potential weaknesses in individual
issuers. Furthermore, regulatory oversight of foreign companies.
issuers may be less stringent or less consistently applied
than in the United States.

Transaction costs risk: Costs of buying, selling and holding We strive to monitor transaction costs and to choose an
foreign securities, including brokerage, tax and custody efficient trading strategy for the Series.
costs, may be higher than those involved in domestic
transactions.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware International Advisers
Ltd. Delaware International Advisers makes investment
decisions for the Series, manages the Series' business
affairs and provides daily administrative services. For
its services to the Series, the manager was paid 0.80%
of average daily net assets for the last fiscal year,
reflecting a waiver of fees by the manager.

Portfolio managers Clive A. Gillmore and Nigel G. May have primary
responsibility for making day-to-day investment
decisions for the International Equity Series. In making
investment decisions for the Series, Mr. Gillmore and
Mr. May regularly consult with an international equity
team of fourteen members.

Clive A. Gillmore, Director, Deputy Managing Director,
Senior Portfolio Manager of Delaware International
Advisers Ltd., is a graduate of the University of
Warwick. He 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 Advisers in 1990 after eight
years of investment experience. His most recent position
prior to joining Delaware International Advisers was as
a Pacific Basin equity analyst and senior portfolio
manager for Hill Samuel Investment Management Ltd. Mr.
Gillmore completed the London Business School Investment
Program. He has been managing the Series since its
inception.

Nigel G. May, Director, Senior Portfolio Manager,
Delaware International Advisers Ltd., 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 Advisers in
1991, assuming portfolio management responsibilities and
sharing analytical responsibilities for continental
Europe. He previously had been with Hill Samuel
Investment Management Ltd. for five years.

83
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
International Equity Series
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Net asset value, beginning of year $16.480 $15.520 $15.110 $13.120 $11.840
highlights table is
intended to help you Income from investment operations
understand the
Series' financial Net investment income(1) 0.371 0.386 0.359 0.557 0.419
performance. The
total returns in the Net realized and unrealized gain
table represent the on investments and foreign currencies 2.161 1.169 0.596 1.966 1.191
rate that an investor ------ ------ ------ ------ ------
would have earned or Total from investment operations 2.532 1.555 0.955 2.523 1.610
lost on an investment ------ ------ ------ ------ ------
in the Series (assuming Less dividends and distributions
reinvestment of all
dividends and Dividends from net investment income (0.356) (0.595) (0.545) (0.420) (0.240)
distributions). All
"per share" information Distributions from net realized gain
reflects financial on investments (0.026) none none (0.113) (0.090)
results for a single ------ ------ ------ ------ ------
Series share. This Total dividends and distributions (0.382) (0.595) (0.545) (0.533) (0.330)
information has been ------ ------ ------ ------ ------
audited by Ernst & Net asset value, end of year $18.630 $16.480 $15.520 $15.110 $13.120
Young LLP, whose ======= ======= ======= ======= =======
report, along with Total return(2) 15.76% 10.33% 6.60% 20.03% 13.98%
the Series' financial
statements, is included Ratios and supplemental data
in the Series' annual
report, which is Net assets, end of period (000 omitted) $304,060 $243,536 $198,863 $131,428 $81,548
available upon request
by calling 800.523.1918. Ratio of expenses to average net assets 0.92% 0.87% 0.85% 0.80% 0.80%

Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 0.94% 0.88% 0.90% 0.91% 0.89%

Ratio of net investment income to
average net assets 2.16% 2.41% 2.28% 4.71% 3.69%

Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly 2.14% 2.40% 2.23% 4.60% 3.60%

Portfolio turnover 9% 5% 7% 8% 19%
------------------------------------------------------------------------------------------------------
(1) Per share information for the years ended December 31, 1997, 1998 and 1999 was based on the
average shares outstanding method.

(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
Total return reflects expense limitations in effect for the Series.
</TABLE>

<PAGE>

REIT Series

Our investment strategies

The REIT Series strives to achieve maximum long-term total return. Capital
appreciation is a secondary objective. We invest 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.

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.

We do not normally acquire securities for short term purposes; however, we may
take advantage of short-term opportunities that are consistent with the Series'
investment objectives.

REIT Series uses the same investment strategy as Delaware REIT Fund, a separate
fund in the Delaware Investments family, although performance may differ
depending on such factors as the size of the funds and the timing of investments
and redemptions. The Series' investment objective is non-fundamental. This means
that the Board of Trustees may change the objective without obtaining
shareholder approval. If the objective were changed, we would notify
shareholders before the change in the objective became effective.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

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 a
proportionate share of the expenses of a fund and indirectly
shares similar expenses of the REITs.

Real estate industry operating companies: We consider a REOC We may invest in equity securities of REOCs that meet the
to be a company that derives at least 50% of its gross criteria described to the left.
revenues or net profits from:

o ownership, development, construction, financing, management
or sale of commercial, industrial or residential real
estate; or

o products or services related to the real estate industry,
such as building supplies or mortgage servicing.

Foreign securities and American Depositary Receipts: The Series' investments may from time to time include
Securities of foreign entities issued directly or, in the case sponsored or unsponsored American Depositary Receipts that are
of American Depositary Receipts, through a U.S. bank. ADRs actively traded in the United States.
represent the bank's holdings of a stated number of shares of
a foreign corporation. An ADR entitles the holder to all We may invest up to 10% of the Series' assets in foreign
dividends and capital gains earned by the underlying foreign securities (not including ADRs).
shares. ADRs are bought and sold the same as U.S. securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

85
<PAGE>

REIT Series (continued)

- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
REIT Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Options and futures: Options represent a right to buy or sell If we have stocks that appreciated in price, we may want to
a security or group of securities at an agreed upon price at a protect those gains when we anticipate adverse conditions. We
future date. The purchaser of an option may or may not choose might use options or futures to neutralize the effect of any
to go through with the transaction. price declines, without selling the security. We might also
use options or future to gain exposure to a particular market
Writing a covered call option on a security obligates the segment without purchasing individual securities in that
owner of the security to sell it at an agreed upon price on an segment. We might use this approach if we had excess cash that
agreed upon date (usually no more than nine months in the we wanted to invest quickly.
future.) The owner of the security receives a premium payment
from the purchaser of the call, but if the security We might use covered call options if we believe that doing so
appreciates to a price greater than the agreed upon selling would help the Series to meet its investment objective.
price, the series would lose out on those gains.
Use of these strategies can increase the operating costs of
Futures contracts are agreements for the purchase or sale of the Series and can lead to loss of principal.
securities at a specified price, on a specified date. Unlike
an option, a futures contract must be executed unless it is
sold before the settlement date.

Options and futures are generally considered to be derivative
securities.

Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Series, and a seller of securities in which the seller investment for our cash position. In order to enter into
agrees to buy the securities back within a specified time at repurchase agreements, the Series must have collateral of at
the same price the buyer paid for them, plus an amount equal least 102% of the repurchase price. Except when we believe a
to an agreed upon interest rate. Repurchase agreements are temporary defensive approach is appropriate, the Series will
often viewed as equivalent to cash. not hold more than 5% of its total assets in cash or other
short-term investments. All short-term investments will be
rated AAA by S&P or Aaa by Moody's or if unrated, be of
comparable quality, based on our evaluation.The Series will
only enter into repurchase agreements in which the collateral
is U.S. government securities.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including those
resale is restricted under securities law. that are eligible for resale only among certain institutional
buyers without registration which are commonly known as Rule
144A Securities. Restricted securities that are determined to
be illiquid may not exceed the Series' 15% limit on illiquid
securities, which is described below.

Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid securities,
market, and cannot be easily sold within seven days at including repurchase agreements with maturities of over seven
approximately the price that the Series has valued them. days.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

The REIT Series may also invest in other securities including convertible
securities including enhanced convertible securities as well as, rights and
warrants to purchase common stock, preferred stocks, mortgage-backed securities,
U.S. government securities and zero coupon 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 The Series may lend up to 25% of its assets to qualified
dealers and institutional investors for their use in security transactions.
These transactions will generate additional income for the Series.

Borrowing from banks The Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. Borrowing money could
result in the Series being unable to meet its investment objective. The Series
will not borrow money in excess of one-third of the value of its net assets.

Temporary defensive positions For temporary defensive purposes, REIT Series may
hold a substantial portion of its assets in cash or cash equivalents. To the
extent it holds cash or cash equivalents, the Series may be unable to achieve
its investment objective.

Portfolio turnover We anticipate that the 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 Investing in any mutual fund involves risk,
in REIT Series 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. 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.

- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
REIT 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 appreciate over an extended time
market--will decline in value because of factors such as frame regardless of interim market fluctuations. We do not try
economic conditions, future expectations or investor to predict overall market movements and generally do not trade
confidence. for short-term purposes.

Industry and security risk is the risk that the value of In REIT Series we hold a number of different individual
securities in a particular industry or the value of an securities, seeking to manage security risk. However, we do
individual stock or bond will decline because of changing concentrate in the real estate industry. As a consequence, the
expectations for the performance of that industry or for the share price of the Series may fluctuate in response to factors
individual company issuing the stock or bond. affecting that industry, and may fluctuate more widely than a
portfolio that invests in a broader range of industries. The
Series may be more susceptible to any single economic,
political or regulatory occurrence affecting the real estate
industry.

Interest rate risk is the risk that securities will decrease REIT Series is subject to interest rate risk. If the Series
in value if interest rates rise and conversely rise in value invests in real estate investment trusts that hold fixed rate
when interest rates fall. obligations, we would expect the value of those trusts to
decrease if interest rates rise and increase if interest rates
decline. However, lower interest rates also tend to increase
the chances that a bond will be refinanced, which can hurt the
returns of REITs that hold fixed rate obligations. We strive
to manage this risk by monitoring interest rates and
evaluating their potential impact on securities already in the
portfolio or those we are considering for purchase.

Real estate industry risks include among others: Since the Series invests principally in REITs, it is subject
o possible declines in the value of real estate; to the risks associated with the real estate industry. We will
o risks related to economic conditions; strive to manage these risks through careful selection of
o possible shortage of mortgage funds; individual REIT securities; however, investors should
o overbuilding and extended vacancies; carefully consider these risks before investing in the Series.
o increased competition;
o changes in property taxes, operating expenses or zoning
laws;
o costs of environmental clean-up, or damages from natural
disasters;
o limitations or fluctuations in rent payments;
o cashflow fluctuations; and
o defaults by borrowers.

REITs are also subject to the risk of failing to qualify for
tax-free pass-through of income under the Internal Revenue
Code and/or failing to qualify for an exemption from
registration as an investment company under the Investment
Company Act of 1940.

Non-diversified funds risk: Non-diversified investment REIT Series is a non-diversified fund and subject to this
companies have the flexibility to invest as much as 50% of risk. Nevertheless, we typically hold securities from a
their assets in as few as two issuers with no single issuer variety of different issuers, representing different sectors
accounting for more than 25% of the portfolio. The remaining of the real estate industry. We also perform extensive
50% of the portfolio must be diversified so that no more than analysis on all securities. We are particularly diligent in
5% of a series' assets is invested in the securities of a reviewing securities that represent a larger percentage of
single issuer. Because a non-diversified fund may invest its portfolio assets.
assets in fewer issuers, the value of series shares may
increase or decrease more rapidly than if the series were
fully diversified.

Foreign risk is the risk that foreign securities may be We may invest up to 10% of the REIT Series' total assets in
adversely affected by political instability (including foreign securities; however we typically invest only a small
governmental seizures or nationalization of assets), changes portion of assets in foreign securities, so this is not
in currency exchange rates, foreign economic conditions or expected to be a major risk to the Series.
inadequate regulatory and accounting standards. Foreign
markets may also be less efficient, less liquid, have greater
price volatility, less regulation and higher transaction costs
than U.S. markets.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

87
<PAGE>
REIT Series (continued)

Futures and options risk is the possibility that a series may REIT Series may use futures contracts and options on futures
experience a loss if it employs an options or futures strategy contracts, as well as options on securities for hedging
related to a security or a market index and that security or purposes. We limit the amount of the Series' assets that may
index moves in the opposite direction from what the manager be committed to these strategies.
anticipated. Futures and options also involve additional
expenses, which could reduce any benefit or increase any loss
the series gains from using the strategy.

Options and futures contracts on foreign currencies, and
forward contracts, entail particular risks related to
conditions affecting the underlying currency.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment manager The Series is managed by Delaware Management Company.
and sub-adviser Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. Lincoln Investment
Management, Inc. (Lincoln) is the Series' sub-adviser. As
sub-adviser, Lincoln provides Delaware with investment
recommendations, asset allocation advice, research,
economic analysis and other investment services regarding
the types of securities in which we invest. For its
services to the Series, the manager and sub-adviser were
paid an aggregate fee of 0.64% of average daily net assets
for the last fiscal year, reflecting a waiver of fees by
the manager.

Lincoln is a wholly owned subsidiary of Lincoln National
Corporation and was incorporated in 1930. Lincoln's primary
activity is institutional fixed-income investment
management and consulting. These activities include
fixed-income portfolios, private placements, real estate
debt and equity, and asset/liability management. Lincoln
provides investment management services to Lincoln National
Corporation, its principal subsidiaries and affiliated
registered investment companies, and acts as investment
adviser to other unaffiliated clients.

Portfolio managers Christopher S. Beck, Vice President/Senior Portfolio
Manager, together with Thomas J. Trotman and Damon J.
Andres, both Vice Presidents, have primary responsibility
for making day-to-day investment decisions for the REIT
Series. Mr. Beck was named to the REIT management team on
May 6, 1999, joining Mr. Trotman who has been on the team
since 1998 and Mr. Andres who has been on the team since
1997.

Christopher S. Beck, Vice President/Senior Portfolio
Manager, has 19 years of investment management experience,
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 at
Pitcairn Trust Company for two years. Mr. Beck holds a BS
from the University of Delaware, an MBA from Lehigh
University and is a CFA charterholder.

Thomas J. Trotman, Vice President/Portfolio Manager, earned
a bachelor's degree in Accounting from Muhlenberg College
and an MBA from Widener University. Prior to joining
Delaware Investments in 1995, he was Vice President and
Director of Investment Research at Independence Capital
Management. Before that, he held credit-related positions
at Marine Midland Bank, U.S. Steel Corporation, and Amerada
Hess. Mr. Trotman is a CFA charterholder.

Damon J. Andres, Vice President/Portfolio Manager, 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, he provided
investment consulting services as a Consulting Associate
with Cambridge Associates, Inc. in Arlington, Virginia.

88
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
REIT Series
- -----------------------------------------------------------------------------------------------------------------------------------
Period 5/4/98(1)
Year Ended through
12/31/99 12/31/99
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The financial Net asset value, beginning of period $9.100 $10.000
highlights table is
intended to help you Income (loss) from investment operations
understand the
Series' financial Net investment income 0.334 0.217
performance. The
total returns in the Net realized and unrealized loss on investments (0.574) (1.117)
table represent the ------ ------
rate that an investor Total from investment operations (0.240) (0.900)
would have earned or ------ ------
lost on an investment Less dividends:
in the Series (assuming
reinvestment of all Dividends from net investment income (0.190) none
dividends and ------ ------
distributions). All Total dividends (0.190) none
"per share" information ------ ------
reflects financial Net asset value, end of period $8.670 $ 9.100
results for a single ====== =======
Series share. This Total return(2) (2.61%) (9.00%)
information has been
audited by Ernst & Ratios and supplemental data
Young LLP, whose
report, along with Net assets, end of period (000 omitted) $11,624 $5,562
the Series' financial
statements, is included Ratio of expenses to average net assets 0.85% 0.85%
in the Series' annual
report, which is Ratio of expenses to average net assets prior to expense limitation
available upon request and expenses paid indirectly 0.96% 1.02%
by calling 800.523.1918.
Ratio of net investment income to average net assets 5.65% 6.42%

Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 5.54% 6.25%

Portfolio turnover 33% 39%
---------------------------------------------------------------------------------------------------
(1) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.

(2) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for all
periods shown. Total return reflects expense limitations in effect for the Series.

</TABLE>

89
<PAGE>

Select Growth Series

Our investment strategies

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; and

o discounted cash flows that are high relative to other stocks.

Once we identify stocks that have these characteristics, we further evaluate the
company. We look at the capability of the management team, the strength of the
company's position within its industry, whether its internal structure can
support continued growth, how high is the company's return on equity, how much
of the company's profits are reinvested into the company to fuel additional
growth, and 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.

We maintain a well-diversified portfolio, typically holding a
mix of different stocks, representing a wide array of industries and a mix of
small companies, medium-size companies and large companies.

Select Growth Series uses the same investment strategy as Delaware Select Growth
Fund, a separate fund in the Delaware Investments family, although performance
may differ depending on such factors as the size of the funds and the timing of
investments and redemptions.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Select Growth Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership We invest at least 65% of the Series' total assets in equity
in a corporation. Stockholders participate in the securities (including common stocks and convertible
corporation's profits and losses, proportionate to the number securities). Generally, however, we invest 90% to 100% of net
of shares they own. assets in common stock. We may invest in companies of any size
greater than $300 million in market capitalization.

Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid securities,
market, and cannot be easily sold within seven days at including repurchase agreements with maturities of over seven
approximately the price that a series has valued them. days.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

90
<PAGE>

Select Growth Series may also invest in other securities including preferred
stocks, warrants, rights, futures, options, debt securities of government or
corporate issuers or investment company securities. Select Growth Series may
invest up to 10% of its net assets in foreign securities (including ADRs);
however, the manager has no present intention of doing so. Please see the
Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.

Lending securities Select Growth Series may lend up to 25% of its assets to
qualified dealers and institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

Purchasing securities on a when-issued or delayed delivery basis Consistent with
its investment objective, the Series may invest in U.S. government securities
and corporate debt obligations on a when-issued or delayed delivery basis; that
is, paying for securities before delivery or taking delivery at a later date.
During the time between the commitment and settlement, the Series does not
accrue interest, but the market value of the bonds may fluctuate. This can
result in the Series' share value increasing or decreasing. The Series will
designate cash or securities in amounts sufficient to cover its obligations, and
will value the designated assets daily.

Borrowing from banks Select Growth Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. It
will not purchase new securities if borrowing exceeds 5% of net assets.

Temporary defensive postions For temporary defensive purposes, Select Growth
Series may hold all of its assets in high quality fixed-income securities, cash
or cash equivalents. To the extent it holds these securities, the Series may be
unable to achieve its investment objective.

Portfolio turnover We anticipate that Select Growth Series' annual portfolio
turnover may be greater 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. High turnover can result in increased transaction costs and tax liability.

The risks of Investing in any mutual fund involves risk,
investing in Select including the risk that you may receive little or
Growth Series 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. Following are the
chief risks you assume when investing in Select
Growth Series. Please see the Statement of
Additional Information for further discussion of
these risks and other risks not discussed here.

Industry and security risk is the risk that the value of We limit the amount of Select Growth Series' assets invested
securities in a particular industry or the value of an in any one industry and in any individual security. We also
individual stock or bond will decline because of changing follow a rigorous selection process before choosing securities
expectations for the performance of that industry or for the and continuously monitor them while they remain in the
individual company issuing the stock. portfolio.

Company size risk is the risk that prices of small and Select Growth Series seeks opportunities among companies of
medium-size companies may be more volatile than larger all sizes. Because its portfolio does not concentrate
companies because of limited financial resources or dependence specifically on small or medium-size companies, this risk may
on narrow product lines. be balanced by our holdings of large companies.

Interest rate risk is the risk that securities will decrease We analyze each company's financial situation and its cash
in value if interest rates rise. The risk is generally flow to determine the company's ability to finance future
associated with bonds; however, because small and medium-size expansion and operations. The potential affect that rising
companies often borrow money to finance their operations, they interest rates might have on a stock is taken into
may be adversely affected by rising interest rates. consideration before the stock is purchased.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price that
a series values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

91
<PAGE>

Select Growth Series (continued)

Investment manager The Series is managed by Delaware Management
Company. Delaware Management Company makes
investment decisions for the Series, manages the
Series' business affairs and provides daily
administrative services. The Series will pay the
manager the following fee on an annual basis:
0.75% on the first $500 million of average daily
net assets; 0.70% on the next $500 million; 0.65%
on the next $1.5 billion and 0.60% on assets in
excess of $2.5 billion.

Portfolio managers Gerald S. Frey has primary responsibility for
making day-to-day investment decisions for the
Select Growth Series. When making investment
decisions for the Series, Mr. Frey regularly
consults with Marshall T. Bassett, John A.
Heffern, Jeffrey W. Hynoski, Steven T. Lampe and
Lori P. Wachs.

Gerald S. Frey, Senior Vice President/Senior
Portfolio Manager, has 23 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 for the Series since its
inception.

Marshall T. Bassett, Vice President/Portfolio
Manager, joined Delaware Investments in 1997.
Before joining Delaware Investments, 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 a bachelor's degree and an
MBA from Duke University.

John A. Heffern, Vice President, Portfolio
Manager, earned bachelors and MBA degrees at the
University of North Carolina at Chapel Hill. Prior
to joining Delaware Investments in 1997, he was a
Senior Vice President, Equity Research at NatWest
Securities Corporation's Specialty Financial
Services unit. Before that, he was a Principal and
Senior Regional Bank Analyst at Alex. Brown &
Sons.

Jeffrey W. Hynoski, Vice President/Portfolio
Manager, joined Delaware Investments in 1998.
Prior to joining Delaware Investments, 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.

Steven T. Lampe, Vice President, Portfolio
Manager, received a bachelor's degree in Economics
and an MBA degree with a concentration in Finance
from the University of Pennsylvania's Wharton
School. He joined Delaware Investments in 1995 and
covers the financial services and business
services sectors for small and mid-capitalization
growth stocks. He previously served as a tax/audit
manager at Price Waterhouse, specializing in
financial services firms. Mr. Lampe is a Certified
Public Accountant.

Lori P. Wachs, Vice President/Portfolio Manager,
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.

92
<PAGE>

Financial highlights

Select Growth Series
(formerly Aggressive Growth Series)
- ---------------------------------------------------------------------------------------------------------------------
Period 5/3/99(1)
through
12/31/99
--------------------------------------------------------------------------------
<S> <C> <C>
The financial Net asset value, beginning of period $10.000
highlights table is
intended to help you Income from investment operations
understand the
Series' financial Net investment income 0.011
performance. The
total return in the Net realized and unrealized gain on investments 4.289
table represents the -----
rate that an investor Total from investment operations 4.300
would have earned -----
on an investment Net asset value, end of period $14.300
in the Series (assuming =======
reinvestment of all Total return(2) 42.90%
dividends and
distributions). All Ratios and supplemental data
"per share" information
reflects financial Net assets, end of period (000 omitted) $53,529
results for a single
Series share. This Ratio of expenses to average net assets 0.80%
information has been
audited by Ernst & Ratio of expenses to average net assets
Young LLP, whose prior to expense limitation and expenses paid indirectly 0.81%
report, along with
the Series' financial Ratio of net investment income to average net assets 0.32%
statements, is included
in the Series' annual Ratio of net investment income to average net assets
report, which is prior to expense limitation and expenses paid indirectly 0.29%
available upon request
by calling 800.523.1918. Portfolio turnover 174%
--------------------------------------------------------------------------------
(1) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.

(2) Total return does not reflect expenses that apply to Separate Accounts or
to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown. Total return reflects
expense limitations in effect for the Series.

</TABLE>

<PAGE>

Small Cap Value Series

Our investment strategies

We strive to identify small companies that we believe 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 stocks of small cap companies, those having a market
capitalization generally less than $1.5 billion at the time of purchase. 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 a mix of different stocks, representing a wide
array of industries.

Small Cap Value Series uses the same investment strategy as Delaware Small Cap
Value Fund, a separate fund in the Delaware Investments family, although
performance may differ depending on such factors as the size of the funds and
the timing of investments and redemptions.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

Real estate investment trusts: A company, usually traded The Series is permitted to invest in REITs and would typically
publicly, that manages a portfolio of real estate to earn do so when this sector or companies within the sector appeared
profits for shareholders. to offer opportunities for price appreciation.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including those
resale is restricted under securities law. that are eligible for resale only among certain institutional
buyers without registration which 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 have a ready We may invest up to 10% of net assets in illiquid securities.
market, and cannot be easily sold within seven days at
approximately the price that a series has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

94
<PAGE>

Small Cap Value Series may also invest in other securities including convertible
securities, warrants, preferred stocks, bonds and foreign securities. The Series
may also enter into futures 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 Small Cap Value Series may lend up to 25% of its assets to
qualified dealers and institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

Borrowing from banks Small Cap Value Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. The
Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, Small Cap Value
Series may hold a substantial portion of its assets in fixed-income obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
corporate bonds rated A or above by an NRSRO and cash or cash equivalents. To
the extent it holds these securities, the Series may be unable to achieve its
investment objective.

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.

The risks of investing Investing in any mutual fund involves risk,
in Small Cap Value including the risk that you may receive little or
Series 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
held for a number of years. 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 other risks not discussed here.

<PAGE>

Industry and security risk is the risk that the value of We limit the amount of Small Cap Value Series' assets invested
securities in a particular industry or the value of an in any one industry and in any individual security. We also
individual stock or bond will decline because of changing follow a rigorous selection process before choosing securities
expectations for the performance of that industry or for the and continuously monitor them while they remain in the
individual company issuing the stock. portfolio.

Small company risk is the risk that prices of smaller Small Cap Value Series maintains a well-diversified portfolio,
companies may be more volatile than larger companies because selects stocks carefully and monitors them continuously. And,
of limited financial resources or dependence on narrow product because we focus on stocks that are already selling at
lines. relatively low prices, we 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 will decrease We analyze each company's financial situation and its cashflow
in value if interest rates rise. The risk is generally to determine the company's ability to finance future expansion
associated with bonds; however, because smaller companies and operations. The potential affect that rising interest
often borrow money to finance their operations, they may be rates might have on a stock is taken into consideration before
adversely affected by rising interest rates. the stock is purchased.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price that
a series values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Small Cap Value Series (continued)

Investment manager The Series is managed by Delaware Management
Company. Delaware Management Company makes
investment decisions for the Series, manages the
Series' business affairs and provides daily
administrative services. For its services to the
Series, the manager was paid 0.75% of average
daily net assets for the last fiscal year.

Portfolio managers Christopher S. Beck has primary responsibility for
making day-to-day investment decisions for the
Small Cap Value Series. In making investment
decisions for the Series, Mr. Beck consults with
Andrea Giles.

Christopher S. Beck, Vice President/Senior
Portfolio Manager, has 19 years of investment
experience, 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. Mr.
Beck holds a BS from the University of Delaware,
an MBA from Lehigh University and is a CFA
charterholder. Mr. Beck has been managing the
Small Cap Value Series since May 1997.

Andrea Giles, Vice President/Portfolio Manager,
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>

Financial highlights

Small Cap Value Series
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.450 $17.920 $14.500 $12.470 $10.290
The financial
highlights table is Income (loss) from investment operations
intended to help you
understand the Net investment income 0.182 0.196 0.122 0.112 0.192
Series' financial
performance. The Net realized and unrealized gain
total returns in the (loss) on investments (0.997) (1.036) 4.338 2.548 2.208
table represent the ------- ------- ------- ------- -------
rate that an investor Total from investment operations (0.815) (0.840) 4.460 2.660 2.400
would have earned or ------- ------- ------- ------- -------
lost on an investment Less dividends and distributions
in the Series (assuming
reinvestment of all Dividends from net investment income (0.195) (0.135) (0.110) (0.180) (0.150)
dividends and
distributions). All Distributions from net realized
"per share" information gain on investments (0.080) (0.495) (0.930) (0.450) (0.070)
reflects financial ------- ------- ------- ------- -------
results for a single Total dividends and distributions (0.275) (0.630) (1.040) (0.630) (0.220)
Series share. This ------- ------- ------- ------- -------
information has been Net asset value, end of year $15.360 $16.450 $17.920 $14.500 $12.470
audited by Ernst & ======= ======= ======= ======= =======
Young LLP, whose Total return(1) (4.86%) (4.79%)(2) 32.91%(2) 22.55%(2) 23.85%(2)
report, along with
the Series' financial Ratios and supplemental data
statements, is included
in the Series' annual Net assets, end of period (000 omitted) $95,425 $103,989 $84,071 $23,683 $11,929
report, which is
available upon request Ratio of expenses to average net assets 0.85% 0.83% 0.80% 0.80% 0.80%
by calling 800.523.1918.
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 0.85% 0.85% 0.90% 0.99% 0.96%

Ratio of net investment income
to average net assets 1.16% 1.32% 1.24% 1.28% 2.13%

Ratio of net investment income to
average net assets prior to expense
limitation and expenses paid
indirectly 1.16% 1.30% 1.14% 1.09% 1.97%

Portfolio turnover 47% 45% 41% 84% 71%
----------------------------------------------------------------------------------------------
(1) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for
all periods shown.

(2) Total return reflects expense limitations in effect for the Series.
</TABLE>

97
<PAGE>

Social Awareness Series

Our investment strategies

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.

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. We use a computer-driven selection
process designed to identify these stocks. 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 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.

Social Awareness Series uses the same investment strategy as Delaware Social
Awareness Fund, a separate fund in the Delaware Investments family, although
performance may differ depending on such factors as the size of the funds and
the timing of investments and redemptions.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation and may pay dividends as well.

Restricted and illiquid securities: Restricted securities are We may invest up to 10% of net assets in illiquid securities.
privately placed securities whose resale is restricted under For this Series, the 10% limit includes restricted securities
securities law. Illiquid securities are securities that do not such as privately placed securities that are eligible for
have a ready market, and cannot be easily sold within seven resale only among certain institutional buyers without
days at approximately the price that a series has valued them. registration, which are commonly known as "Rule 144A
Securities" and repurchase agreements with maturities of over
seven days.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Social Awareness Series is permitted to invest in all available types of equity
securities, including preferred stock, warrants, convertible securities and
foreign securities. The Series may also enter into futures 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 Social Awareness Series may lend up to 25% of its assets to
qualified brokers, dealers and institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

Borrowing from banks Social Awareness Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. The
Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, Social Awareness
Series may hold a substantial portion of its assets in cash or cash equivalents.
To the extent it holds these securities, the Series may be unable to achieve its
investment objective.

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.

The risks of investing Investing in any mutual fund involves risk,
in Social Awareness including the risk that you may receive little or
Series 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. 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 other risks not discussed here.

Industry and security risk is the risk that the value of We limit the amount of Social Awareness Series' assets
securities in a particular industry or the value of an invested in any one industry and in any individual security.
individual stock or bond will decline because of changing
expectations for the performance of that industry or for the Because Social Awareness Series avoids investing in companies
individual company issuing the stock or bond. that don't meet socially responsible criteria, its exposure to
certain industry sectors may be greater or less than similar
funds or market indexes. This could affect its performance
positively or negatively, depending on the performance of
those sectors.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price that
the Series has valued them.

Limited market risk is the risk that because the Series avoids Because the Series only invests in companies that meet its
certain companies not considered socially responsible, it definition of "socially responsible," this risk is
could miss out on strong performance from those companies. unavoidable.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Social Awareness Series (continued)

Investment manager The Series is managed by Delaware Management
and sub-adviser Company. Vantage Investment Advisors is the
Series' sub-adviser. As sub-adviser, Vantage 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. For their services to the Series, the
manager and sub-adviser were paid an aggregate fee
of 0.70% of average daily net assets for the last
fiscal year, reflecting a waiver of fees by the
manager.

Vantage Investment Advisors was founded in 1979.
It provides investment advice to pension plans,
endowments, insurance and commingled products.

Portfolio managers Enrique Chang and Christopher P. Harvey have
primary responsibility for making day-to-day
investment decisions for Social Awareness Series.

Enrique Chang, Senior Vice President and Chief
Investment Officer of Vantage Investment Advisors,
became co-manager of the Series 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 Advisors, became co-manager of the Series
in January 1999. Mr. Harvey manages portfolios,
conducts investment research and assists in equity
trading. He graduated from Bucknell University with
a BS degree in accounting. He received an MBA 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.

100
<PAGE>

Financial highlights

Social Awareness Series
- ----------------------------------------------------------------------------------------------------------------------------------
Period
5/1/97(1)
Year Ended 12/31 through
1998 1999 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

The financial Net asset value, beginning of period $14.550 $ 12.840 $10.000
highlights table is
intended to help you Income from investment operations
understand the
Series' financial Net investment income 0.036 0.065 0.051
performance. The
total returns in the Net realized and unrealized gain on investments 1.834 1.880 2.789
table represent the ------- -------- -------
rate that an
investor would have Total from investment operations 1.870 1.945 2.840
earned or lost on an ------- -------- -------
investment in the
Series (assuming Less dividends and distributions
reinvestment of all
dividends and Dividends from net investment income (0.060) (0.050) none
distributions). All
"per share" Distributions from net realized gain on investments none (0.185) none
information reflects ------- -------- -------
financial results
for a single Series Total dividends and distributions (0.060) (0.235) none
share. This ------- -------- -------
information has been
audited by Ernst & Net asset value, end of period $16.360 $ 14.550 $12.840
Young LLP, whose ======= ======== =======
report, along with
the Series' Total return(2) 12.91% 15.45% 28.40%
financial
statements, is Ratios and supplemental data
included in the
Series' annual Net assets, end of period (000 omitted) $36,739 $ 26,962 $ 7,800
report, which is
available upon Ratio of expenses to average net assets 0.85% 0.83% 0.80%
request by calling
800.523.1918. Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.90% 0.89% 1.40%

Ratio of net investment income to average net assets 0.30% 0.80% 1.13%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.25% 0.74% 0.53%

Portfolio turnover 22% 30% 52%
----------------------------------------------------------------------------------------------------------
(1) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown. Total
return reflects expense limitations in effect for the Series.

</TABLE>

101

<PAGE>

Strategic Income Series

Our investment strategies

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 high current income and total return. Certain economic
and market events generally may have a greater impact on certain types of bonds.
By spreading the portfolio assets among three key types of bonds, we strive to
reduce the affect that such events might have on the portfolio. The foundation
of our strategy is the belief that when one or more bond sectors are not
performing well, the others may continue to provide high income and appreciation
potential, helping to support the Series' performance.

Following are the three key sectors we focus on as well as our general
investment approach in each sector:

o U.S. government and high-quality corporate bonds are selected primarily on
the basis of their income potential. In periods of slower U.S. economic
growth, these bonds might also provide a stabilizing influence on the
portfolio which could enhance total return.

o U.S. high-yield corporate bonds are primarily used to increase the
portfolio's income potential. These bonds are of lower quality and involve
the risk that the companies issuing them may not be able to pay interest or
repay principal. However, we carefully select the high-yield bonds for the
portfolio after evaluating both the company's fundamental strength and the
bond's liquidity.

o Foreign bonds are used to add diversification to the portfolio. Because
foreign markets are often affected by different economic cycles than the
U.S., foreign bonds may experience performance cycles that are different as
well. In selecting foreign bonds for the portfolio, we strive to manage the
risk associated with foreign investing through a thorough analysis of the
bond's issuer and the inflation trends in the country where the bond is
issued.

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.

Strategic Income Series uses the same investment strategy as Delaware Strategic
Income Fund, a separate fund in the Delaware Investments family, although
performance may differ depending on such factors as the size of the funds and
the timing of investments and redemptions.

The securities we Fixed-income securities offer the potential for
typically invest in greater income payments than stocks, and also may
provide capital appreciation.

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Income Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
High-yield corporate bonds: Debt obligations The Series may invest up to 60% of net assets in high-yield corporate
issued by a corporation and rated lower than bonds. Emphasis is typically on those rated BB or Ba by an NRSRO.
investment grade by an NRSRO such as S&P or
Moody's. High-yield bonds are issued by We carefully evaluate an individual company's financial situation, its
corporations that have poor credit quality and may management, the prospects for its industry and the technical factors
have difficulty repaying principal and interest. 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 may invest in unrated bonds if we believe
their credit quality is comparable to the rated bonds we are permitted
to invest in. Unrated bonds may be more speculative in nature than
rated bonds.

U.S. government securities: Direct U.S. The Series may invest up to 60% of net assets in direct U.S.
obligations including bills, notes, bonds as well government obligations; however, these securities will typically be a
as other debt securities issued by the U.S. smaller percentage of the portfolio because they generally do not
Treasury or securities of U.S. government agencies offer as high a level of current income as other fixed-income
or instrumentalities which are backed by the full securities the Series may invest in.
faith and credit of the United States.

Mortgage-backed securities: Fixed-income We may invest up to 60% of net assets in government-related
securities that represent pools of mortgages, with mortgage-backed securities or fully collateralized privately issued
investors receiving principal and interest mortgage-backed securities.
payments as the underlying mortgage loans are paid
back. Many are issued and guaranteed against We may invest up to 20% of net assets in mortgage-backed securities
default by the U.S. government or its agencies or issued by private companies if the securities are not collateralized
instrumentalities, such as the Federal Home Loan by the U.S. government, or its agencies or instrumentalities. However,
Mortgage Corporation, Fannie Mae and the these securities must be rated at the time of purchase in one of the
Government National Mortgage Association. Others four highest categories by an NRSRO such as S&P or Moody's. They must
are issued by private financial institutions, with also represent interests in whole-loan mortgages, multi-family
some fully collateralized by certificates issued mortgages, commercial mortgages and other motgage collateral supported
or guaranteed by the U.S. government or its by a first mortgage lien on real estate. The privately issued
agencies or instrumentalities. securities we invest in are either CMOs or REMICs (see below).

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</TABLE>

102
<PAGE>

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.

Investment grade corporate bonds: Debt obligations The Series may invest up to 60% of net assets in investment grade
issued by a corporation rated in one of the four corporate bonds.
highest categories by an NRSRO (or, if unrated,
that we believe are of equal quality). Debt
securities within the top three categories by an
NRSRO comprise what are known as high-grade bonds
and are regarded as having a strong ability to pay
principal and interest. Securities in the fourth
category by an NRSRO are known as medium-grade
bonds and are 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 and foriegn We may invest in foreign government securities and primarily focus on
corporate bonds: Foriegn government securities better quality bonds with investment-grade credit ratings. The Series
issued by foreign governments or supranational may also invest in securities issued by supranational entities, which
entities. A supranational entity is an entity are typically of higher quality.
established or financially supported by the
national governments of one or more countries. The We may invest in both rated and unrated foreign securities. We may
International Bank for Reconstruction and invest both in investment grade securities and non-investment grade
Development (more commonly known as the World (i.e., those rated BB or lower by S&P or Fitch, Ba or lower by
Bank) is one example of a supranational entity. Moody's, or similarly rated by another NRSRO.)

Foreign corporate bonds are debt obligations However, up to 15% of the Series' assets may also be invested in
issued by a foreign corporation. foreign securities issued by emerging or developing countries, which
may be lower rated, including securities rated below investment grade.

Zero coupon bonds and pay-in-kind bonds: Zero We may invest in zero coupon bonds and payment in kind bonds, though
coupon securities are debt obligations which do we do not expect this to be a significant component of our strategy.
not entitle the holder to any periodic payments of The market prices of these bonds are generally more volatile than the
interest prior to maturity or a specified date market prices of securities that pay interest periodically and are
when the securities begin paying current interest. likely to react to changes in interest rates to a greater degree than
Therefore, they are issued and traded at a price interest-paying bonds having similar maturities and credit quality.
lower than their face amounts or par value. They may have certain tax consequences which, under certain
Payment-in-kind bonds pay interest or dividends in conditions, could be adverse to the Fund.
the form of additional bonds or preferred stock.

<PAGE>

Equity securities: Common stocks, preferred stocks Up to 10% of the Series' assets may be invested in U.S. equity
(including adjustable rate preferred stocks) and securities.
other equity securities, such as convertible
securities and warrants. We would select only equity securities that were consistent with the
Series' objective of high current income and total return.

Options and futures: Options represent a right to At times when we anticipate adverse conditions, we may want to protect
buy or sell a security or group of securities at gains on securities without actually selling them. We might use
an agreed upon price at a future date. The options or futures to neutralize the effect of any price declines,
purchaser of an option may or may not choose to go without selling the bond or bonds, or as a hedge against changes in
through with the transaction. interest rates.

Futures contracts are agreements for the purchase Use of these strategies can increase the operating costs of the Series
or sale of securities at a specified price, on a and can lead to loss of principal.
specified date. Unlike an option, a futures
contract must be executed unless it is sold before
the settlement date.

Options and futures are generally considered to be
derivative securities.

Investment company securities: In some foreign We may invest in closed-end investment companies consistent with the
countries, investments by a mutual fund may only 1940 Act requirements. These investments involve an indirect payment
be made through investments in closed-end of a portion of the other investment companies' expenses, including
investment companies that in turn invest in the advisory fees.
securities of such countries.

Brady Bonds: These are debt securities issued We may invest in Brady Bonds. We believe that the economic reforms
under the framework of the Brady Plan, an undertaken by countries in connection with the issuance of Brady Bonds
initiative for debtor nations to restructure their makes the debt of countries that have issued Brady Bonds or those that
outstanding external indebtedness (generally, have announced plans to issue them a viable opportunity for
commercial bank debt). Brady Bonds tend to be of investment.
lower quality and more speculative than securities
of developed country issuers.
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</TABLE>

103
<PAGE>

Strategic Income Series (continued)

<TABLE>
<CAPTION>
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Securities How we use them
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Strategic Income Series
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<S> <C>
Foreign currency transactions: A forward contract We may invest in securities issued in any currency and may hold
involves an obligation to purchase or sell a foreign currency.
specific currency at a future date at a price set
at the time of the contract. Forward contracts are Although the Series values its assets daily in terms of U.S. dollars,
used to "lock-in" the price of a security that we do not convert our holdings of foreign currencies into U.S. dollars
will be purchased or sold, in terms of U.S. on a daily basis. We may, however, from time to time, purchase or sell
dollars or other currencies. 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 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 may use forward
contracts for defensive hedging purposes to attempt to protect the
value of the Series' current security or currency holdings. It may
also use forward contracts if it has agreed to sell a security and
wants to "lock-in" the price of that security, in terms of U.S.
dollars. Investors should be aware of the costs of currency
conversion. The Series will not use forward contracts for speculative
purposes.

These transactions may increase the Series' expenses.

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. The Series will only enter into repurchase
same price the buyer paid for them, plus an amount agreements in which the collateral is U.S. government securities.
equal to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.

Restricted securities: Privately placed securities We may invest in privately placed securities, including those that are
whose resale is restricted under securities law. eligible for resale only among certain institutional buyers without
registration which 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.

Interest rate swap and index swap agreements: In We may use interest rate swaps to adjust the Series' sensitivity to
an interest rate swap, a series receives payments interest rates, or to hedge against changes in interest rates.
from another party based on a floating interest
rate in return for making payments based on a Index swaps may be used to gain exposure to markets that the Series
fixed interest rate. An interest rate swap can invests in or as a substitute for futures options or forward contracts
also work in reverse, with a series receiving if such contracts are not directly available to the Series on
payments based on a fixed interest rate and making favorable terms.
payments based on a floating interest rate. In an
index swap, a series receives gains or incurs Interest rate swaps and index swaps will be considered illiquid
losses based on the total return of an index, in securities (see below).
exchange for making fixed or floating interest
rate payments to another party.

Illiquid securities: Securities that do not have a We may invest up to 10% of net assets in illiquid securities,
ready market, and cannot be easily sold within including repurchase agreements with maturities of over seven days.
seven days at approximately the price that a
series has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Series may also invest in other securities including real estate investment
trusts. Please see the Statement of Additional Information for additional
descriptions on these securities as well as those listed in the table.

Lending securities Strategic Income Series may lend up to 25% of its assets to
qualified brokers, dealers and institutional investors for their use in security
transactions. These transactions will generate additional income for the Series.

104
<PAGE>

Borrowing from banks Strategic Income Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective. The
Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, Strategic Income
Series may hold a substantial portion of its assets in cash or cash equivalents.
To the extent it holds these securities, the Series may be unable to achieve its
investment objective.

Portfolio turnover We anticipate that Strategic Income Series' annual portfolio
turnover will exceed 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.
High turnover can result in increased transaction costs and tax liability.

The risks of investing Investing in any mutual fund involves risk, including
in Strategic Income the risk that you may receive little or no return on
Series 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. Following are
the chief risks you assume when investing in Strategic
Income Series. Please see the Statement of Additional
Information for further discussion of these risks and
other risks not discussed here.

<TABLE>
<CAPTION>
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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 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 generally do not trade for short-term purposes.
expectations or investor confidence.
In evaluating the use of an index swap, we carefully consider how
Index swaps are subject to the same market risks market changes could affect the swap and how that compares to us
as the investment market or sector that the index investing directly in the market the swap is intended to represent.
represents. Depending on the actual movements of
the index and how well the portfolio managers
forecast those movements, a series could
experience a higher or lower return than
anticipated.

Industry and security risk is the risk that the We diversify the Series assets across three distinct sectors of the
value of securities in a particular industry or bond market and among a wide variety of individual issuers.
the 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 rate risk is the risk that securities The Series is subject to interest rate risk. We cannot eliminate that
will decrease in value if interest rates rise. The risk, but we do strive to manage it by monitoring economic conditions.
risk is greater for bonds with longer maturities
than for those with shorter maturities. We will not invest in swaps with maturities of more than two years.
Each business day we will calculate the amount the Series must pay for
Swaps may be particularly sensitive to interest any swaps it holds and will segregate cash or other liquid securities
rate changes. Depending on the actual movements of to cover that amount.
interest rates and how well the portfolio managers
anticipate them, a series could experience a
higher or lower return than anticipated.

<PAGE>

Credit risk The possibility that a bond's issuer Our careful, credit-oriented bond selection and our commitment to hold
(or an entity that insures the bond) will not be a diversified selection of high-yield bonds are designed to manage
able to make timely payments of interest and this risk.
principal.
Our holdings of high quality investment grade bonds are less subject
Investing in so-called "junk" or "high-yield" to credit risk and may help to balance any credit problems experienced
bonds entails the risk of principal loss, which by individual high-yield bond issuers or foreign issuers.
may be greater than the risk involved in
investment grade bonds. High-yield bonds are When selecting dealers with whom we would make interest rate or index
sometimes issued by companies whose earnings at swap agreements, we focus on those with high quality ratings and do
the time the bond is issued are less than the careful credit analysis before investing.
projected debt payments on the bonds.

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. It is likely that protracted periods of
economic uncertainty would cause increased
volatility in the market prices of high-yield
bonds, an increase in the number of high-yield
bond defaults and corresponding volatility in a
series' net asset value.

If there were a national credit crisis or an
issuer were to become insolvent, principal values
could be adversely affected.
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</TABLE>

105
<PAGE>

Strategic Income Series (continued)

<TABLE>
<CAPTION>
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Risks How we strive to manage them
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Strategic Income Series
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<S> <C>
Futures and options risk is the possibility that a We will use options and futures for defensive purposes, such as to
series may experience a significant loss if it protect gains in the portfolio without actually selling the security
employs an option or futures strategy related to a or to neutralize the impact of interest rate changes. We will not use
security or a market index and that security or futures and options for speculative reasons or in an effort to enhance
index moves in the opposite direction from what return.
the portfolio managers anticipated. Futures and
options also involve additional expenses, which
could reduce any benefit or increase any loss to a
series from using the strategy.

Foreign risk is the risk that foreign securities The Series will attempt to reduce foreign investing risks through
may be adversely affected by political instability portfolio diversification, credit analysis and attention to trends in
(including governmental seizures or the world economies, industries and financial markets.
nationalization of assets), changes in currency
exchange rates, foreign economic conditions or We carefully evaluate the political and economic situations in the
inadequate regulatory and accounting standards. countries where we invest and take these risks into account before we
Foreign markets may also be less efficient, less select securities for the portfolio. However, there is no way to
liquid, have greater price volatility, less eliminate foreign risks when investing internationally.
regulation and higher transaction costs than U.S.
markets.

Foreign government securities risks involve the Strategic Income Series attempts to reduce the risks associated with
ability of a foreign government or government investing in foreign governments by limiting the portion of portfolio
related issuer to make timely and ultimate assets that may be invested in such securities.
payments on its 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.

Currency risk is the risk that the value of an We may try to hedge currency risk by purchasing foreign currency
investment may be negatively affected by changes exchange contracts. By agreeing to purchase or sell foreign securities
in foreign currency exchange rates. Adverse at a pre-set price on a future date, the Series strives to protect the
changes in exchange rates may reduce or eliminate value of the stock it owns 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.

Emerging markets risk is the possibility that the While the Strategic Income Series may purchase securities of issuers
risks associated with international investing will in any foreign country, developed and emerging, no more than 15% of
be greater in emerging markets than in more the Series' assets may be invested in direct obligations of issuers
developed foreign markets because, among other located in emerging market countries.
things, emerging markets may have less stable
political and economic environments.

Liquidity risk is the possibility that securities A less liquid secondary market may have an adverse effect on our
cannot be readily sold within seven days at ability to dispose of particular issues, when necessary, to meet the
approximately the price that a series values them. Series' liquidity needs or in response to a specific event, such as
the declining creditworthiness of the issuer. In striving to manage
The high-yield secondary market is particularly this risk, we evaluate the size of a bond issuance as a way to
susceptible to liquidity problems when the anticipate its likely liquidity level.
institutions, such as mutual funds and certain
financial institutions that dominate it, We may invest only 10% of net assets in illiquid securities, excluding
temporarily stop buying bonds for regulatory, Rule 144A securities described above.
financial or other reasons.

Valuation risk: A less liquid secondary market as We will strive to manage this risk by carefully evaluating individual
described above can make it more difficult for a bonds and by limiting the amount of the portfolio that can be
series to obtain precise valuations of the allocated to privately placed high-yield securities.
high-yield securities in its portfolio. During
periods of reduced liquidity, judgment plays a
greater role in valuing high-yield securities.

Legislative and regulatory risk: The United States We monitor the status of regulatory and legislative proposals to
Congress has from time to time taken or considered evaluate any possible effects they might have on the Series'
legislative actions that could adversely affect portfolio.
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. 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 a fund to attain its
investment objective.
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</TABLE>

Investment manager The Series is managed by Delaware Management Company.
and sub-adviser Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. Delaware
International Advisers Ltd. is the Series' sub-adviser.
Subject to the overall supervision of manager, the
sub-adviser manages the international sector of the Series'
portfolio and furnishes the manager with investment
recommendations, asset allocation advice, research and
other investment services regarding foreign securities. For
its services to the Series, the Series paid the manager and
sub-adviser an aggregate fee of 0.65% of average daily net
assets for the last fiscal year.

106
<PAGE>

Portfolio managers Paul A. Matlack and Paul Grillo have primary responsibility
for making day-to-day investment decisions for Strategic
Income Series. Christopher A. Moth and Joanna Bates have
primary responsibility for making day-to-day investment
decisions for Strategic Income Series regarding its
investments in foreign securities. In making investment
decisions for the Series, Mr. Moth and Ms. Bates regularly
consult with David G. Tilles and four global fixed-income
team members.

Paul A. Matlack, Vice President/Senior Portfolio Manager,
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. 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. He is a CFA
charterholder. Mr. Matlack has been a member of Strategic
Income Series' management team since its inception.

Paul Grillo, Vice President/Portfolio Manager, 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 the Series regarding its investments in
investment grade securities. Mr. Grillo has been a member
of Strategic Income Series' management team since its
inception.

Christopher A. Moth, Senior Portfolio Manager, Director of
Investment Strategy, Fixed Income and Currency and Director
of Delaware International Advisers Ltd., is a graduate of
The City University London. He 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 and Investment from the Institute of Actuaries in
London. At Delaware International Advisers, he has been a
key contributor in developing the fixed-income product and
establishing in-house systems to control and faciliate the
investment process. He chairs the global fixed-income and
currency meeting. Mr. Moth became Co-Manager of the Series
in July 1999.

Joanna Bates, Senior Portfolio Manager, Credit and Emerging
Markets of Delaware International Advisers Ltd., is a
graduate of London University. She joined the Fixed Income
team at Delaware International Advisers in June 1997. Prior
to that she was Associate Director, Fixed Interest at Hill
Samuel Investment Management Ltd. which she joined in 1990.
She had previously worked at Fidelity International and
Save & Prosper as a fund manager and analyst for global
bond markets. Ms. Bates is an associate of the Institute of
Investment Management and Research. Ms. Bates became
Co-Manager of the Series in July 1999.

David G. Tilles, Managing Director and Chief Investment
Officer of Delaware International Advisers Ltd., was
educated at the Sorbonne, Warwick University and Heidelberg
University. Prior to joining Delaware International
Advisers in 1990 as Managing Director and Chief Investment
Officer, he spent 16 years with Hill Samuel Investment
Management Group in London, serving in a number of
investment capacities. His most recent position prior to
joining Delaware International Advisers was Chief
Investment Officer of Hill Samuel Investment Management
Ltd.

107
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Strategic Income Series
- --------------------------------------------------------------------------------------------------------------------------------
Period 5/1/97(1)
Year Ended 12/31 through
1999 1998 12/31/97
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The financial Net asset value, beginning of period $10.600 $10.620 $10.000
highlights table is
intended to help you Income (loss) from investment operations
understand the
Series' financial Net investment income(2) 0.779 0.832 0.523
performance. All
"per share" Net realized and unrealized gain (loss) on
information reflects investments and foreign currencies (1.109) (0.557) 0.097
financial results ------- ------- ------
for a single Series Total from investment operations (0.330) 0.275 0.620
share. The total ------- ------- ------
returns in the table Less dividends and distributions
represent the rate
that an investor Dividends from net investment income (0.610) (0.270) none
would have earned or
lost on an Distributions from net realized gain on investments none (0.025) none
investment in the ------- ------- ------
Series (assuming Total dividends and distributions (0.610) (0.295) none
reinvestment of all ------- ------- ------
dividends and
distributions). This Net asset value, end of period $9.660 $10.600 $10.620
information has been ======= ======= ======
audited by Ernst &
Young LLP, whose Total return(3) (3.29%) 2.63%(4) 6.20%(4)
report, along with
the Series' Ratios and supplemental data
financial
statements, is Net assets, end of period (000 omitted) $19,842 $20,571 $8,606
included in the
Series' annual Ratio of expenses to average net assets 0.80% 0.80% 0.80%
report, which is
available upon Ratio of expenses to average net assets
request by calling prior to expense limitation and expenses paid indirectly 0.80% 0.81% 1.23%
800.523.1918.
Ratio of net investment income to average net assets 7.88% 7.90% 7.44%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 7.88% 7.89% 7.01%

Portfolio turnover 101% 143% 70%
------------------------------------------------------------------------------------------------------------
(1) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
(4) Total return reflects expense limitations in effect for the Series.

</TABLE>

108
<PAGE>

Trend Series

Our investment strategies

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.

Companies in the early stages of their development often offer the greatest
opportunities for rising share prices. The key to investing successfully in
small companies is to invest in them before their stock price matches their
growth potential. In striving to do this, Trend Series studies:

o the operational history of the company;

o the strategic focus of the company; and

o the company's competitive environment.

The Series uses a bottom-up approach to stock selection that seeks market
leaders, strong product cycles, innovative concepts and industry trends. We look
at price-to-earnings ratios, estimated growth rates, market capitalization and
cashflow as we strive to determine how attractive a company is relative to other
companies.

We also rely on our own research in selecting companies for the portfolio. That
research might include one-on-one meetings with executives, company competitors,
industry experts and customers. Our goal is to select companies that are likely
to perform well over an extended time frame.

Because there is added risk when investing in small companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding a mix of different stocks, representing a wide
array of industries.

Trend Series uses the same investment strategy as Delaware Trend Fund, a
separate fund in the Delaware Investments family, although performance may
differ depending on such factors as the size of the funds and the timing of
investments and redemptions.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

American Depositary Receipts (ADRs): ADRs are We may hold ADRs when we believe they offer greater appreciation
issued by a U.S. bank and represent the bank's potential than U.S. securities.
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.

109
<PAGE>

Trend Series (continued)

Trend Series may also invest in other securities including convertible
securities, warrants and preferred stocks. The Series may also enter into
futures and options. Trend Series may invest a portion of its net assets
directly in foreign securities; however, the manager has no present intention of
doing so. Please see the Statement of Additional Information for additional
descriptions information on these securities as well as those listed in the
table above.

Lending securities Trend Series may lend up to 25% of its assets to qualified
dealers and institutional investors for their use in security transactions.
These transactions will generate additional income for the Series.

Borrowing from banks Trend Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. To the extent that it does
so, the Series may be unable to meet its investment objective. The Series will
not borrow money in excess of one-third of the value of its net assets.

Temporary defensive positions For temporary defensive purposes, Trend Series may
hold a substantial portion of its assets in cash or cash equivalents,
fixed-income obligations issued by the U.S. government, its agencies or
instrumentalities and corporate bonds. To the extent it holds these securities,
the Series may be unable to achieve its investment objective.

Portfolio turnover We anticipate that Trend Series' annual portfolio turnover
may be greater 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. High
turnover can result in increased transaction costs and tax liability.

The risks of investing Investing in any mutual fund involves risk, including
in Trend Series 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. Following are
the chief risks you assume when investing in Trend
Series. Please see the Statement of Additional
Information for further discussion of these risks and
other risks not discussed here.

<PAGE>

Industry and security risk is the risk that the We limit the amount of Trend Series' assets invested in any one
value of securities in a particular industry or 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 Trend Series maintains a well-diversified portfolio, selects stocks
smaller companies may be more volatile than larger carefully and monitors them continuously.
companies because of limited financial resources
or dependence on narrow product lines.

Interest rate risk is the risk that securities We analyze each company's financial situation and its cash flow to
will decrease in value if interest rates rise. The determine the company's ability to finance future expansion and
risk is generally associated with bonds; however, operations. The potential effect that rising interest rates might have
because smaller companies often borrow money to on a stock is taken into consideration before the stock is purchased.
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 the Series' portfolio in
may be adversely affected by political instability foreign corporations through American Depositary Receipts. We do not
(including governmental seizures or presently intend to invest directly in foreign securities. When we do
nationalization of assets), changes in currency purchase ADRs, they are generally denominated in U.S. dollars and
exchange rates, foreign economic conditions or traded on a U.S. exchange.
inadequate regulatory and accounting standards.
Foreign markets may also be less efficient, less
liquid, have greater price volatility, less
regulation and higher transaction costs than U.S.
markets.

Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold within seven days at
approximately the price that a series has valued
them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

110
<PAGE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.75% of average daily
net assets for the last fiscal year.

Portfolio managers Gerald S. Frey has primary responsibility for making
day-to-day investment decisions for the Trend Series. When
making investment decisions for the Series, Mr. Frey
regularly consults with Marshall T. Bassett, John A.
Heffern, Jeffrey W. Hynoski, Steven T. Lampe and Lori P.
Wachs.

Gerald S. Frey, Senior Vice President/Senior Portfolio
Manager, has 23 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 for the Series since March 1997 and was Co-Manager
from June 1996 to March 1997.

John A. Heffern, Vice President, Portfolio Manager, earned
bachelors and MBA degrees at the University of North
Carolina at Chapel Hill. Prior to joining Delaware
Investments in 1997, he was a Senior Vice President,
Equity Research at NatWest Securities Corporation's
Specialty Financial Services unit. Before that, he was a
Principal and Senior Regional Bank Analyst at Alex. Brown
& Sons.

Jeffrey W. Hynoski, Vice President/Portfolio Manager,
joined Delaware Investments in 1998. Prior to joining
Delaware Investments, 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.

Steven T. Lampe, Vice President, Portfolio Manager,
received a bachelor's degree in Economics and an MBA
degree with a concentration in Finance from the University
of Pennsylvania's Wharton School. He joined Delaware
Investments in 1995 and covers the financial services and
business services sectors for small and mid-capitalization
growth stocks. He previously served as a tax/audit manager
at Price Waterhouse, specializing in financial services
firms. Mr. Lampe is a Certified Public Accountant.

Lori P. Wachs, Vice President/Portfolio Manager, 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.

111
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Trend Series
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Net asset value, beginning of year $ 19.760 $ 17.380 $14.560 $14.020 $10.160
highlights table is
intended to help you Income (loss) from investment operations
understand the
Series' financial Net investment income(loss)(1) (0.043) 0.006 0.019 0.050 0.098
performance. The
total returns in the Net realized and unrealized gain
table represent the (loss) on investments 13.945 2.736 3.031 1.380 3.852
rate that an -------- -------- -------- ------- -------
investor would have Total from investment operations 13.902 2.742 3.050 1.430 3.950
earned or lost on an -------- -------- -------- ------- -------
investment in the Less dividends and distributions
Series (assuming
reinvestment of all Dividends from net investment income (0.002) (0.020) (0.050) (0.090) (0.090)
dividends and
distributions). All Distributions from net realized
"per share" gain on investments none (0.342) (0.180) (0.800) none
information reflects -------- -------- -------- ------- -------
financial results Total dividends and distributions (0.002) (0.362) (0.230) (0.890) (0.090)
for a single Series -------- -------- -------- ------- -------
share. This Net asset value, end of year $ 33.660 $ 19.760 $17.380 $14.560 $14.020
information has been ======== ======== ======== ======= =======
audited by Ernst & Total return(2) 70.45% 16.04%(3) 21.37%(3) 11.00%(3) 39.21%(3)
Young LLP, whose
report, along with Ratios and supplemental data
the Series'
financial Net assets, end of period (000 omitted) $503,657 $168,251 $118,276 $56,423 $20,510
statements, is
included in the Ratio of expenses to average net assets 0.82% 0.81% 0.80% 0.80% 0.80%
Series' annual
report, which is Ratio of expenses to average net assets prior
available upon to expense limitation and
request by calling expenses paid indirectly 0.82% 0.85% 0.88% 0.92% 0.96%
800.523.1918.
Ratio of net investment income to average net
assets (0.18%) 0.03% 0.16% 0.56% 1.03%

Ratio of net investment income to average net
assets prior to expense limitation and
expenses paid indirectly (0.18%) (0.01%) 0.08% 0.44% 0.87%

Portfolio turnover 82% 121% 125% 112% 76%
-------------------------------------------------------------------------------------------------------
(1) Per share information for the year ended December 31, 1999 was based on the average shares
outstanding method.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
(3) Total return reflects expense limitations in effect for the Series.
</TABLE>

112
<PAGE>

U.S. Growth Series

Our investment strategies

U.S. Growth Series seeks to maximize capital appreciation. We invest primarily
in common stocks and though we have the flexibility to invest in companies of
all sizes, we generally focus on medium- and large-sized companies. Our goal is
to own companies with the potential to grow earnings faster than the U.S.
economy in general. We look for companies that have:

o low dividend yields;

o strong balance sheets; and

o high expected earnings growth rates relative to their industry.

There are a number of catalysts that might increase a company's potential for
accelerated earnings growth. Our disciplined, research-intensive selection
process is designed to identify earnings catalysts such as:

o management changes;

o new products;

o structural changes in the economy; or

o corporate restructurings and turnaround situations.

We maintain a diversified portfolio representing a number of different
industries. Such an approach helps to minimize the impact that any one security
or industry could have on the portfolio if it were to experience a period of
slow or declining earnings growth. Because our objective is capital
appreciation, the amount of dividend income that a stock provides is only an
incidental consideration for us.

U.S. Growth Series uses the same investment strategy as Delaware U.S. Growth
Fund, a separate fund in the Delaware Investments family, although performance
may differ depending on such factors as the size of the funds and the timing of
investments and redemptions.

<PAGE>

The securities we Stocks offer investors the potential for capital
typically invest in appreciation.

Foreign securities and American Depositary The Series may invest up to 20% of its assets in securities of foreign
Receipts: Securities of foreign entities issued issuers. Such foreign securities may be traded on a foreign exchange,
directly or, in the case of American Depositary or they may be in the form of ADRs. Direct ownership of foreign
Receipts (ADRs), through a U.S. bank. ADRs securities will typically not be a significant part of our strategy.
represent a bank's holding of a stated number of We may, however own ADRs when we think they offer greater appreciation
shares of a foreign corporation. An ADR entitles potential than domestic stocks.
the holder to all dividends and capital gains
earned by the underlying foreign shares. ADRs are
bought and sold in the same way 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 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. The Series would only enter into repurchase
same price the buyer paid for them, plus an amount agreements in which the collateral is U.S. government securities.
equal to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.

113
<PAGE>

U.S. Growth Series (continued)

Illiquid securities: Securities that do not have a We may invest up to 15% of net assets in illiquid securities.
ready market, and cannot be easily sold within
seven days at approximately the price that a
series has valued them.

Fixed-income securities: Securities that may We may invest up to 35% of the Series' assets in debt securities,
include debt securities, bonds, convertible bonds, bonds, convertible bonds, preferred stocks and convertible preferred
as well as, non-investment grade fixed-income stock. We may also invest up to 10% of this portion in non-investment
securities. grade bonds if we believe that doing so would help us to meet the
Series' objective.

Options and futures: Options represent a right to We might use options or futures to neutralize the effect of any
buy or sell a security or group of securities at anticipated price declines, without selling the security. We might
an agreed upon price at a future date. The also use options or futures to gain exposure to a particular market
purchaser of an option may or may not choose to go segment without purchasing individual securities in that segment
through with the transaction. particularly if we had excess cash that we wanted to invest quickly.

Writing a covered call option on a security When writing call options we will only write covered call options -
obligates the owner of the security to sell it at call options on securities we actually own.
an agreed upon price on an agreed upon date
(usually no more than nine months in the future.) Use of these strategies can increase the operating costs of the Series
The owner of the security receives a premium and can lead to loss of principal.
payment from the purchaser of the call, but if the
security appreciates to a price greater than the
agreed upon selling price, a series would lose out
on those gains.

Futures contracts are agreements for the purchase
or sale of securities at a specified price, on a
specified date. Unlike an option, a futures
contract must be executed unless it is sold before
the settlement date.

Options and futures are generally considered to be
derivative securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Series may also invest in other securities including U.S. government
securities. Please see the Statement of Additional Information for additional
descriptions on these securities as well as those listed in the table above.

When-issued securities, delayed delivery and firm commitment agreements The
Series may purchase securities on a delayed delivery or when-issued basis; that
is, paying for securities before delivery or taking delivery at a later date.
The Series may also enter into firm commitment agreements (the payment
obligation and interest rate are fixed at the time of the transaction but the
settlement is delayed). The transactions may involve either corporate, municipal
or government securities. The Series assumes the risk of any decline in value of
the security beginning on the date of the agreement or purchase. The Series will
designate cash or securities in amounts sufficient to cover its obligations, and
will value the designated assets daily.

Borrowing from banks The Series may borrow money as a temporary measure for
extraordinary purposes or to facilitate redemptions. To the extent that it does
so, the Series may be unable to meet its investment objective. The Series will
not borrow money in excess of one-third of the value of its net assets. Whenever
these borrowings, including reverse repurchase agreements, exceed 5% of the
value of the Series' total assets, the Series will not purchase any securities.

Temporary defensive positions For temporary defensive purposes, U.S. Growth
Series may hold all or a substantial portion of its assets in cash or cash
equivalents. To the extent it holds these securities, the Series may be unable
to achieve its investment objective.

Portfolio turnover We anticipate that the Series' annual portfolio turnover may
be greater 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. High
turnover can result in increased transaction costs and tax liability.

114
<PAGE>

The risks of investing Investing in any mutual fund involves risk, including
in U.S. Growth Series 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. Following are
the chief risks you assume when investing in U.S.
Growth Series. Please see the Statement of Additional
Information for further discussion of these risks and
other risks not discussed here.

Industry and security risk is the risk that the We limit the amount of U.S. Growth Series' assets invested in any one
value of securities in a particular industry or industry and in any individual security.
the 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.

Foreign risk is the risk that foreign securities We are permitted to invest up to 20% of the Series' portfolio in
may be adversely affected by political instability foreign securities. When we do purchase foreign securities, they are
(including governmental seizures or generally ADRs which are denominated in U.S. dollars and traded on
nationalization of assets), changes in currency U.S. stock exchanges.
exchange rates, foreign economic conditions or
inadequate regulatory and accounting standards.
Foreign markets may also be less efficient, less
liquid, have greater price volatility, less
regulation and higher transaction costs than U.S.
markets.

Liquidity risk is the possibility that securities We limit exposure to illiquid securities to 15% of net assets.
cannot be readily sold within seven days at
approximately the price that the Series values
them.

Credit risk is the possibility that a bond's Fixed-income securities are not typically a significant component of
issuer (or an entity that insures the bond) will our strategy. However, when we do invest in fixed-income securities,
be unable to make timely payments of interest and we will not hold more than 10% of net assets in high-yield,
principal. non-investment grade bonds. This limitation, combined with our
careful, credit-oriented bond selection and our commitment to hold a
diversified selection of high-yield bonds are designed to manage this
risk.

Futures and options risk is the possibility that a We will not use futures and options for speculative reasons. We may
series may experience a loss if it employs an use options and futures to protect gains in the portfolio without
options or futures strategy related to a security actually selling a security. We may also use options and futures to
or a market index and that security or index moves quickly invest excess cash so that the portfolio is generally fully
in the opposite direction from what the manager invested.
anticipated. Futures and options also involve
additional expenses, which could reduce any
benefit or increase any loss that a series gains
from using the strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. The Series
will pay Delaware Management Company the following fee
on an annual basis: 0.65% on the first $500 million of
average daily net assets; 0.60% on the next $500
million; 0.55% on the next $1.5 billion and 0.50% on
assets in excess of $2.5 billion.

Portfolio manager Frank Houghton has primary responsibility for making
investment decisions for U.S. Growth Series.

Frank Houghton, Vice President/Senior Portfolio
Manager, joined Delaware in March 2000. Prior to
joining Delaware, Mr. Houghton was President and
Portfolio Manager of Lynch & Mayer, Inc., which he
joined in 1990 and became President in 1999. Prior to
joining Lynch & Mayer, Inc., Mr. Houghton was Chairman
of BMI Capital from 1984 to1990, a Portfolio Manager at
Neuberger & Berman from 1977 to 1984 and a Partner at
Oppenheimer & Co., Inc. from 1969-1977. Mr. Houghton
received a BBA from Manhattan College and attended New
York University Graduate School of Business
Administration.

115
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
U.S. Growth Series
- ---------------------------------------------------------------------------------------------------------
Period 11/15/99(1)
through
12/31/99
-------------------------------------------------------------------------------
<S> <C> <C>
The financial Net asset value, beginning of period $10.000
highlights table is
intended to help you Income from investment operations
understand the
Series' financial Net investment income 0.026
performance. The
total return in the Net realized and unrealized gain on investments 0.564
table represents the -------
rate that an Total from investment operations 0.590
investor would have -------
earned on an Net asset value, end of period $10.590
investment in the =======
Series (assuming Total return(2) 5.90%
reinvestment of all
dividends and Ratios and supplemental data
distributions). All
"per share" Net assets, end of period (000 omitted) $8,744
information reflects
financial results Ratio of expenses to average net assets 0.75%
for a single Series
share. This Ratio of expenses to average net assets prior to expense
information has been limitation and expenses paid indirectly 0.79%
audited by Ernst &
Young LLP, whose Ratio of net investment income to average net assets 3.33%
report, along with
the Series' Ratio of net investment income to average net assets prior to
financial expense limitation and expenses paid indirectly 3.29%
statements, is
included in the Portfolio turnover 0%
Series' annual --------------------------------------------------------------------------------
report, which is (1) Date of commencement of operations; ratios have been annualized but total
available upon return has not been annualized.
request by calling
800.523.1918. (2) Total return does not reflect expenses that apply to Separate Accounts or to
the related insurance policies and inclusion of these charges would reduce
total return figures for all periods shown. Total return reflects expense
limitations in effect for the Series.

</TABLE>

116
<PAGE>

Who's who? The following describes the various organizations involved with
managing, administering, and servicing the Series.

Board of trustees
A mutual fund is governed by a board of trustees which has oversight
responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance
of the investment manager, the distributor and others that perform
services for the series. At least 40% of the board of trustees must
be independent of the fund's investment manager and distributor.
These independent fund trustees, in particular, are advocates for
shareholder interests.

Investment managers
Delaware Management Company, One Commerce Square, Philadelphia, PA
19103 Delaware International Advisers Ltd., Third Floor, 80
Cheapside, London, England EC2V 6EE

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.

Delaware Management Company and its predecessors have been managing
the funds in Delaware Investments since 1938. On December 31, 1999,
Delaware Management Company and its affiliates within Delaware
Investments, including Delaware International Advisers Ltd., were
managing in the aggregate more than $47 billion in assets in the
various institutional or separately managed (approximately
$27,783,710,000) and investment company (approximately
$19,579,950,000) accounts. Delaware International Advisers began
operating in 1990 and manages global and international institutional
and mutual fund accounts. Delaware Management Company is a series of
Delaware Management Business Trust, which is an indirect, wholly
owned subsidiary of Delaware Management Holdings, Inc.

Sub-advisers
Lincoln Investment Management, Inc., 200 E. Berry Street, Fort
Wayne, Indiana 46802 Vantage Investment Advisors, 405 Lexington
Avenue, New York, NY 10174 Delaware International Advisers Ltd.,
Third Floor, 80 Cheapside, London, England EC2V 6EE

A sub-adviser is a company generally responsible for the management
of the fund's assets and is selected and supervised by the
investment manager.

Portfolio managers
Portfolio managers are employed by the investment managers or
sub-advisers to make investment decisions for individual portfolios
on a day-to-day basis. See "Information about individual Series" for
information about the portfolio managers of the various series.

Distributor
Delaware Distributors, L.P., 1818 Market Street, Philadelphia, PA
19103

Shares of the Series are only sold to separate accounts of insurance
companies used in connection with variable annuity or variable life
products.

Custodian
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY
11245

Mutual funds are legally required to protect their portfolio
securities and most funds place them with a custodian, typically a
qualified bank custodian, who segregates fund securities from other
bank assets.

117

<PAGE>

Important information about all Series
- --------------------------------------------------------------------------------

Share classes Each Series has two classes of shares, Standard Class and
Service Class. Each class is identical except that Service Class
has a distribution or "Rule 12b-1" plan which is described in
the prospectuses offering Service Class shares.

Purchase and Shares are sold only to separate accounts of life companies at
redemption of net asset value. (See "Valuation of shares.") Redemptions will
shares 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 Series shares.

Valuation The price you pay for shares will depend on when we receive your
of shares purchase order. If we or an authorized agent receive your order
before the close of regular 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 regular 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 regular 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 in 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. Foreign securities, currencies
and other assets denominated in foreign currencies are
translated into U.S. dollars at the exchange rate of these
currencies against the U.S. dollar, as provided by an
independent pricing service. 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 trustees. Any investments that
have a maturity of less than 60 days we price at amortized cost.
For all other securities, we use methods approved by the board
of trustees that are designed to price securities at their fair
market value.

A significant portion of the portfolio securities of the
Emerging Markets, Global Bond, International Equity and
Strategic Income Series is listed on foreign exchanges. From
time to time, other Series may also hold securities that are
listed on foreign exchanges. These foreign exchanges may trade
on weekends or days when the Series do not price their shares.
As a result, the NAV of these Series may change on days when you
will not be able to purchase or redeem shares of the Series.

118
<PAGE>

Dividends, For the Capital Reserves and Cash Reserve Series,
distributions and dividends, if any, are declared daily and paid monthly.
taxes 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 Balanced 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 Convertible Securities, Devon, Emerging Markets,
Global Bond, Growth Opportunities, High Yield,
International Equity, REIT, Select Growth, Small Cap
Value, Social Awareness, Strategic Income, Trend and U.S.
Growth Series, dividends and capital gain distributions,
if any, are distributed annually.

We automatically reinvest all dividends and any capital
gains.

A Series will not be subject to federal income tax to the
extent its earnings are distributed. The Fund intends to
distribute substantially all of the respective Series' net
investment income and net capital gains. Shareholders may
be proportionately liable for taxes on income and gains of
the Series but shareholders not subject to tax on their
income will not be required to pay tax on amounts
distributed to them, and the Fund will inform shareholders
of the amount and nature of income or gains.

Please refer to the prospectus for the variable insurance
contract for additional tax information relevant to such
contracts.

EURO Several European countries began participating in the
European Economic and Monetary Union, which has
established a common currency for participating countries.
This currency is commonly known as the "Euro." The
long-term consequences of the Euro conversion for foreign
exchange rates, interest rates and the value of European
securities in which the Series may invest are unclear. The
consequences may adversely affect the value and/or
increase the volatility of securities held by the Series.

119
<PAGE>

Delaware Group
Premium Fund

Additional information about the Series' investments is
available in the Series' Annual and Semi-Annual Reports to
shareholders. In the Series' annual reports you will find
a discussion of the market conditions and investment
strategies that significantly affected the Series'
performance during the 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 the Statement of
Additional Information by writing to us at 1818 Market
Street, Philadelphia, PA 19103, or call toll-free
800.523.1918.

You can find reports and other information about the
Series on the EDGAR Database on the SEC web site
(http://www.sec.gov). You can also get copies of this
information, after payment of a duplicating fee, by
e-mailing the SEC at [email protected] or by writing to
the Public Reference Section of the SEC, Washington, D.C.
20549-0102. 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 1.202.942.8090.

Investment Company Act File No. 811-5162

DELAWARE(SM)
INVESTMENTS
- --------------------
Philadelphia[]London

<PAGE>

DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London

Delaware Group
Premium Fund

Service Class

1818 Market Street,
Philadelphia, PA 19103

Prospectus May 1, 2000

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.

<PAGE>

The Global Bond Series and the Convertible Securities Series are not available
in the Group Flexible Premium Variable Life Insurance product.

<PAGE>

Table of contents
<TABLE>
<CAPTION>
- ------------------------------------------------------------------- --------------------------------------------------------------
Profiles Information about individual Series
(Strategies, Risks, Portfolio managers, Financial highlights)

<S> <C> <C>
Balanced Series Page 2 Page 26
Capital Reserves Series 3 31
Cash Reserve Series 4 36
Convertible Securities Series 5 39
Devon Series 6 45
Emerging Markets Series 7 50
Global Bond Series 9 57
Growth and Income Series 11 64
Growth Opportunities Series 12 68
High Yield Series 13 74
International Equity Series 14 80
REIT Series 16 85
Select Growth Series 18 90
Small Cap Value Series 19 94
Social Awareness Series 20 98
Strategic Income Series 22 102
Trend Series 24 109
U.S. Growth Series 25 113

Fund administration (Who's who) Page 117

Important Information about all Series
Share classes 118
Purchase and redemption of shares 118
Valuation of shares 118
Dividends, distributions and taxes 119
</TABLE>

<PAGE>

Profile: Balanced Series (formerly Delaware Balanced 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.

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 Balanced Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in
Balanced Series. We show how returns 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 applicable voluntary expense caps. The returns
would be lower without the voluntary caps. Moreover, the performance presented
does not reflect any separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -3.11%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 17.54% for the quarter ended March 31,
1991 and its lowest quarterly return was -12.93% for the quarter ended September
30, 1990.

[BAR CHART]

Year-by-year total return

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
- -0.18% 26.59% 13.85% 8.18% -0.15% 26.58% 15.91% 26.40% 18.62% -7.85%

Average annual returns for periods ending 12/31/99

Balanced S&P 500
Series Composite Stock Lehman Brothers
Standard Class Price Index Aggregate Bond Index

1 year -7.85% 21.03% -0.82%
5 years 15.18% 28.54% 7.73%
10 years 12.16% 18.19% 7.70%

Performance shown in the average annual return table is based on the Standard
Class shares of the Series, which do not carry a 12b-1 fee and are offered
through a separate prospectus. Performance of Service Class shares will be lower
than the Standard Class and will differ from the Standard Class to the extent of
the 12b-1 fee.

<PAGE>

Profile: Capital Reserves 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.

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.

<PAGE>

How has Capital Reserves Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in Capital
Reserves Series. We show how returns 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 applicable voluntary expense caps. The returns
would be lower without the voluntary caps. Moreover, the performance presented
does not reflect any separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 1.12%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 4.35% for the quarter ended June 30,
1995 and its lowest quarterly return was -2.21% for the quarter ended March 31,
1994.

[BAR CHART]

Year-by-year total return

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
8.23% 8.84% 7.20% 7.85% -2.68% 14.08% 4.05% 7.60% 6.78% 0.28%

Average annual returns for periods ending 12/31/99

Capital Reserves
Series Lehman Brothers Intermediate
Standard Class Government Corporate Bond Index

1 year 0.28% 0.39%
5 years 6.46% 7.10%
10 years 6.13% 7.26%

Performance shown in the average annual return table is based on the Standard
Class shares of the Series, which do not carry a 12b- I fee and are offered
through a separate prospectus. Performance of Service Class shares will be lower
than the Standard Class and will differ from the Standard Class to the extent of
the 12b-1 fee

<PAGE>

Profile: Cash Reserve Series

Cash Reserve Series is a money market fund. A money market fund is designed for
stability of principal; consequently, the level of income fluctuates.

Who should invest in the Series
o Investors with short-term financial goals.
o Investors who do not want an investment whose value may fluctuate 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.

<PAGE>

How has Cash Reserve Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the
risks of investing in Cash Reserve Series. We show how returns 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 applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 1.35%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 1.88% for the quarter ended June 30,
1990 and its lowest quarterly return was 0.58% for the quarter ended June 30,
1993.

[BAR CHART]

Year-by-year total return

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.56% 5.58% 3.25% 2.48% 3.68% 5.48% 4.93% 5.10% 5.08% 4.81%

Average annual returns for periods ending 12/31/99

Cash Reserve
Series Standard Class

1 year 4.81%
5 years 5.08%
10 years 4.79%

<PAGE>

Profile: Convertible Securities 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.

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.

<PAGE>

How has Convertible Securities Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in
Convertible Securities Series. We show how returns have varied over the past two
calendar years, as well as average annual returns for one year and since
inception. The Series' past performance does not necessarily indicate how it
will perform in the future. The returns reflect applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 6.94%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 8.70% for the quarter ended December 31,
1999 and its lowest quarterly return was -10.65% for the quarter ended September
30, 1998.

[BAR CHART]

Year-by-year total return

1998 1999
- ---- ----

- -1.17% 6.97%

Average annual returns for periods ending 12/31/99

Convertible Securities Merrill Lynch Convertible
Series Standard Class Securities Index

1 year 6.97% 44.32%
Since Inception (5/1/97) 8.18% 25.36%

<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.

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.

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 risks of investing in Devon
Series. We show how returns have varied over the past two calendar years as well
as average annual returns for one year and since inception. The Series' past
performance does not necessarily indicate how it will perform in the future. The
returns reflect applicable voluntary expense caps. The returns would be lower
without the voluntary caps. Moreover, the performance presented does not reflect
any separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -3.14%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 20.81% for the quarter ended December
31, 1998 and its lowest quarterly return was -12.09% for the quarter ended
September 30, 1999.

[BAR CHART]

Year-by-year total return

1998 1999
- ---- ----

24.05% -10.13%

Average annual returns for periods ending 12/31/99

Devon S&P 500
Series Composite Stock
Standard Class Price Index

1 year -10.13% 21.03%
Since Inception (5/1/97) 14.00% 25.50%

<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.

In selecting investments for the Series,

o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.

o In order to compare the value of different stocks, we consider whether the
future dividends on a stock are expected to increase faster than, slower
than, or in line with the level of inflation. We then estimate what we
think the value of those anticipated future dividends would be worth if
they were being paid today. We believe this gives us an estimate of the
stock's true value. Because many of the countries in which the Series
invests are emerging countries, there may be less information available for
us to use in making this analysis than is available for more developed
countries.

o We generally prefer to purchase securities in countries where the currency
is undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine
whether a particular currency is overvalued or undervalued by comparing the
amount of goods and services that a dollar will buy in the United States to
the amount of foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less, the foreign
currency may be overvalued, and when the dollar buys more, the foreign
currency may be undervalued.

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. These fluctuations can be even more pronounced for funds like
Emerging Markets Series, which invests in emerging countries. 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. The value of the Series' investments and, therefore, the price of the
Series' shares may be more volatile than investments in more developed markets.
Because the Series invests in international securities in developing countries
as well as established countries, it will be affected by international
investment risks related to currency valuations, political instability, economic
instability, or lax accounting and regulatory standards.

For a more complete discussion of risk, please turn to "The risks of investing
in Emerging Markets 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.

Who should invest in the Series
o Investors with long-term financial goals.
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 or are unwilling to accept the significant
risks associated with investing in emerging markets.

7
<PAGE>

Emerging Markets Series (continued)

How has Emerging Markets Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in
Emerging Markets Series. We show how returns have varied over the past two
calendar years, as well as average annual returns for one year and since
inception. The Series' past performance does not necessarily indicate how it
will perform in the future. The returns reflect applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -1.45%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 22.99% for the quarter ended December
31, 1999 and its lowest quarterly return was -22.25% for the quarter ended June
30, 1998.

[BAR CHART]

Year-by-year total return

1998 1999
- ------- ------

- -32.48% 48.28%

Average annual returns for periods ending 12/31/99

Emerging Markets Morgan Stanley Capital International
Series Standard Class Emerging Markets Free Index

1 year 48.28% 66.41%
Since inception (5/1/97) -4.31% 0.41%

The Series returns are compared to the performance of the Morgan Stanley Capital
International Emerging Markets Free Index. The Morgan Stanley Capital
International Emerging Markets Free Index is a U.S. dollar denominated index
comprised of stocks of countries with below average per capita GDP as defined by
the world bank, foreign ownership restrictions, a lax regulatory environment ,
and greater perceived market risk than in the developed countries. Within this
index, Morgan Stanley Capital International aims to capture an aggregate of 60%
of local market capitalization. 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.

8
<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.

In selecting investments for the Series,

o We strive to identify fixed-income securities that provide high income
potential.

o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine
whether a particular currency is overvalued or undervalued by comparing the
amount of goods and services that a dollar will buy in the United States to
the amount of foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less, the foreign currency
may be overvalued, and when the dollar buys more, the foreign currency may be
undervalued.

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. These fluctuations can be even more pronounced for funds like Global
Bond Series, which invests in developing countries. The Series' investments
normally decrease when there are declines in bond prices, which can be caused by
a drop in the bond market, an adverse change in interest rates or an adverse
situation affecting the issuer of the bond. Because the Series invests in
international securities in both established and developing countries, it will
be affected by international investment risks related to currency valuations,
political instability, economic instability, or lax accounting and 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.

For a more complete discussion of risk, please turn to "The risks of investing
in Global Bond 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.

Who should invest in the Series

o Investors with long-term financial goals.

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.

9
<PAGE>

Global Bond Series (continued)

How has Global Bond Series performed?
- --------------------------------------------------------------------------------
This bar chart and table can help you evaluate the risks of investing in Global
Bond Series. We show how returns have varied over the past three calendar years,
as well as average annual returns for one year and since inception. The Series'
past performance does not necessarily indicate how it will perform in the
future. The returns reflect applicable voluntary expense caps. The returns would
be lower without the voluntary caps. Moreover, the performance presented does
not reflect any separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the l2b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -1.74%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 4.25% for the quarter ended September
30, 1998 and its lowest quarterly return was -3.07% for the quarter ended March
31, 1997.

Year-by-year total return

1997 1998 1991
---- ---- ----
0.88% 7.82% -3.60%

Average annual returns for periods ending 12/31/99

Global Bond Salomon Smith Barney World
Series Standard Class Government Bond Index

1 year -3.60% -5.07%
Since inception (5/2/96) 4.43% 4.45%

10
<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.

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.

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.

How has Growth and Income Series performed?

This bar chart and table can help you evaluate the risks of investing in Growth
and Income Series. We show how returns 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 applicable voluntary expense caps. The returns
would be lower without the voluntary caps. Moreover, the performance presented
does not reflect any separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -5.97%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 15.29% for the quarter ended June 30,
1997 and its lowest quarterly return was -15.79% for the quarter ended September
30, 1990.

Year-by-year total return

Average annual returns for periods ending 12/31/99

Growth and Income S&P 500 Composite
Series Standard Class Stock Price Index

1 year -2.98% 21.03%
5 years 18.39% 28.54%
10 years 11.95% 18.19%

The Series returns are compared to the performance of the S&P 500 Composite
Stock Price Index. The S&P 500 Composite Stock Price Index is an unmanaged index
of 500 widely held common stocks that is often used to represent performance of
the U.S. stock market.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.

11
<PAGE>

Profile: Growth Opportunities Series (formerly DelCap Series)

What are the Series' goals?
Growth Opportunities 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 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 Growth Opportunities
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 industries. In addition, the Series invests in
medium-size or small companies. These companies may involve greater risk due to
their relatively smaller size, narrow product lines and limited financial
resources. For a more complete discussion of risk, please turn to "The risks of
investing in Growth Opportunities 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.

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, growth oriented 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.

How has Growth Opportunities Series performed?

This bar chart and table can help you evaluate the risks of investing in Growth
Opportunities Series. We show how returns have varied over the past eight
calendar years, as well as average annual returns for one and five years and
since inception. The Series' past performance does not necessarily indicate how
it will perform in the future. The returns reflect applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 22.52%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 46.48% for the quarter ended December
31, 1999 and its lowest quarterly return was -16.07% for the quarter ended
September 30, 1998.

Year-by-year total return

1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
1.93% 11.56% -3.54% 29.53% 14.46% 14.90% 18.81% 62.94%

<PAGE>

Growth Russell
Opportunities Midcap Growth
Series Standard Class Index

1 year 62.94% 51.29%
5 years 26.95% 28.02%
Since Inception (7/12/91) 17.75% 20.18%

<PAGE>
Profile: High Yield Series (formerly Delchester Series)

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 bond prices, which can be
caused by adverse changes in interest rates, adverse economic conditions or poor
performance from specific industries or bond issuers. High-yield bonds are rated
below investment grade and are subject to greater risk that the issuer will be
unable to make payments on interest and principal. Bonds of foreign issuers are
also subject to certain risks such as political and economic instability,
currency fluctuations and less stringent regulatory standards. For a more
complete discussion of risk, please turn to "The risks of investing in High
Yield 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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking a fixed-income investment that offers a combination of
total return with high current income.

o Investors who want a total return-oriented income investment as a
diversification tool for long-term, equity-oriented portfolios.

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.

How has High Yield Series performed?

This bar chart and table can help you evaluate the risks of investing in High
Yield Series. We show how returns 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 applicable voluntary expense caps. The returns would be lower
without the voluntary caps. Moreover, the performance presented does not reflect
any separate account fees, which would reduce the returns. On May 1, 2000, the
Series' name was changed from Delchester Series to High Yield Series and the
Series' investment objective changed from high current income to total return
and, as a secondary objective, high current income.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -5.12%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 15.95% for the quarter ended March 31,
1991 and its lowest quarterly return was -7.20% for the quarter ended September
30, 1998.
Year-by-year total return
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-7.13% 37.54% 13.44% 16.36% -2.87% 15.50% 12.79% 13.63% -1.83% -2.64%
</TABLE>

<PAGE>

Average annual returns for periods ending 12/31/99

High Yield Salomon Smith
Series Barney Cash Pay
Standard Class High-Yield Index

1 year -2.64% 0.84%
5 years 7.19% 9.49%
10 years 8.77% 10.46%

13
<PAGE>

Profile: International Equity Series

In selecting investments for the Series,

o We strive to identify well managed companies that are undervalued based on
such factors as assets, earnings, dividends or growth potential.

o We generally prefer to purchase securities in countries where the currency is
undervalued or fair-valued compared to other countries because these
securities may offer greater return potential. We attempt to determine
whether a particular currency is overvalued or undervalued by comparing the
amount of goods and services that a dollar will buy in the United States to
the amount of foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less, the foreign currency
may be overvalued, and when the dollar buys more, the foreign currency may be
undervalued.

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 currency valuations, political
instability, economic instability, and lax accounting and regulatory standards.
For a more complete discussion of risk, please turn to "The risks of investing
in International Equity 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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking for a portfolio of equity securities from foreign
countries.

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
securities.

o Investors looking for an investment that provides a high level of income.

<PAGE>

International Equity Series (continued)

How has International Equity Series performed?

This bar chart and table can help you evaluate the risks of investing in
International Equity Series. We show how returns have varied over the past seven
calendar years, as well as average annual returns for one and five years and
since inception. The Series' past performance does not necessarily indicate how
it will perform in the future. The returns reflect applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -5.52%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 14.44% for the quarter ended December
31, 1998 and its lowest quarterly return was -14.24% for the quarter ended
September 30, 1998.
Year-by-year total return

1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ----
15.97% 2.57% 13.98% 20.03% 6.60% 10.33% 15.76%

Average annual returns for periods ending 12/31/99

International Equity Morgan Stanley Capital
Series Standard Class International EAFE Index

1 year 15.76% 27.30%
5 years 13.24% 13.15%
Since inception (10/29/92) 11.77% 14.90%

15
<PAGE>

Profile: REIT Series

o retain a substantial portion of the properties' cashflow;

o effectively use capital to expand;

o have a strong ability to raise rents; and,

o can create a franchise value for the REIT.

For a more complete discussion of risk, please turn to "The risks of investing
in REIT 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.

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 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.

16
<PAGE>

REIT Series (continued)

How has REIT Series performed?

This bar chart and table can help you evaluate the risks of investing in REIT
Series. We show returns for the past calendar year, as well as average annual
returns for one year and since inception. The Series' past performance does not
necessarily indicate how it will perform in the future. The returns reflect
applicable voluntary expense caps. The returns would be lower without the
voluntary caps. Moreover, the performance presented does not reflect any
separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 2.85%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 11.55% for the quarter ended June 30,
1999 and its lowest quarterly return was -7.47% for the quarter ended September
30, 1999.

Year-by-year total return

1999
----
-2.61%

Average annual return for periods ending 12/31/99

REIT Series NAREIT Equity
Standard Class REIT Index

1 year -2.61% -4.62%
Since inception (5/4/98) -7.00% -11.41%

17
<PAGE>

Profile: Select Growth Series (formerly Aggressive Growth Series)

What are the Series' goals?
Select Growth Series seeks long-term capital appreciation. Although the
Series will strive to meet its goals, there is no assurance that it will.

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.

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.

18
<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.

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.

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.

How has Small Cap Value Series performed?

This bar chart and table can help you evaluate the risks of investing in Small
Cap Value Series. We show how returns have varied over the past six calendar
years, as well as average annual returns for one and five years and since
inception. The Series' past performance does not necessarily indicate how it
will perform in the future. The returns reflect applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 0.84%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 15.29% for the quarter ended June 30,
1997 and its lowest quarterly return was -16.13% for the quarter ended September
30, 1998.

Year-by-year total return

1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
0.78% 23.85% 22.55% 32.91% -4.79% -4.86%

<PAGE>

Average annual returns for periods ending 12/31/99

Small Cap Value Russell 2000 Russell 2000
Series Standard Class Value Index Index

1 year -4.86% -1.49% 21.26%
5 years 12.81% 13.14% 16.69%
Since inception (12/27/93) 11.07% 10.60% 13.38%

19
<PAGE>

Profile: Social Awareness Series

What are the Series' goals?
Social Awareness Series seeks long-term capital appreciation. Although the
Series will strive to achieve its goal, there is no assurance that it will.

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; and

o conduct animal testing for cosmetic or personal care products.

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.

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.

20
<PAGE>

Social Awareness Series (continued)

How has Social Awareness Series performed?

This bar chart and table can help you evaluate the risks of investing in Social
Awareness Series. We show how returns have varied over the past two calendar
years, as well as average annual returns for one year and since inception. The
Series' past performance does not necessarily indicate how it will perform in
the future. The returns reflect applicable voluntary expense caps. The returns
would be lower without the voluntary caps. Moreover, the performance presented
does not reflect any separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 4.60%. During the periods illustrated in this bar chart,
the Class' highest return was 21.45% for the quarter ended December 31, 1998 and
its lowest quarterly return was -17.21% for the quarter ended September 30,
1998.

Year-by-year total return
1998 1999
---- ----
15.45% 12.91%

Average annual returns for periods ending 12/31/99

Social Awareness S&P 500
Series Composite Stock
Standard Class Price Index

1 year 12.91% 21.03%
Since Inception (5/1/97) 21.27% 25.50%

21
<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 the High-Yield Sector, consisting of high-yielding, higher risk, lower-rated
or unrated fixed-income securities that we believe to be similarly rated
issued by U.S. companies. (These involve higher risks and are commonly known
as junk bonds).

o the Investment Grade Sector, consisting of investment grade debt obligations
of U.S. companies and those issued or guaranteed by the U.S. government, its
agencies or instrumentalities, or by U.S. companies.

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 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. In particular, high-yield bonds are rated below investment
grade and are subject to a higher risk that issuers will be unable to make
interest or principal payments, particularly under adverse economic conditions.
Foreign investing involves risks related to currency valuations, political
instability, economic instability or lax accounting and regulatory standards.
For a more complete discussion of risk, please turn to "The risks of investing
in Strategic Income 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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking for an investment that offers professional allocation among
key types of fixed-income securities.

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.

22
<PAGE>

Strategic Income Series (continued)

How has Strategic Income Series performed?

This bar chart and table can help you evaluate the risks of investing in
Strategic Income Series. We show how returns have varied over the past two
calendar years, as well as average annual returns for one year and since
inception. The Series' past performance does not necessarily indicate how it
will perform in the future. The returns reflect applicable voluntary expense
caps. The returns would be lower without the voluntary caps. Moreover, the
performance presented does not reflect any separate account fees, which would
reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of -2.40%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 2.05% for the quarter ended March 31,
1998 and its lowest quarterly return was -2.59% for the quarter ended June 30,
1999.

Year-by-year total return
1998 1999
---- ----
2.63% -3.29%

Average annual returns for periods ending 12/31/99

Strategic Income Lehman Brothers
Series Aggregate Bond
Standard Class Index

1 year -3.29% -0.82%
Since Inception (5/1/97) 1.99% 6.10%

23
<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.

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.

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, growth-oriented 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.

How has Trend Series performed?

This bar chart and table can help you evaluate the risks of investing in Trend
Series. We show how returns have varied over the past six calendar years, as
well as average annual returns for one and five years and since inception. The
Series' past performance does not necessarily indicate how it will perform in
the future. The returns reflect applicable voluntary expense caps. The returns
would be lower without the voluntary caps. Moreover, the performance presented
does not reflect any separate account fees, which would reduce the returns.

The Service Class shares of the Series are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Performance shown in the bar chart is
based on the Standard Class shares of the Series, which do not carry a 12b-1 fee
and are offered through a separate prospectus. Performance of Service Class
shares will be lower than the Standard Class and will differ from the Standard
Class to the extent of the 12b-1 fee. As of March 31, 2000, the Class had a
year-to-date return of 22.27%. During the periods illustrated in this bar chart,
the Class' highest quarterly return was 34.16% for the quarter ended December
31, 1999 and its lowest quarterly return was -15.51% for the quarter ended
September 30, 1998.

Year-by-year total return

1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
-0.39% 39.21% 11.00% 21.37% 16.04% 70.45%
<PAGE>

Average annual returns for periods ending 12/31/99

Trend Series Russell 2000
Standard Class Growth Index

1 year 70.45% 43.09%
5 years 29.97% 18.99%
Since inception (12/27/93) 24.68% 15.12%

24
<PAGE>

Profile: U.S. Growth Series

What are the Series' goals?
U.S. Growth Series seeks to maximize capital appreciation. Although the
Series will strive to achieve its investment goal, there is no assurance that
it will.

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.

Who should invest in the Series

o Investors with long-term financial goals.

o Investors looking for capital growth potential.

o Investors looking for a fund that can be a complement to income-producing or
value-oriented investments.

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.

25
<PAGE>
Information about individual Series

Balanced Series
Our investment strategies

We seek capital appreciation by investing primarily in common stocks of
companies we believe have:

o reasonably priced equity securities with strong, consistent and predictable
earnings growth rates;

o strong, capable management teams and competitive products or services;

o an attractive debt to capitalization ratio or strong cash flow.

We conduct ongoing analysis of the different markets to determine the
appropriate mix of stocks and bonds for the current economic and investment
environment.

The securities we Stocks offer investors the potential for capital
typically invest in 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>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Series
-----------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, we invest up to 75% of net assets in common stocks.
ownership in a corporation. Stockholders
participate in the corporation's profits and
losses, proportionate to the number of shares they
own.

Convertible securities: Usually preferred stocks The Series may invest in convertible securities; however, we will not
or corporate bonds that can be exchanged for a set invest more than 10% of the net assets of the Series in convertible
number of shares of common stock at a securities that are rated below investment grade by a nationally recognized
predetermined price. These securities offer higher statistical rating organization (NRSRO) or in securities that are unrated
appreciation potential than nonconvertible bonds but deemed equivalent to non-investment grade.
and greater income potential than nonconvertible
preferred stocks.

Mortgage-backed securities: Fixed-income There is no limit on government-related mortgage-backed securities or on
securities that represent pools of mortgages, with privately issued mortgage-backed securities that are fully collateralized
investors receiving principal and interest by government securities.
payments as the underlying mortgage loans are paid
back. Many are issued and guaranteed against We may invest up to 20% of net assets in mortgage-backed securities issued
default by the U.S. government or its agencies or by private companies if the securities are not collateralized by the U.S.
instrumentalities, such as the Federal Home Loan government, or its agencies or instrumentalities. However, these securities
Mortgage Corporation, Fannie Mae and the must be rated at the time of purchase in one of the four highest categories
Government National Mortgage Association. Others by an NRSRO such as S&P or Moody's. They must also represent interests in
are issued by private financial institutions, with whole-loan mortgages, multi-family mortgages, commercial mortgages and
some fully collateralized by certificates issued other mortgage collateral supported by a first mortgage lien on real
or guaranteed by the U.S. government or its estate. The privately issued securities we invest in are either CMOs or
agencies or instrumentalities. REMICs (see below).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Asset-backed securities: Bonds or notes backed by We invest only in asset-backed securities rated in one of the four highest
accounts receivables including home equity, 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 NRSRO
corporation. (or, if unrated, deemed equivalent), with maturities typically between five
and 30 years.

Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for the
buyer, such as the Series, and a seller of Series' cash position. In order to enter into these repurchase agreements,
securities in which the seller agrees to buy the the Series must have collateral of at least 102% of the repurchase price.
securities back within a specified time at the The Series will only enter into repurchase agreements in which the
same price the buyer paid for them, plus an amount collateral is U.S. government securities.
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
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. ADRs are bought and
sold the same as U.S. securities.

Interest rate swap and index swap agreements: In We may use interest rate swaps to adjust the Series' sensitivity to
an interest rate swap, a series receives payments interest rates, or to hedge against changes in interest rates.
from another party based on a floating interest
rate in return for making payments based on a Index swaps may be used to gain exposure to markets that the Series invests
fixed interest rate. An interest rate swap can in or as a substitute for futures options or forward contracts if such
also work in reverse, with a series receiving contracts are not directly available to the Series on favorable terms.
payments based on a fixed interest rate and making
payments based on a floating interest rate. In an Interest rate swaps and index swaps will be considered illiquid securities
index swap, a series receives gains or incurs (see below).
losses based on the total return of an index, in
exchange for making fixed or floating interest
rate payments to another party.

Restricted and illiquid securities: Restricted We may invest up to 10% of net assets in illiquid securities. For this
securities are privately placed securities whose Series, the 10% limit includes restricted securities such as privately
resale is restricted under securities law. placed securities that are eligible for resale only among certain
institutional buyers without registration, which are commonly known as
Illiquid securities are securities that do not "Rule 144A Securities" and repurchase agreements with maturities of over
have a ready market, and cannot be easily sold seven days.
within seven days at approximately the price that
a series has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

27
<PAGE>

Balanced Series (continued)

The risks of investing in Investing in any mutual fund involves risk,
Balanced Series 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. Following are the chief risks you assume when
investing in Balanced Series. Please see the
Statement of Additional Information for further
discussion of these risks and other risks not
discussed here.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
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 believe
the securities in a certain market--like the stock can appreciate over an extended time frame regardless of interim market
or bond market--will decline in value because of fluctuations. We do not try to predict overall stock market movements and
factors such as economic conditions, future generally do not trade for short-term purposes.
expectations or investor confidence.

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.

In evaluating the use of an index swap, we carefully consider how market
changes could affect the swap and how that compares to us investing directly
in the market the swap is intended to represent.

Industry and security risk is the risk that the We limit the amount of Balanced Series' assets invested in any one industry
value of securities in a particular industry or and in any individual security. We also follow a rigorous selection process
the value of an individual stock or bond will before choosing securities for the portfolio.
decline because of changing expectations for the
performance of that industry or for the individual
company issuing the stock or bond.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

28
<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Series
-----------------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities, We do not try to increase return by predicting and aggressively
particularly bonds with longer maturities, will capitalizing on interest rate moves. Instead, we aim to keep the interest
decrease in value if interest rates rise. rate risk similar to the Lehman Brothers Aggregate Bond Index.

Swaps may be particularly sensitive to interest We will not invest in swaps with maturities of more than two years. Each
rate changes. Depending on the actual movements of business day we calculate the amount the Series must pay for swaps it holds
interest rates and how well the portfolio manager and will segregate cash or other liquid securities to cover that amount.
anticipates them, a series could experience a
higher or lower return than anticipated.

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 often
(including governmental seizures or denominated in U.S. dollars. We also tend to avoid markets where we believe
nationalization of assets), changes in currency accounting principles or the regulatory structure are underdeveloped.
exchange rates, foreign economic conditions or
inadequate regulatory and accounting standards.
Foreign markets may also be less efficient, less
liquid, have greater price volatility, less
regulation and higher transaction costs than U.S.
markets.

Liquidity risk is the possibility that securities We limit exposure to illiquid securities. Swap agreements will be treated
cannot be readily sold within seven days at as illiquid securities, but most swap dealers will be willing to repurchase
approximately the price that the Series values interest rate swaps.
them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. For its services to
the Series, the manager was paid 0.63% of average daily net
assets for the last fiscal year.

Portfolio managers John Jares and Gary A. Reed have primary responsibility for
making day-to-day investment decisions for the Balanced
Series.

John Jares, Vice President/Senior Portfolio Manager, holds a
BS degree in finance and an MBA from the University of
Colorado. He joined Delaware Investments in March 2000. Mr.
Jares came to Delaware from Berger Funds, where he served as
a portfolio manager and securities analyst specializing in
the consumer and technology sectors. Prior to joining
Berger, Mr. Jares was a senior equity analyst at Founders
Asset Management, with responsibility for large
capitalization companies. He began his career at Lipper
Analytical Services, Inc. in 1992. Mr. Jares is a CFA
charterholder. He has been managing the Balanced Series
since March 2000.

Gary A. Reed, Vice President/Senior Portfolio Manager, 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 Balanced
Series' senior portfolio manager for fixed-income since
1989.

29
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Balanced Series(1)
(formerly Delaware Balanced Series)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 12/31
The financial 1999 1998 1997 1996 1995
highlights table is ----------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of year $20.040 $19.050 $16.640 $15.500 $12.680
understand the Series'
financial performance. Income (loss) from investment operations
The total returns in the
table represent the rate Net investment income 0.408 0.349 0.435 0.530 0.509
that an investor would
have earned or lost on Net realized and unrealized
an investment in the gain (loss) on investments (1.958) 2.831 3.575 1.765 2.761
Series (assuming -------- -------- -------- ------- -------
reinvestment of all
dividends and Total from investment operations (1.550) 3.180 4.010 2.295 3.270
distributions). All "per -------- -------- -------- ------- -------
share" information
reflects financial results Less dividends and distributions
for a single Series
share. This information Dividends from net investment income (0.380) (0.420) (0.530) (0.500) (0.450)
has been audited by
Ernst & Young LLP, Distributions from net realized
whose report, along gain on investments (0.770) (1.770) (1.070) (0.655) none
with the Series' -------- -------- -------- ------- -------
financial statements, is
included in the Series' Total dividends and distributions (1.150) (2.190) (1.600) (1.155) (0.450)
annual report, which is -------- -------- -------- ------- -------
available upon request
by calling Net asset value, end of year $17.340 $20.040 $19.050 $16.640 $15.500
800.523.1918. ======= ======= ======= ======= =======

Total return(2) (7.85%) 18.62% 26.40% 15.91% 26.58%

Ratios and supplemental data

Net assets, end of period (000 omitted) $172,002 $201,856 $127,675 $75,402 $63,215

Ratio of expenses to average net assets 0.74% 0.70% 0.67% 0.68% 0.69%

Ratio of net investment income to
average net assets 2.17% 2.20% 2.85% 3.56% 3.75%

Portfolio turnover 107% 94% 67% 92% 106%
----------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares, which
are not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee
of not more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect
its 12b-1 plan fees which will, among other things, lower performance.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for all
periods shown.

</TABLE>

30
<PAGE>

Capital Reserves Series

Our investment strategies

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.

The securities we Fixed-income securities offer the potential for greater
typically invest in 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 are
bills, notes and bonds of varying maturities. U.S. typically not our largest holding because they generally do not offer as
Treasury securities are backed by the "full faith high a level of current income as other fixed-income securities.
and credit" of the United States.

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>

31
<PAGE>

Capital Reserves Series (continued)

Corporate debt: Debt obligations issued by a We focus on corporate debt with investment grade ratings, that is bonds
corporation, including corporate notes, bonds and rated BBB or better by S&P or Baa or better by Moody's. We may invest in
other debt securities. debt that is unrated, if we believe the quality of the securities is
comparable to the ratings above.

Certificates of deposit and obligations of both We may invest in certificates of deposit from banks that have assets of at
U.S. and foreign banks: Debt instruments issued by least one billion dollars.
a bank 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 270 and/or A-1 or A-2 by S&P.
days, issued by companies.

Interest rate swap agreements: In an interest rate We may use interest rate swaps to adjust the Series' sensitivity to
swap, a series receives payments from another interest rates by changing its duration, or to hedge against changes in
party based on a floating interest rate in return interest rates.
for making payments based on a fixed interest
rate. An interest rate swap can also work in Interest rate swaps will be considered illiquid securities (see below).
reverse, with a series receiving payments based on
a fixed interest rate and making payments based on
a floating interest rate.

32
<PAGE>

The risks of investing Investing in any mutual fund involves risk, including
in Capital Reserves the risk that you may receive little or no return on
Series 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. Following are
the chief risks you assume when investing in Capital
Reserves 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
- ------------------------------------------------------------------------------------------------------------------------------------
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-income
the securities in a certain market--like the stock securities that we believe can continue to make interest and principal
or bond market--will decline in value because of payments over an extended time frame regardless of interim market
factors such as economic conditions, future fluctuations. We do not try to predict overall bond market movements and
expectations or investor confidence. generally do not trade for short-term purposes.

Industry and security risk is the risk that the We diversify the Series' portfolio. We also follow a rigorous selection
value of securities in a particular industry or process before choosing securities for the portfolio.
the 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 rate risk is the risk that securities, We do not try to increase return by predicting and aggressively
particularly bonds with longer maturities, will capitalizing on interest rate moves.
decrease in value if interest rates rise.

Swaps may be particularly sensitive to interest We will not invest in interest rate swaps with maturities of more than two
rate changes. Depending on the actual movements of years. Each business day we calculate the amount the Series must pay for
interest rates and how well the portfolio manager swaps it holds and will segregate cash or other liquid securities to cover
anticipates them, a series could experience a that amount.
higher or lower return than anticipated.

Credit risk is the risk that there is the We may hold securities rated in the fourth category of investment grade;
possibility that a bond's issuer (or an entity however, we carefully evaluate their creditworthiness before purchasing the
that insures the bond) will be unable to make security.
timely payments of interest and principal.

Debt securities rated in the fourth category of If the rating of a corporate debt security held by the Series falls below
investment grade (e.g., BBB by S&P or Baa by the fourth rating grade or if we determine that an unrated security is no
Moody's) may have speculative characteristics. longer of comparable quality, we will dispose of the security as soon as
Changes in economic conditions or other practical, unless we think that would be detrimental in light of market
circumstances are more likely to affect issuers conditions.
ability to make principal and interest payments.

Prepayment risk is the risk that homeowners will We take into consideration the likelihood of prepayment when we select
prepay mortgages during periods of low interest mortgages. We may look for mortgage securities that have characteristics
rates, forcing an investor to reinvest their money that make them less likely to be prepaid, such as low outstanding loan
at interest rates that might be lower than those balance or below-market interest rates.
on the prepaid mortgage.

Liquidity risk is the possibility that securities We limit exposure to illiquid securities. Swap agreements will be treated
cannot be readily sold within seven days at as illiquid securities, but most swap dealers will be willing to repurchase
approximately the price that a series values them. interest rate swaps.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

33
<PAGE>

Capital Reserves Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. For its services to
the Series, the manager was paid 0.53% of average daily net
assets for the last fiscal year.

Portfolio manager Gary A. Reed has primary responsibility for making
day-to-day investment decisions for the Capital Reserves
Series.

Gary A. Reed, Vice President/Senior Portfolio Manager, 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.

34
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Capital Reserves Series(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 12/31
The financial 1999 1998 1997 1996 1995
highlights table is -----------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of year $9.880 $9.790 $9.690 $9.930 $9.300
understand the Series'
financial performance. Income (loss) from investment operations
The total returns in the
table represent the rate Net investment income 0.546 0.556 0.613 0.623 0.643
that an investor would
have earned or lost on Net realized and unrealized gain
an investment in the (loss) on investments (0.520) 0.090 0.100 (0.240) 0.630
Series (assuming ------- ------- ------- ------- -------
reinvestment of all
dividends and Total from investment operations 0.026 0.646 0.713 0.383 1.273
distributions). All "per ------- ------- ------- ------- -------
share" information
reflects financial results Less dividends
for a single Series
share. This information Dividends from net investment income (0.546) (0.556) (0.613) (0.623) (0.643)
has been audited by
Ernst & Young LLP, Total dividends (0.546) (0.556) (0.613) (0.623) (0.643)
whose report, along ------- ------- ------- ------- -------
with the Series'
financial statements, Net asset value, end of year $9.360 $9.880 $9.790 $9.690 $9.930
is included in the ======= ======= ======= ======= =======
Series' annual report,
which is available upon Total return(2) 0.28% 6.78% 7.60% 4.05% 14.08%
request by calling
800.523.1918. Ratios and supplemental data
Net assets, end of period (000 omitted) $36,701 $41,711 $29,177 $27,768 $27,935

Ratio of expenses to average net assets 0.79% 0.79% 0.75% 0.72% 0.71%

Ratio of net investment income to
average net assets 5.68% 5.62% 6.31% 6.43% 6.64%

Portfolio turnover 129% 166% 120% 122% 145%
-----------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares, which
are not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1
fee of not more than 0.30% (currently set at 0.15%). Future data for the Service Class will
reflect its 12b-1 plan fees which will, among other things, lower performance.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for all
periods shown.

</TABLE>

35
<PAGE>

Cash Reserve Series

Our investment strategies

The securities we
typically invest in

Direct U.S. Treasury obligations include Treasury We may invest without limit in U.S. Treasury securities. We would typically
bills, notes and bonds of varying maturities. U.S. invest in Treasury bills or longer term Treasury securities whose remaining
Treasury securities are backed by the "full faith effective maturity is less than 13 months.
and credit" of the United States.

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 and other corporate We may invest in commercial paper and other corporate obligations rated in
obligations: Short-term debt obligations with one of the two highest ratings categories by at least two NRSROs. The
maturities ranging from 2 to 270 days, issued by purchase of a security that does not possess those ratings must be approved
companies. by the Board of Trustees in accordance with the maturity, quality and
diversification conditions with which taxable money markets must comply.
The Series will not invest more than 5% of its total assets in securities
rated in the second highest category by an NRSRO.

The Series may also invest in asset-backed securities. Please see the Statement
of Additional Information for additional descriptions on these securities as
well as those listed in the table.

36
<PAGE>
Borrowing from banks Cash Reserve Series may borrow money as a temporary measure
for extraordinary purposes or to facilitate redemptions. To the extent that it
does so, the Series may be unable to meet its investment objective. The Series
will not borrow money in excess of one-third of the value of its net assets.

The risks of investing Investing in any mutual fund involves risk, including
in Cash Reserve the risk that you may receive little or no return on
Series 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.
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 other risks not discussed here.

Credit risk is the risk that there is the Cash Reserve Series holds only high quality short-term securities.
possibility that a bond's issuer (or an entity Therefore it is generally not subject to significant credit risk.
that insures the bond) will be unable to make
timely payments of interest and principal. We limit our investments to those which the Board of Trustees 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.

Inflation risk is the risk that the return from Cash Reserve Series is designed for short-term investment goals and
your investments will be less than the increase in therefore may not outpace inflation over longer time periods. For this
the cost of living due to inflation, thus reason, Cash Reserve Series is not recommended as a primary investment for
preventing you from reaching your financial goals. people with long-term goals.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. For its services to
the Series, the manager was paid 0.46% of average daily net
assets for the last fiscal year.

37
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Cash Reserve Series(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 12/31
The financial 1999 1998 1997 1996 1995
highlights table is ----------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of year $10.000 $10.000 $10.000 $10.000 $10.000
understand the Series'
financial performance. Income from investment operations
The total returns in
the table represent the Net investment income 0.471 0.497 0.497 0.482 0.535
rate that an investor ------- ------- ------- ------- -------
would have earned or
lost on an investment Total from investment operations 0.471 0.497 0.497 0.482 0.535
in the Series (assuming ------- ------- ------- ------- -------
reinvestment of all
dividends and Less dividends
distributions). All "per
share" information Dividends from net investment income (0.471) (0.497) (0.497) (0.482) (0.535)
reflects financial ------- ------- ------- ------- -------
results for a single
Series share. This Total dividends (0.471) (0.497) (0.497) (0.482) (0.535)
information has been ------- ------- ------- ------- -------
audited by Ernst &
Young LLP, whose Net asset value, end of year $10.000 $10.000 $10.000 $10.000 $10.000
report, along with ======= ======= ======= ======= =======
the Series' financial
statements, is included Total return(2) 4.81% 5.08% 5.10% 4.93% 5.48%
in the Series' annual
report, which is Ratios and supplemental data
available upon
request by calling Net assets, end of period (000 omitted) $57,421 $42,893 $30,711 $26,479 $16,338
800.523.1918.
Ratio of expenses to average net assets 0.56% 0.59% 0.64% 0.61% 0.62%

Ratio of net investment income
to average net assets 4.72% 4.96% 4.98% 4.82% 5.35%
----------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares, which
are not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee of
not more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect its
12b-1 plan fees which will, among other things, lower performance.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.

</TABLE>

38
<PAGE>

Convertible Securities Series

Our investment strategies

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.

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.

The securities we Stocks offer investors the potential for capital
typically invest in 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.

Convertible bonds are often rated below investment If a convertible security held by the Series is called for redemption, the
grade, that is, not rated within the four highest Series will be required to redeem the security, convert it into the
categories by S&P and Moody's. Debt securities underlying common stock or sell it to a third party.
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 bond 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 The Series may invest in zero coupon bonds and payment-in-kind bonds,
coupon securities are debt obligations which do though this is not expected to be a significant component of its strategy.
not entitle the holder to any periodic payments of The market prices of these bonds are generally more volatile than the
interest prior to maturity or a specified date market prices of securities that pay interest periodically and are likely
when the securities begin paying current interest. to react to changes in interest rates to a greater degree than
Therefore, they are issued and traded at a interest-paying bonds having similar maturities and credit quality. They
discount from their face amounts or par value. may have certain tax consequences which, under certain conditions, could be
Payment-in-kind bonds pay interest or dividends in adverse to the Series.
the form of additional bonds or preferred stock.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Convertible Securities Series (continued)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible Securities Series
-----------------------------------------------------------------------------
<S> <C>
Private placements: Private placement securities What portion of the Series' portfolio is invested in convertible securities
are securities which have not been registered with purchased in private placements depends upon the relative attractiveness of
the SEC and are usually only sold to large those securities compared to convertible securities that are publicly
institutional investors. An issuer is often offered. Ordinarily, the Series expects that 50% of its portfolio may be
willing to provide more attractive features in invested in convertible securities purchased in private placements, but the
securities issued privately because it has avoided percentage may be substantially greater or less than 50%, depending upon
the expense and delay involved in a public prevailing market conditions.
offering. Many private placement securities are
subject to the SEC's Rule 144A, which permits them We anticipate that substantially all of the private placements we purchase
to be freely traded among qualified institutional will be subject to Rule 144A. Subject to procedures approved by the Series'
buyers. These securities may therefore have a Board of Trustees, we may treat Rule 144A securities as liquid and
liquid secondary market. therefore not subject to the 15% limitation on illiquid securities
described below.

Repurchase agreements:: An agreement between a Typically, we use repurchase agreements as a short-term investment for the
buyer, such as the Series, and a seller of Series' cash position. In order to enter into these repurchase agreements,
securities in which the seller agrees to buy the the Series must have collateral of at least 102% of the repurchase price.
securities back within a specified time at the The Series will only enter into repurchase agreements in which the
same price the buyer paid for them, plus an amount collateral is U.S. government securities.
equal to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.

Foreign securities, Eurodollar convertible We may use foreign securities, Eurodollar convertible securities and
securities and depositary receipts or notes: depositary receipts to add diversification to the portfolio by permitting
Securities of foreign entities, including issuers the Series to make investments outside the U.S. market.
located in emerging markets, issued directly or,
in the case of depositary receipts, through a
bank. Such foreign securities may be traded on a
foreign exchange, or they may be in the form of
depositary receipts or notes, such as American
Depositary Receipts (ADRs), American Depositary
Notes (ADNs), European Depositary Receipts (EDRs),
European Depositary Notes (EDNs), Global
Depositary Receipts (GDRs) or Global Depositary
Notes (GDNs). Depositary receipts and notes
represent a bank's holding of a stated number of
shares of a foreign corporation, which entitles
the holder to all dividends and capital gains
earned by the underlying foreign shares.

The Series may also invest in Eurodollar
convertible securities. Eurodollar convertible
securities are fixed-income securities that are
denominated in U.S. dollars and which are
convertible into equity securities of that issuer.
These Eurodollar securities are payable outside of
the United States.

Illiquid securities: Securities that do not have a We may invest up to 15% of net assets in illiquid securities, including
ready market, and cannot be easily sold within repurchase agreements with maturities of over seven days.
seven days at approximately the price that a
series has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

40
<PAGE>

41
<PAGE>

Convertible Securities Series (continued)

The risks of investing Investing in any mutual fund involves risk, including
in Convertible the risk that you may receive little or no return on
Securities your investment, and the risk that you may lose part or
Series 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. Following are
the chief risks you assume when investing in Convertible
Securities 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
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible Securities Series
-----------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on securities we
the securities in a certain market--like the stock believe can continue to pay income and appreciate over an extended time
or bond market--will decline in value because of frame regardless of interim market fluctuations. We do not try to predict
factors such as economic conditions, future overall stock market movements and though we may hold securities for any
expectations or investor confidence. period of time, we do not typically trade for short-term purposes.

Industry and security risk is the risk that the We limit the amount of Convertible Securities Series' assets invested in
value of securities in a particular industry or any 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 for the portfolio.
decline because of changing expectations for the
performance of that industry or for the individual
company issuing the security.

Credit risk The possibility that a security's This risk may be reduced because of the ability to convert these securities
issuer (or an entity that insures the security) into common stock.
will be unable to make 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 potential impact on the
particularly bonds with longer maturities, will Series. Though convertible securities may be sensitive to interest rate
decrease in value if interest rates rise. movements, an individual security's link to the underlying common stock may
reduce that sensitivity.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

42
<PAGE>

Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold within seven days at
approximately the price that a series values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. For its services to
the Series, the manager was paid 0.75% of average daily net
assets for the last fiscal year.

Portfolio manager Damon Andres has primary responsibility for making
day-to-day investment decisions for the Convertible
Securities Series.

Damon Andres, Vice President/Portfolio Manager, 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. Mr.
Andres has been managing the Convertible Securities Series
since February 1999.

43
<PAGE>
Financial highlights

<TABLE>
<CAPTION>
Convertible Securities Series(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Period 5/1/97(2)
Year Ended 12/31 through
1999 1998 12/31/97
The financial highlights --------------------------------------------------------------------------------------------------
table is intended to help
you understand the Series' Net asset value, beginning of period $11.160 $11.660 $10.000
financial performance.
The total returns in Income (loss) from investment operations
the table represent the
rate that an investor Net investment income 0.493 0.386 0.318
would have earned
or lost on an investment Net realized and unrealized gain (loss) on investments 0.247 (0.511) 1.342
in the Series (assuming ------- ------- -------
reinvestment of all Total from investment operations 0.740 (0.125) 1.660
dividends and distributions). ------- ------- -------
All "per share" information Less dividends and distributions
reflects financial results
for a single Series share. Dividends from net investment income (0.410) (0.305) none
This information has been
audited by Ernst & Young LLP, Distributions from net realized gain on investments none (0.070) none
whose report, along with ------- ------- -------
the Series' financial Total dividends and distributions (0.410) (0.375) none
statements, is included ------- ------- -------
in the Series' annual report, Net asset value, end of period $11.490 $11.160 $11.660
which is available upon ======= ======= =======
request by calling Total return(3) 6.97% (1.17%) 16.60%(4)
800.523.1918.
Ratios and supplemental data

Net assets, end of period (000 omitted) $ 9,637 $ 8,133 $ 3,921

Ratio of expenses to average net assets 0.83% 0.82% 0.80%

Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.83% 0.82% 2.30%

Ratio of net investment income to average net assets 4.64% 4.78% 5.68%

Ratio of net investment income to average net assets
prior to expense limitation and expenses
paid indirectly 4.64% 4.78% 4.18%

Portfolio turnover 35% 77% 209%
-------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard
Class shares, which are not subject to 12b-1 plan fees. The Service Class
shares are subject to an annual 12b-1 fee of not more than 0.30% (currently
set at 0.15%). Future data for the Service Class will reflect its 12b-1 plan
fees which will, among other things, lower performance.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Total return does not reflect expenses that apply to Separate Accounts or to
the related insurance policies and inclusion of these charges would reduce
total return figures for all periods shown.
(4) Total return reflects expense limitations in effect for the Series.
</TABLE>

44
<PAGE>

Devon Series

Our investment strategies

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Devon Series
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Common stocks: Securities that represent shares of ownership Generally, 90% to 100% of the Series' assets will be
in a corporation. Stockholders participate in the invested in common stocks. Under normal market conditions we
corporation's profits and losses, proportionate to the will invest at least 65% of total assets in dividend-paying
number of shares they own. stocks.

Convertible securities: Usually preferred stocks or Devon Series may invest in convertible securities; however,
corporate bonds that can be exchanged for a set number of we will not invest more than 5% of net assets in convertible
shares of common stock at a predetermined price. These debt securities that are rated below investment grade by an
securities offer higher appreciation potential than NRSRO or in securities that are unrated but deemed
nonconvertible bonds and greater income potential than equivalent to non-investment grade.
nonconvertible preferred stocks.

45
<PAGE>

Devon Series (continued)

American Depositary Receipts (ADRs): Certificates issued by We may invest without limitation in ADRs.
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. ADRs are bought and sold the same
as U.S. securities.

46
<PAGE>

The risks of investing Investing in any mutual fund involves risk, including
in Devon Series 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. 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
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 the We maintain a long-term investment approach and focus on
securities in a certain market--like the stock or bond stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall stock market movements and generally do not
confidence. trade for short-term purposes.

Industry and security risk is the risk that the value of We limit the amount of Devon Series' assets invested in any
securities in a particular industry or the value of an one industry and in any individual security. We also follow
individual stock or bond will decline because of changing a rigorous selection process before choosing securities for
expectations for the performance of that industry or for the the portfolio.
individual company issuing the stock or bond.

Foreign risk is the risk that foreign securities may be We typically invest only a small portion of Devon Series'
adversely affected by political instability (including portfolio in foreign securities. When we do purchase foreign
governmental seizures or nationalization of assets), changes securities, they are often denominated in U.S. dollars. We
in currency exchange rates, foreign economic conditions or also tend to avoid markets where we believe accounting
inadequate regulatory and accounting standards. Foreign principles or the regulatory structure are underdeveloped.
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

47
<PAGE>

Devon Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.63% of average
daily net assets for the last fiscal year.

48
<PAGE>
Financial highlights

<TABLE>
<CAPTION>
Devon Series(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Period
5/1/97(2)
Year Ended 12/31 through
1999 1998 12/31/97
The financial -----------------------------------------------------------------------------------------------------
highlights Net asset value, beginning of period $15.440 $12.730 $10.000
table is intended
to help you Income (loss) from investment operations
understand the Series'
financial performance. Net investment income 0.113 0.106 0.080
The total returns
in the table Net realized and unrealized gain (loss) on investments (1.669) 2.889 2.650
represent the rate ------- ------- -------
that an investor Total from investment operations (1.556) 2.995 2.730
would have earned ------- ------- -------
or lost on an Less dividends and distributions
investment in the
Series (assuming Dividends from net investment income (0.090) (0.080) none
reinvestment of all
dividends and Distributions from net realized gain on investments (0.174) (0.205) none
distributions). All "per ------- ------- -------
share" information Total dividends and distributions (0.264) (0.285) none
reflects financial ------- ------- -------
results for a single Net asset value, end of period $13.620 $15.440 $12.730
Series share. ======= ======= =======
This information Total return(3) (10.13%) 24.05% 27.30%(4)
has been audited by
Ernst & Young Ratios and supplemental data
LLP, whose report,
along with the Series' Net assets, end of period (000 omitted) $77,929 $68,714 $16,653
financial statements,
is included in the Ratio of expenses to average net assets 0.75% 0.66% 0.80%
Series' annual report,
which is available upon Ratio of expenses to average net assets prior to expense
request by calling limitation and expenses paid indirectly 0.75% 0.66% 0.91%
800.523.1918.
Ratio of net investment income to average net assets 0.90% 1.30% 2.01%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.90% 1.30% 1.90%

Portfolio turnover 101% 34% 80%
--------------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard
Class shares, which are not subject to 12b-1 plan fees. The Service Class
shares are subject to an annual 12b-1 fee of not more than 0.30% (currently
set at 0.15%). Future data for the Service Class will reflect its 12b-1 plan
fees which will, among other things, lower performance.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Total return does not reflect expenses that apply to Separate Accounts or to
the related insurance policies and inclusion of these charges would reduce
total return figures for all periods shown.
(4) Total return reflects expense limitations in effect for the Series.
</TABLE>

49
<PAGE>

Emerging Markets Series

Our investment strategies

We consider an "emerging country" to be any country that is:

o generally recognized to be an emerging or developing country by the
international financial community, including the World Bank and the
International Finance Corporation;

o any country that is classified by the United Nations as developing; or

o any country that is included in the International Finance Corporation Free
Index or the Morgan Stanley Capital International Emerging Markets Free Index.

o the principal trading market for the company's securities is in a country that
is emerging;

<PAGE>

o the company is organized under the laws of an emerging market country and has
a principal office in an emerging country.

The Series may invest up to 35% of its net assets in
high-yield, high risk foreign fixed-income securities. This typically includes
so-called Brady Bonds.

50
<PAGE>

Corporate bonds: Debt obligations issued by U.S. or foreign Emerging Markets Series may invest in corporate obligations
corporations. issued by emerging country companies. These bonds may be
high risk, fixed-income securities.

Foreign government securities: Debt obligations issued by a We may invest a portion of Emerging Markets Series' assets
government other than the United States or by an agency, in foreign governmental securities issued by emerging or
instrumentality or political subdivision of such developing countries, which may be lower rated, including
governments. securities rated below investment grade.

Investment company securities: In some countries, The Series may hold open-end and closed-end investment
investments by U.S. mutual funds are generally made by company securities if we believe the country offers good
purchasing shares of investment companies that in turn investment opportunities. These investments involve an
invest in the securities of such countries. indirect payment of a portion of the expenses of the other
investment companies, including their advisory fees.

Foreign currency transactions: A forward foreign currency The Series may invest in securities issued in any currency
exchange contract involves an obligation to purchase or sell and hold foreign currency. Securities of issuers within a
a specific currency on a fixed future date at a price that given country may be denominated in the currency of another
is set at the time of the contract. The future date may be country or in multinational currency units such as the Euro.
any number of days from the date of the contract as agreed
by the parties involved. Although the Series values its assets daily in U.S. dollars,
it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Series
will, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency
exchange transactions. The Series may conduct its foreign
currency transactions on a cash basis at the rate prevailing
in the foreign currency exchange market or through a forward
foreign currency exchange contract or forward contract.

The Series may use forward contracts for defensive hedging
purposes to attempt to protect the value of the Series'
current security or currency holdings. It may also use
forward contracts if it has agreed to sell a security and
wants to "lock-in" the price of that security, in terms of
U.S. dollars. Investors should be aware of the costs of
currency conversion. The Series will not use forward
contracts for speculative purposes.

Brady Bonds: These are debt securities issued under the The Series may invest in Brady Bonds. We believe that the
framework of the Brady Plan, an initiative for debtor economic reforms undertaken by countries in connection with
nations to restructure their outstanding external the issuance of Brady Bonds can make the debt of countries
indebtedness (generally, commercial bank debt). Brady Bonds that have issued or have announced plans to issue these
tend to be of lower quality and more speculative than bonds a viable opportunity for investment.
securities of developed country issuers.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>

Emerging Markets Series (continued)

Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Series, and a seller of securities in which the seller investment for the Series' cash position. In order to enter
agrees to buy the securities back within a specified time at into these repurchase agreements, the Series must have
the same price the buyer paid for them, plus an amount equal collateral of at least 102% of the repurchase price. The
to an agreed upon interest rate. Repurchase agreements are Series may enter into repurchase agreements in which the
often viewed as equivalent to cash. collateral is any security in which it may invest, but
normally uses U.S. government securities as collateral.

Illiquid securities: Securities that do not have a ready We may invest up to 10% of net assets in illiquid
market, and cannot be easily sold within seven days at securities, including repurchase agreements with maturities
approximately the price that a series has valued them. of over seven days.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Series may also invest in other securities including preferred stocks,
convertible securities, zero coupon bonds, warrants, futures and options. Please
see the Statement of Additional Information for additional descriptions on these
securities as well as those listed in the table above.

52
<PAGE>

The risks of investing Investing in any mutual fund involves risk, including
in Emerging Markets the risk that you may receive little or no return on
Series 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. Following are
the chief risks you assume when investing in Emerging
Markets 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
- ------------------------------------------------------------------------------------------------------------------------------------
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
securities in a certain market--like the stock or bond stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. In deciding what
economic conditions, future expectations or investor portion of the Series' portfolio should be invested in any
confidence. individual country, we evaluate a variety of factors,
including opportunities and risks relative to other
countries. We can also somewhat reduce market risk by
holding a diversified portfolio.

Industry and security risk is the risk that the value of We typically hold a number of different securities in a
securities in a particular industry or the value of an variety of sectors in order to minimize the impact that a
individual stock or bond will decline because of changing poorly performing security would have on the Series. This
expectations for the performance of that industry or for the risk is more significant for the Series, which is a
individual company issuing the stock or bond. non-diversified fund.

Foreign risk is the risk that foreign securities may be We carefully evaluate the overall situations in the
adversely affected by political instability (including countries where we invest in an attempt to reduce these
governmental seizures or nationalization of assets), changes risks. We also tend to avoid markets where we believe
in currency exchange rates, foreign economic conditions or accounting principles or the regulatory structure are too
inadequate regulatory and accounting standards. Foreign underdeveloped.
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

Another way in which we can protect against this risk is by
holding stocks whose earnings are from exports or priced in
U.S. dollars, so that a devaluation means unchanged U.S.
dollar earnings (and higher local currency earnings).

Small company risk is the risk that prices of smaller The Series may invest in small companies and would be
companies may be more volatile than larger companies because subject to this risk. We typically hold a number of
of limited financial resources or dependence on narrow different stocks in order to reduce the impact that one
product lines. Small company risk also comes from lower small company stock would have on the Series. This risk is
liquidity typically associated with small company stocks, more significant for the Series, which is a non-diversified
which means the price may be affected by poorly executed fund.
trades, even if the underlying business of the company is
unchanged.

Political risk is the risk that countries or the entire We carefully evaluate the political situations in the
region where we invest may experience political instability, countries where we invest and take into account any
which may cause greater fluctuation in the value and potential risks before we select securities for the
liquidity of our investments due to changes in currency portfolio. We can also somewhat reduce political risk by
exchange rates, governmental seizures or nationalization of holding a diversified portfolio. However, there is no way to
assets. eliminate political risk when investing internationally.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

53
<PAGE>

Emerging Markets Series (continued)

Emerging markets risk is the possibility that the risks Striving to manage this risk, the portfolio managers
associated with international investing will be greater in carefully screen securities within emerging markets and
emerging markets than in more developed foreign markets attempt to consider material risks associated with an
because, among other things, emerging markets may have less individual company or bond issuer. We cannot eliminate
stable political and economic environments. emerging market risk and consequently encourage shareholders
to invest in this Series only if they have a long-term time
horizon, over which the potential of individual securities
is more likely to be realized.

Information risk is the possibility that foreign companies The Series conducts a great deal of fundamental research on
are subject to different accounting, auditing and financial the companies that it invests in rather than relying solely
reporting standards than U.S. companies. There may be less on information available through financial reporting. We
information available about foreign issuers than domestic believe this will help us to better uncover any potential
issuers. Furthermore, regulatory oversight of foreign weaknesses in individual companies.
issuers may be less stringent or less consistently applied
than in the United States.

Non-diversified funds risk: Non-diversified investment The Series is a non-diversified fund as defined by the
companies have the flexibility to invest as much as 50% of Investment Company Act of 1940. Neverless, we typically hold
their assets in as few as two issuers with no single issuer securities from a variety of different issuers representing
accounting for more than 25% of the portfolio. The remaining a number of different countries. We also perform extensive
50% of the portfolio must be diversified so that no more analysis on all securities, particularly those that
than 5% of a fund's assets is invested in the securities of represent a larger percentage of portfolio assets.
a single issuer. Because a non-diversified fund may invest
its assets in fewer issuers, the value of fund shares may
increase or decrease more rapidly than if the fund were
fully diversified.

Foreign government securities risks relate to the ability of The Series attempts to limit this risk by performing credit
a foreign government or government related issuer to make analysis on the issuer of each security purchased. In
timely payments on its external debt obligations. addition, the Series attempts to reduce this risk by
limiting the portion of net assets that may be invested in
these securities.

The Series also compares the risk-reward potential of
foreign government securities being considered to that
offered by equity securities to determine whether to
allocate assets to equity or fixed-income investments.

Credit risk of high-yield, high risk fixed-income The Series may invest up to 35% of its net assets in
securities: Securities rated lower than BBB by S&P and Baa high-yield, high risk foreign fixed-income securities.
by Moody's are considered to be of poor standing and
predominantly speculative as to the issuer's ability to We intend to limit our investment in any single lower rated
repay interest and principal. bond, which can help to reduce the effect of an individual
default on the Series. We also intend to limit our overall
These bonds are often issued by less creditworthy companies holdings of bonds in this category. Such limitations may not
or by highly leveraged (indebted) firms, which are generally protect the Series from widespread bond defaults brought
less able than more financially stable firms to make about by a sustained economic downturn or from price
scheduled payments of interest and principal. The risks declines that might result from changes in the quality
posed by bonds issued under such circumstances are ratings of individual bonds.
substantial.

If there were a national credit crisis or an issuer were to
become insolvent, principal values could be adversely
affected.

54
<PAGE>

55
<PAGE>
Financial highlights

Emerging Markets Series(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Period
5/1/97(2)
Year Ended 12/31 through
1999 1998 12/31/97
The financial highlights ---------------------------------------------------------------------------------------------------
table is intended to Net asset value, beginning of period $ 5.810 $ 8.880 $ 10.000
help you understand
the Series' financial Income (loss) from investment operations
performance. The
total returns in the Net investment income(3) 0.126 0.171 0.060
table represent the
rate that an investor Net realized and unrealized gain (loss) on investments
would have earned or and foreign currencies 2.597 (2.991) (1.180)
lost on an investment ------- -------- --------
in the Series (assuming Total from investment operations 2.723 (2.820) (1.120)
reinvestment of all ------- -------- --------
dividends and Less dividends and distributions
distributions). All
"per share" information Dividends from net investment income (0.133) (0.030) none
reflects financial
results for a single Distributions from net realized gain on investments none (0.220) none
Series share. This ------- -------- --------
information has been Total dividends and distributions (0.133) (0.250) none
audited by Ernst & ------- -------- --------
Young LLP, whose report, Net asset value, end of period $ 8.400 $ 5.810 $ 8.880
along with the Series' ======= ======== ========
financial statements, is Total return(4) 48.28% (32.48%) (11.20%)
included in the Series'
annual report, which is Ratios and supplemental data
available upon request by
calling 800.523.1918. Net assets, end of period (000 omitted) $13,349 $ 5,356 $ 5,776

Ratio of expenses to average net assets 1.47% 1.50% 1.50%

Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.53% 1.67% 2.45%

Ratio of net investment income to average net assets 1.88% 2.34% 0.89%

Ratio of net investment income (loss) to average net assets
prior to expense limitation and expenses paid indirectly 1.82% 2.17% (0.06%)

Portfolio turnover 20% 38% 48%
---------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard
Class shares, which are not subject to 12b-1 plan fees. The Service Class
shares are subject to an annual 12b-1 fee of not more than 0.30% (currently
set at 0.15%). Future data for the Service Class will reflect its 12b-1 plan
fees which will, among other things, lower performance.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Per share information was based on the average shares outstanding method.
(4) Total return does not reflect expenses that apply to Separate Accounts or to
the related insurance policies and inclusion of these charges would reduce
total return figures for all periods shown. Total return reflects expense
limitations in effect for the Series.
</TABLE>

56
<PAGE>

Global Bond Series

Our investment strategies

Global Bond Series seeks current income consistent
with the preservation of principal. We invest primarily in fixed-income
securities that may also provide the potential for capital appreciation.

We may invest in:

o foreign and U.S. government securities;

o debt obligations of foreign and U.S. companies;

o debt securities of supranational entities;

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;

o zero-coupon bonds.

<PAGE>

The securities we Fixed-income securities offer the potential for greater
typically invest in income payments than stocks, and also may provide
capital appreciation.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Global Bond Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Corporate bonds: Debt obligations issued by U.S. or foreign Global Bond Series may invest in corporate bonds, generally
corporations. those rated A or better by S&P or Moody's or if unrated,
determined to be of comparable quality. The Series may also
invest in high-yield, high risk emerging markets corporate
bonds.

Foreign government securities: Debt obligations issued by a The Series will generally invest in securities issued by
government other than the United States or by an agency, foreign governments, their agencies, instrumentalities or
instrumentality or political subdivision of such political subdivisions that are rated AAA or AA by S&P or
governments. Aaa or Aa by Moody's or, if unrated, considered to be of
comparable quality. We may invest a portion of the Series'
assets in foreign governmental securities issued by emerging
countries, which may be lower rated, including securities
rated below investment grade.

U.S. government securities: Securities issued or guaranteed by the The Series may invest a significant portion of its assets in
U.S. government or issued by an agency or instrumentality of the U.S. government securities. It will invest only in U.S.
U.S. government. government obligations, including bills, notes and bonds
that are issued or guaranteed as to the payment of principal
and interest by the U.S. government and securities of U.S.
government agencies or instrumentalities that are backed by
the full faith and credit of the United States.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
Global Bond Series (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Global Bond Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment company securities: In some countries, Global Bond Series may hold closed-end investment company
investments by U.S. mutual funds are generally made by securities. The Series may hold investment company
purchasing shares of investment companies that in turn securities if we believe the country offers good investment
invest in the securities of such countries. opportunities. These investments involve an indirect payment
of a portion of the expenses of the other investment
companies, including their advisory fees.

The Series may use forward contracts for defensive hedging
purposes to attempt to protect the value of the Series'
current security or currency holdings. It may also use
forward contracts if it has agreed to sell a security and
wants to "lock-in" the price of that security, in terms of
U.S. dollars. Investors should be aware of the costs of
currency conversion. The Series will not use forward
contracts for speculative purposes.

Supranational entities: Debt securities of supranational The Series may invest in a significant portion of its assets
entities may be denominated in any currency. These in debt securities of supranational entities.
securities 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 to promote reconstruction or development. The
International Bank for Reconstruction and Development (more
commonly known as the World Bank) would be one example of a
supranational entity.

Brady Bonds: These are debt securities issued under the Global Bond Series may invest in Brady Bonds. We believe
framework of the Brady Plan, an initiative for debtor that the economic reforms undertaken by countries in
nations to restructure their outstanding external connection with the issuance of Brady Bonds can make the
indebtedness (generally, commercial bank debt). Brady Bonds debt of countries that have issued or have announced plans
tend to be of lower quality and more speculative than to issue these bonds a viable opportunity for investment.
securities of developed country issuers.

High-yield, high risk fixed-income securities: Securities Global Bond Series may invest a portion of its assets in
that are rated lower than BBB by S&P or Baa by Moody's, or these securities.
if unrated, of equal quality. These securities may be issued
by companies or governments of emerging or developing
countries, which may be less creditworthy. The risk that
these companies or governments may not be able to make
interest or principal payments is substantial.

Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Series, and a seller of securities in which the seller investment for the Series' cash position. In order to enter
agrees to buy the securities back within a specified time at into these repurchase agreements, the Series must have
the same price the buyer paid for them, plus an amount equal collateral of at least 102% of the repurchase price. The
to an agreed upon interest rate. Repurchase agreements are Series may enter into repurchase agreements in which the
often viewed as equivalent to cash. collateral is any security in which it may invest, but
normally uses U.S. government securities as collateral.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

58
<PAGE>

Illiquid securities: Securities that do not have a ready We may invest up to 10% of net assets in illiquid
market, and cannot be easily sold within seven days at securities, including repurchase agreements with maturities
approximately the price that a series has valued them. of over seven days.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Series may also invest in other securities including futures contracts and
options and interest rate swaps. Please see the Statement of Additional
Information for additional descriptions on these securities as well as those
listed in the table above.

59
<PAGE>

Global Bond Series (continued)

The risks of investing Investing in any mutual fund involves risk, including
in Global Bond Series 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. Following are
the chief risks you assume when investing in Global Bond
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
- ------------------------------------------------------------------------------------------------------------------------------------
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 in a certain market--like the stock or bond stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. In deciding what
economic conditions, future expectations or investor portion of the Series' portfolio should be invested in any
confidence. individual country, we evaluate a variety of factors,
including opportunities and risks relative to other
countries. As part of the Series' principal investment
strategy, the Series may invest in securities that generally
have relatively less market risk.

Industry and security risk is the risk that the value of We typically hold a number of different securities in a
securities in a particular industry or the value of an variety of sectors in order to minimize the impact that a
individual stock or bond will decline because of changing poorly performing security would have on the Series. This
expectations for the performance of that industry or for the risk is more significant for the Series, which is a
individual company issuing the stock or bond. non-diversified fund.

Interest rate risk is the risk that securities, particularly Interest rate risk is a significant risk for Global Bond
bonds with longer maturities, will decrease in value if Series. In an attempt to manage interest rate risk, we
interest rates rise. adjust the Series' average weighted maturity based on our
view of interest rates. The Series' average weighted
maturity will generally be in the five-to-ten year range.
When we anticipate that interest rates will decline, we may
extend the average maturity beyond ten years and when we
anticipate that interest rates will rise, we may shorten the
average maturity to less than five years.

Currency risk is the risk that the value of a series' The Series may try to hedge its currency risk by purchasing
investments may be negatively affected by changes in foreign foreign currency exchange contracts. If the Series agrees to
currency exchange rates. Adverse changes in exchange rates purchase or sell foreign securities at a pre-set price on a
may reduce or eliminate any gains produced by investments future date, the Series attempts to protect the value of a
that are denominated in foreign currencies and may increase security it owns from future changes in currency rates. If
any losses. the Series has agreed to purchase or sell a security, it may
also use foreign currency exchange contracts to "lock-in"
the security's price in terms of U.S. dollars or another
applicable currency. The Series may use forward currency
exchange contracts only for defensive or protective
measures, not to enhance portfolio returns. However, there
is no assurance that such a strategy will be successful.

Political risk is the risk that countries or the entire We evaluate the political situations in the countries where
region where we invest may experience political instability. we invest and take into account any potential risks before
This may cause greater fluctuation in the value and we select securities for the portfolio. However, there is no
liquidity of our investments due to changes in currency way to eliminate political risk when investing
exchange rates, governmental seizures or nationalization of internationally.
assets.

Emerging market risk is the possibility that the risks Striving to manage this risk, the portfolio managers
associated with international investing will be greater in carefully screen securities within emerging markets and
emerging markets than in more developed foreign markets attempt to consider material risks associated with an
because, among other things, emerging markets may have less individual company or bond issuer. We cannot eliminate
stable political and economic environments. emerging market risk and consequently encourage shareholders
to invest in the Series only if they have a long-term time
horizon, over which the potential of individual securities
is more likely to be realized.

The Series will also perform credit analysis in an attempt
to reduce these risks.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

60
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Global Bond Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Information risk is the risk that foreign companies may be We conduct fundamental research on the companies we invest
subject to different accounting, auditing and financial in rather than relying solely on information available
reporting standards than U.S. companies. There may be less through financial reporting. We believe this will help us to
information available about foreign issuers than domestic better uncover any potential weaknesses in individual
issuers. Furthermore, regulatory oversight of foreign companies.
issuers may be less stringent or less consistently applied
than in the United States.

Non-diversified funds risk: Non-diversified investment Global Bond Series is a non-diversified fund as defined by
companies have the flexibility to invest as much as 50% of the Investment Company Act of 1940. Nevertheless, we
their assets in as few as two issuers with no single issuer typically hold securities from a variety of different
accounting for more than 25% of the portfolio. The remaining issuers, representing a number of different countries. We
50% of the portfolio must be diversified so that no more also perform extensive analysis on all securities,
than 5% of a fund's assets is invested in the securities of particularly those that represent a larger percentage of
a single issuer. Because a non-diversified fund may invest portfolio assets.
its assets in fewer issuers, the value of series shares may
increase or decrease more rapidly than if the series were
fully diversified.

Foreign government and supranational securities risk relates The Series will attempt to limit this risk by performing
to the ability of a foreign government or government related credit analysis on the issuer of each security purchased.
issuer to make timely payments on its external debt
obligations. The Series attempts to reduce the risks associated with
investing in foreign governments by focusing on bonds rated
within the two highest rating categories.

Credit risk of high-yield, high risk fixed-income The Series may invest a portion of its assets in these
securities: Securities rated lower than BBB by S&P and Baa securities. We intend to limit our investment in any single
by Moody's are considered to be of poor standing and lower rated bond, which can help to reduce the effect of an
predominantly speculative as to the issuer's ability to individual default on the Series. We also intend to limit
repay interest and principal. our overall holdings of bonds in this category. Such
limitations may not protect the Series from widespread bond
These bonds are often issued by less creditworthy companies defaults brought about by a sustained economic downturn or
or by highly leveraged (indebted) firms, which are generally from price declines that might result from changes in the
less able than more financially stable firms to make quality ratings of individual bonds.
scheduled payments of interest and principal. The risks
posed by bonds issued under such circumstances are
substantial.

If there were a national credit crisis or an issuer were to
become insolvent, principal values could be adversely
affected.

Transaction cost risk: Costs of buying, selling and holding We strive to monitor transaction costs and to choose an
foreign securities, including brokerage, tax and custody efficient trading strategy for the Series.
costs, may be higher than those involved in domestic
transactions.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

61
<PAGE>

Global Bond Series (continued)

Investment manager The Series is managed by Delaware International Advisers
Ltd. Delaware International Advisers makes investment
decisions for the Series, manages the Series' business
affairs and provides daily administrative services. For
its services to the Series, the manager was paid 0.75%
of average daily net assets for the last fiscal year.

62
<PAGE>
Financial highlights

<TABLE>
<CAPTION>
Global Bond Series(1)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Period
5/2/96(2)
Year Ended 12/31 through
1999 1998 1997 12/31/96
------------------------------------------------------------------------------------------------------
The financial highlights Net asset value, beginning of period $10.680 $10.500 $10.960 $10.000
table is intended to
help you understand Income (loss) from investment operations
the Series'
financial performance. Net investment income(3) 0.576 0.608 0.636 0.339
The total returns in
the table represent Net realized and unrealized gain (loss) on investments
the rate that an and foreign currencies (0.950) 0.182 (0.551) 0.831
investor would have ------- ------- ------- -------
earned or lost on an Total from investment operations (0.374) 0.790 0.085 1.170
investment in the ------- ------- ------- -------
Series (assuming Less dividends and distributions
reinvestment of all
dividends and Dividends from net investment income (0.514) (0.600) (0.460) (0.210)
distributions). All
"per share" information Distributions from net realized gain on investments (0.062) (0.010) (0.085) none
reflects financial ------- ------- ------- -------
results for a single Total dividends and distributions (0.576) (0.610) (0.545) (0.210)
Series share. This ------- ------- ------- -------
information has been Net asset value, end of period $ 9.730 $10.680 $10.500 $10.960
audited by Ernst & ======= ======= ======= =======
Young LLP, whose Total return(4) (3.60%) 7.82%(5) 0.88%(5) 11.79%(5)
report, along with
the Series' financial Ratios and supplemental data
statements, is included
in the Series' annual Net assets, end of period (000 omitted) $20,231 $21,711 $16,876 $9,471
report, which is
available upon Ratio of expenses to average net assets 0.85% 0.83% 0.80% 0.80%
request by calling
800.523.1918. Ratio of expenses to average net assets prior
to expense limitation and expenses paid indirectly 0.85% 0.92% 1.08% 1.19%

Ratio of net investment income to average net assets 5.64% 5.83% 6.03% 6.51%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 5.64% 5.74% 5.75% 6.12%

Portfolio turnover 100% 79% 97% 56%
------------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard
Class shares, which are not subject to 12b-1 plan fees. The Service Class
shares are subject to an annual 12b-1 fee of not more than 0.30% (currently
set at 0.15%). Future data for the Service Class will reflect its 12b-1 plan
fees which will, among other things, lower performance.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Per share information for the years ended December 31, 1997, 1998 and 1999
was based on the average shares outstanding method.
(4) Total return does not reflect expenses that apply to Separate Accounts or to
the related insurance policies and inclusion of these charges would reduce
total return figures for all periods shown.
(5) Total return reflects expense limitations in effect for the Series.
</TABLE>

63
<PAGE>

Growth and Income Series

Our investment strategies

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

American Depositary Receipts (ADRs): Certificates issued by We use them when we believe they offer better total return
a U.S. bank which represent the bank's holdings of a stated opportunities than U.S. securities.
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. We may invest without limitation in
ADRs.

Restricted and illiquid securities: Restricted securities We may invest up to 10% of net assets in illiquid
are privately placed securities whose resale is restricted securities. For this Series, the 10% limit includes
under securities law. restricted securities such as privately placed securities
that are eligible for resale only among certain
Illiquid securities are securities that do not have a ready institutional buyers without registration, which are
market, and cannot be easily sold within seven days at commonly known as "Rule 144A Securities" and repurchase
approximately the price that a series has valued them. agreements with maturities of over seven days.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 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. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the table
above.

64
<PAGE>

Borrowing from banks Growth and Income Series may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions. To the extent
that it does so, the Series may be unable to meet its investment objective.
The Series will not borrow money in excess of one-third of the value of its net
assets.

Temporary defensive positions For temporary defensive purposes, Growth
and Income Series may hold a substantial portion of its assets in cash or cash
equivalents. To the extent it holds cash or cash equivalents, the Series may be
unable to achieve its investment objective.

Foreign risk is the risk that foreign securities may be We typically invest only a small portion of the Series'
adversely affected by political instability (including portfolio in foreign corporations through American
governmental seizures or nationalization of assets), changes Depositary Receipts. We do not presently intend to invest
in currency exchange rates, foreign economic conditions or directly in foreign securities. When we do purchase ADRs,
inadequate regulatory and accounting standards. Foreign they are generally denominated in U.S. dollars and traded on
markets may also be less efficient, less liquid, have a U.S. exchange.
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

65
<PAGE>

Growth and Income Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.60% of average
daily net assets for the last fiscal year.

Portfolio manager John B. Fields has primary responsibility for making
day-to-day investment decisions for Growth and Income
Series.

66
<PAGE>
Financial highlights

<TABLE>
<CAPTION>
Growth and Income Series(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The financial Year Ended 12/31
highlights table is 1999 1998 1997 1996 1995
intended to help you ------------------------------------------------------------------------------------------------------
understand the Net asset value, beginning of year $ 19.420 $ 18.800 $ 15.980 $ 14.830 $ 11.480
Series' financial
performance. The Income (loss) from investment operations
total returns in the
table represent the Net investment income 0.323 0.361 0.324 0.377 0.416
rate that an
investor would have Net realized and unrealized gain (loss)
earned or lost on an on investments (0.882) 1.636 4.216 2.398 3.574
investment in the -------- -------- -------- -------- --------
Series (assuming Total from investment operations (0.559) 1.997 4.540 2.775 3.990
reinvestment of all -------- -------- -------- -------- --------
dividends and Less dividends and distributions
distributions). All
"per share" Dividends from net investment income (0.361) (0.327) (0.370) (0.420) (0.430)
information reflects
financial results Distributions from net realized
for a single Series gain on investments (1.480) (1.050) (1.350) (1.205) (0.210)
share. This -------- -------- -------- -------- --------
information has been Total dividends and distributions (1.841) (1.377) (1.720) (1.625) (0.640)
audited by Ernst & -------- -------- -------- -------- --------
Young LLP, whose Net asset value, end of year $ 17.020 $ 19.420 $ 18.800 $ 15.980 $ 14.830
report, along with ======== ======== ======== ======== ========
the Series' Total return(2) (2.98%) 11.35% 31.00% 20.72% 36.12%
financial
statements, is Ratios and supplemental data
included in the
Series' annual Net assets, end of period (000 omitted) $501,928 $579,907 $401,402 $166,647 $109,003
report, which is
available upon Ratio of expenses to average net assets 0.71% 0.71% 0.71% 0.67% 0.69%
request by calling
800.523.1918. Ratio of net investment income to
average net assets 1.75% 2.00% 2.02% 2.66% 3.24%

Portfolio turnover 92% 81% 54% 81% 85%
------------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares, which
are not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee
of not more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect
its 12b-1 plan fees which will, among other things, lower performance.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.

</TABLE>

<PAGE>

Growth Opportunities Series

Our investment strategies

o a history of high earnings-per-share growth;

o expectations for future earnings growth that are either high or
accelerating;

o a price to earnings ratio that is low relative to other stocks - indicating
that the stock might be undervalued;

o a discounted cash flow that is high relative to other stocks; or

o a special situation that has caused the stock to fall out of favor, but
which we believe creates potential for even greater long-term price
appreciation.

Once we have narrowed our search to companies with these characteristics, we
then conduct even more thorough hands-on research, evaluating a wide variety of
factors, including:

o the financial strength of the company;

o the expertise of its management;

o the growth potential of the company within its industry; and

o the growth potential of the industry.

Our goal is to select companies that are likely to perform well over an extended
time frame.

In order to reduce the inherent risks of equity investing, we maintain a
diversified portfolio, typically holding a mix of different stocks, representing
a wide array of industries.

<PAGE>

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

Repurchase agreements: An agreement between a buyer, such Typically, we use repurchase agreements as a short-term
as the Series, and a seller of securities in which the investment for the Series' cash position. In order to enter
seller agrees to buy the securities back within a specified into these repurchase agreements, the Series must have
time at the same price the buyer paid for them, plus an collateral of at least 102% of the repurchase price. The
amount equal to an agreed upon interest rate. Repurchase Series will only enter into repurchase agreements in which
agreements are often viewed as equivalent to cash. the collateral is U.S. government securities.

Options: Options represent a right to buy or sell a If we have stocks that appreciated in price, we may want to
security or group of securities at an agreed upon price at protect those gains when we anticipate adverse conditions.
a future date. The purchaser of an option may or may not We might use options to neutralize the effect of any price
choose to go through with the transaction. declines, without selling the security. We might also use
options to gain exposure to a particular market segment
Writing a covered call option on a security obligates the without purchasing individual securities in that segment.
owner of the security to sell it at an agreed upon price on We might use this approach if we had excess cash that we
an agreed upon date (usually no more than nine months in wanted to invest quickly.
the future.) The owner of the security receives a premium
payment from the purchaser of the call, but if the security We might use covered call options if we believe that doing
appreciates to a price greater than the agreed upon selling so would help the Series to meet its investment objective.
price, the fund would lose out on those gains.
Use of these strategies can increase the operating costs of
Options are generally considered to be derivative the Series and can lead to loss of principal.
securities.

- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

69
<PAGE>

Growth Opportunities Series (continued)

Industry and security risk is the risk that the value of We limit the amount of Growth Opportunities Series' assets
securities in a particular industry or the value of an 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 and continuously monitor them
the individual company issuing the stock. while they remain in the portfolio.

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

70
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Small- and medium-size company risk is the risk that prices Though the Series may invest in small companies, our focus
of smaller companies may be more volatile than larger is on medium-size companies. We believe medium-size
companies because of limited financial resources or companies, in general, are more stable than smaller
dependence on narrow product lines. companies and involve less risk due to their larger size,
greater experience and more extensive financial resources.
Nonetheless, medium-size companies have many of the same
risks as small companies and are considered to be riskier,
in general, than large-size companies. To address this
risk, the Series maintains a well-diversified portfolio,
selects stocks carefully and monitors them continuously.

Foreign risk is the risk that foreign securities may be We typically invest only a small portion of the Series'
adversely affected by political instability (including portfolio in foreign corporations indirectly through
governmental seizures or nationalization of assets), changes American Depositary Receipts. When we do purchase ADRs,
in currency exchange rates, foreign economic conditions or they are generally denominated in U.S. dollars and traded
inadequate regulatory and accounting standards. Foreign on a U.S. exchange.
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

71
<PAGE>

Growth Opportunities Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. For its
services to the Series, the manager was paid 0.75% of
average daily net assets for the last fiscal year.

Portfolio managers Gerald S. Frey has primary responsibility for making
day-to-day investment decisions for Growth
Opportunities Series. When making investment decisions
for the Series, Mr. Frey regularly consults with
Marshall T. Bassett, John A. Heffern, Jeffrey W.
Hynoski, Steven T. Lampe and Lori P. Wachs.

Gerald S. Frey, Senior Vice President/Senior Portfolio
Manager, has 23 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 for the Series
since March 1997 and was Co-Manager from June 1996 to
March 1997.

Marshall T. Bassett, Vice President/Portfolio Manager,
joined Delaware Investments in 1997. Before joining
Delaware Investments, 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 a bachelor's degree and an
MBA from Duke University.

John A. Heffern, Vice President, Portfolio Manager,
earned bachelors and MBA degrees at the University of
North Carolina at Chapel Hill. Prior to joining
Delaware Investments in 1997, he was a Senior Vice
President, Equity Research at NatWest Securities
Corporation's Specialty Financial Services unit. Before
that, he was a Principal and Senior Regional Bank
Analyst at Alex. Brown & Sons.

Jeffrey W. Hynoski, Vice President/Portfolio Manager,
joined Delaware Investments in 1998. Prior to joining
Delaware Investments, 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.

Steven T. Lampe, Vice President, Portfolio Manager,
received a bachelor's degree in Economics and an MBA
degree with a concentration in Finance from the
University of Pennsylvania's Wharton School. He joined
Delaware Investments in 1995 and covers the financial
services and business services sectors for small and
mid-capitalization growth stocks. He previously served
as a tax/audit manager at Price Waterhouse,
specializing in financial services firms. Mr. Lampe is
a Certified Public Accountant.

72
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Growth Opportunities Series(1)
(formerly DelCap Series)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 12/31
The financial 1999 1998 1997 1996 1995
highlights table is ----------------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of year $18.550 $17.270 $15.890 $15.130 $11.750
understand the
Series' financial Income (loss) from investment operations
performance. The
total returns in the Net investment income (loss)(2) (0.055) (0.026) (0.010) (0.015) 0.072
table represent the
rate that an Net realized and unrealized gain
investor would have on investments 11.055 2.901 2.260 2.030 3.378
earned or lost on an -------- -------- -------- -------- --------
investment in the Total from investment operations 11.000 2.875 2.250 2.015 3.450
Series (assuming -------- -------- -------- -------- --------
reinvestment of all Less dividends and distributions
dividends and
distributions). All Dividends from net investment income none none none (0.070) (0.070)
"per share"
information reflects Distributions from net realized
financial results gain on investments (1.000) (1.595) (0.870) (1.185) none
for a single Series -------- -------- -------- -------- --------
share. This
information has been Total dividends and distributions (1.000) (1.595) (0.870) (1.255) (0.070)
audited by Ernst & -------- -------- -------- -------- --------
Young LLP, whose
report, along with Net asset value, end of year $28.550 $18.550 $17.270 $15.890 $15.130
the Series' ======== ======== ======== ======== ========
financial
statements, is Total return(3) 62.94% 18.81%(4) 14.90%(4) 14.46%(4) 29.53%(4)
included in the
Series' annual Ratios and supplemental data
report, which is
available upon Net assets, end of period (000 omitted) $216,062 $130,548 $110,455 $79,900 $58,123
request by calling
800.523.1918. Ratio of expenses to average net assets 0.82% 0.80% 0.80% 0.80% 0.80%
average net assetsc prior to expense
limitation and expenses paid indirectly 0.82% 0.86% 0.87% 0.82% 0.85%

Ratio of net investment income (loss) to
average net assets (0.27%) (0.16%) (0.06%) (0.11%) 0.61%

Ratio of net investment income (loss)
to average net assets prior to expense
limitation and expenses paid indirectly (0.27%) (0.22%) (0.13%) (0.13%) 0.56%

Portfolio turnover 132% 142% 134% 85% 73%
---------------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares, which are
not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect its 12b-1
plan fees which will, among other things, lower performance.
(2) Per share information for the years ended December 31, 1997, 1998 and 1999 was based on the average
shares outstanding method.
(3) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
(4) Total return reflects expense limitations in effect for the Series.

</TABLE>

<PAGE>

High Yield Series

Our investment strategies

We also do a thorough credit analysis of the issuer to determine whether that
company has the financial ability to meet the bond's payments.

The securities we Fixed-income securities offer the potential for greater
typically invest in income payments than stocks, and also may provide
capital appreciation.

<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Zero coupon bonds and pay-in-kind bonds: Zero coupon We may invest in zero coupon bonds and payment-in-kind
securities are debt obligations which do not entitle the bonds, though we do not expect this to be a significant
holder to any periodic payments of interest prior to component of our strategy. The market prices of these bonds
maturity or a specified date when the securities begin 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
traded at a price lower than their face amounts or par react to changes in interest rates to a greater degree than
value. Payment-in-kind bonds pay interest or dividends in interest-paying bonds having similar maturities and credit
the form of additional bonds or preferred stock. quality. They may have certain tax consequences which, under
certain conditions, could be adverse to the Series.

Restricted securities that are determined to be illiquid
may not exceed the Series' 15% limit on illiquid
securities, which is described below.

75
<PAGE>

High Yield Series (continued)

The risks of investing Investing in any mutual fund involves risk,
in High Yield Series 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
High Yield Series typically provides the best
results when held for a number of years. 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 other risks not discussed here.

Industry and security risk is the risk that the value of We limit the amount of the Series' assets invested in any
securities in a particular industry or the value of an one industry and in any individual security. We also follow
individual stock or bond will decline because of changing a rigorous selection process before choosing securities for
expectations for the performance of that industry or for the the portfolio.
individual company issuing the stock or bond.

Credit risk is the risk that there is the possibility that a Our careful, credit-oriented bond selection and our
bond's issuer will be unable to make timely payments of commitment to hold a diversified selection of high-yield
interest and principal. bonds are designed to manage this risk.

Investing in so-called "junk" or "high-yield" bonds entails We will not purchase more than 15% of total assets in bonds
the risk of principal loss, which may be greater than the which, at the time of purchase, are rated CCC by S&P or Caa
risk involved in investment grade bonds. High-yield bonds by Moody's or, if unrated, are of equivalent quality. If a
are sometimes issued by companies whose earnings at the time bond held by the Series drops below this level or goes into
of issuance are less than the projected debt service on the default, the Series will begin to sell the security in an
junk bonds. orderly manner, striving to minimize any adverse affect on
the Series.
If there were a national credit crisis or an
issuer were to become insolvent, principal values could be
adversely affected.

<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Liquidity risk is the possibility that securities cannot be A less liquid secondary market may have an adverse effect on
readily sold within seven days at approximately the price the Series' ability to dispose of particular issues, when
that a series values them. necessary, to meet the Series' liquidity needs or in
response to a specific economic event, such as the
There is generally no established retail secondary market deterioration in the creditworthiness of the issuer. In
for high-yield securities. As a result, the secondary market striving to manage this risk, we evaluate the size of a bond
for high-yield securities is more limited and less liquid issuance as a way to anticipate its likely liquidity level.
than other secondary securities markets. The high-yield
secondary market is particularly susceptible to liquidity We may invest only 15% of net assets in illiquid securities.
problems when the institutions, such as mutual funds and
certain financial institutions, which dominate it
temporarily stop buying bonds for regulatory, financial or
other reasons.

Adverse publicity and investor perceptions may also disrupt
the secondary market for high-yield securities.

77
<PAGE>

High Yield Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. For its
services to the Series, the manager was paid 0.63% of
average daily net assets for the last fiscal year.

Portfolio managers Paul A. Matlack and Gerald T. Nichols have primary
responsibility for making day-to-day investment
decisions for High Yield Series.

Paul A. Matlack, Vice President/Senior Portfolio
Manager, 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. He is a CFA charterholder. Mr.
Matlack has been a member of the High Yield Series team
since 1990 and has been co-managing the High Yield
Series since January 1993.

Gerald T. Nichols, Vice President/Senior Portfolio
Manager, 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
High Yield Series team since 1990 and has been
co-managing the High Yield Series since January 1993.

<PAGE>

Financial highlights

<TABLE>
<CAPTION>
High Yield Series(1/2)
(formerly Delchester Series)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 12/31
The financial 1999 1998 1997 1996 1995
highlights table is ---------------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of year $8.460 $9.510 $9.170 $8.940 $8.540
understand the
Series' financial Income (loss) from investment operations
performance. The
total returns in the Net investment income 0.781 0.906 0.863 0.853 0.872
table represent the
rate that an Net realized and unrealized gain (loss)
investor would have on investments (0.987) (1.048) 0.332 0.230 0.400
earned or lost on an -------- -------- ------- ------- -------
investment in the Total from investment operations (0.206) (0.142) 1.195 1.083 1.272
Series (assuming -------- -------- ------- ------- -------
reinvestment of all Less dividends and distributions
dividends and
distributions). All Dividends from net investment income (0.784) (0.905) (0.855) (0.853) (0.872)
"per share"
information reflects Distributions from net realized gain
financial results on investments (0.050) (0.003) none none none
for a single Series -------- -------- ------- ------- -------
share. This Total dividends and distributions (0.834) (0.908) (0.855) (0.853) (0.872)
information has been -------- -------- ------- ------- -------
audited by Ernst & Net asset value, end of year $7.420 $8.460 $9.510 $9.170 $8.940
Young LLP, whose ======== ======== ======= ======= =======
report, along with Total return(3) (2.64%) (1.83%) 13.63% 12.79% 15.50%
the Series'
financial Ratios and supplemental data
statements, is
included in the Net assets, end of period (000 omitted) $102,633 $120,708 $98,875 $67,665 $56,605
Series' annual
report, which is Ratio of expenses to average net assets 0.72% 0.70% 0.70% 0.70% 0.69%
available upon
request by calling Ratio of net investment income
800.523.1918. to average net assets 9.75% 9.85% 9.24% 9.54% 9.87%

Portfolio turnover 110% 86% 121% 93% 74%
---------------------------------------------------------------------------------------------------------
(1) Effective May 1, 2000, the Series' investment objective changed from "high current income" to
"total return and, as a secondary objective, high current income."
(2) The financial highlights data are derived from data of the Series' Standard Class shares, which are
not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect its 12b-1
plan fees which will, among other things, lower performance.
(3) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.

</TABLE>

79
<PAGE>

International Equity Series

Our investment strategies

We generally maintain a long-term focus in the Series, seeking companies that we
believe will perform well over the next three to five years.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------------------------------------------------------------------------
International Equity Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign currency transactions: A forward foreign currency The Series may invest in securities issued in any currency
exchange contract involves an obligation to purchase or sell and hold foreign currency. Securities of issuers within a
a specific currency on a fixed future date at a price that given country may be denominated in the currency of another
is set at the time of the contract. The future date may be country or in multinational currency units such as the Euro.
any number of days from the date of the contract as agreed
by the parties involved. Although the Series values its assets daily in U.S. dollars,
its does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Series
will, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency
exchange transactions. The Series may conduct its foreign
currency transactions on a cash basis at the rate prevailing
in the foreign currency exchange market or through a forward
foreign currency exchange contract or forward contract.

The Series may use forward contracts for defensive hedging
purposes to attempt to protect the value of the Series'
current security or currency holdings. It may also use
forward contracts if it has agreed to sell a security and
wants to "lock-in" the price of that security, in terms of
U.S. dollars. Investors should be aware of the costs of
currency conversion. The Series will not use forward
contracts for speculative purposes.

Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Series, and a seller of securities in which the seller investment for the Series' cash position. In order to enter
agrees to buy the securities back within a specified time at into these repurchase agreements, the Series must have
the same price the buyer paid for them, plus an amount equal collateral of at least 102% of the repurchase price. The
to an agreed upon interest rate. Repurchase agreements are Series may enter into repurchase agreements in which the
often viewed as equivalent to cash. collateral is any security in which it may invest, but
normally uses U.S. government securities as collateral.

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

International Equity Series (continued)

The risks of investing Investing in any mutual fund involves risk, including
in International the risk that you may receive little or no return on
Equity Series 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. Following are
the chief risks you assume when investing in
International Equity Series. Please see the Statement
of Additional Information for further discussion of
these risks and other risks not discussed here.

<PAGE>

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware International
Advisers Ltd. Delaware International Advisers makes
investment decisions for the Series, manages the
Series' business affairs and provides daily
administrative services. For its services to the
Series, the manager was paid 0.80% of average daily net
assets for the last fiscal year, reflecting a waiver of
fees by the manager.

Portfolio managers Clive A. Gillmore and Nigel G. May have primary
responsibility for making day-to-day investment
decisions for the International Equity Series. In
making investment decisions for the Series, Mr.
Gillmore and Mr. May regularly consult with an
international equity team of fourteen members.

Clive A. Gillmore, Director, Deputy Managing Director,
Senior Portfolio Manager of Delaware International
Advisers Ltd., is a graduate of the University of
Warwick. He 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 Advisers in 1990 after
eight years of investment experience. His most recent
position prior to joining Delaware International
Advisers was as a Pacific Basin equity analyst and
senior portfolio manager for Hill Samuel Investment
Management Ltd. Mr. Gillmore completed the London
Business School Investment Program. He has been
managing the Series since its inception.

Nigel G. May, Director, Senior Portfolio Manager,
Delaware International Advisers Ltd., 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 Advisers in
1991, assuming portfolio management responsibilities
and sharing analytical responsibilities for continental
Europe. He previously had been with Hill Samuel
Investment Management Ltd. for five years.

<PAGE>

Financial highlights

<TABLE>
<CAPTION>
International Equity Series(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 12/31
The financial 1999 1998 1997 1996 1995
highlights table is ------------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of year $16.480 $15.520 $15.110 $13.120 $11.840
understand the
Series' financial Income from investment operations
performance. The
total returns in the Net investment income(2) 0.371 0.386 0.359 0.557 0.419
table represent the
rate that an Net realized and unrealized gain
investor would have on investments and foreign currencies 2.161 1.169 0.596 1.966 1.191
earned or lost on an -------- -------- -------- -------- -------
investment in the Total from investment operations 2.532 1.555 0.955 2.523 1.610
Series (assuming -------- -------- -------- -------- -------
reinvestment of all Less dividends and distributions
dividends and
distributions). All Dividends from net investment income (0.356) (0.595) (0.545) (0.420) (0.240)
"per share"
information reflects Distributions from net realized gain
financial results on investments (0.026) none none (0.113) (0.090)
for a single Series -------- -------- -------- -------- -------
share. This Total dividends and distributions (0.382) (0.595) (0.545) (0.533) (0.330)
information has been -------- -------- -------- -------- -------
audited by Ernst & Net asset value, end of year $18.630 $16.480 $15.520 $15.110 $13.120
Young LLP, whose ======== ======== ======== ======== =======
report, along with Total return(3) 15.76% 10.33% 6.60% 20.03% 13.98%
the Series'
financial Ratios and supplemental data
statements, is
included in the Net assets, end of period (000 omitted) $304,060 $243,536 $198,863 $131,428 $81,548
Series' annual
report, which is Ratio of expenses to average net assets 0.92% 0.87% 0.85% 0.80% 0.80%
available upon
request by calling Ratio of expenses to average net assets
800.523.1918. prior to expense limitation and
expenses paid indirectly 0.94% 0.88% 0.90% 0.91% 0.89%

Ratio of net investment income to
average net assets 2.16% 2.41% 2.28% 4.71% 3.69%

Ratio of net investment income to
average net assets prior to expense
limitation and expenses
paid indirectly 2.14% 2.40% 2.23% 4.60% 3.60%

Portfolio turnover 9% 5% 7% 8% 19%
---------------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares, which are
not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect its 12b-1
plan fees which will, among other things, lower performance.
(2) Per share information for the years ended December 31, 1997, 1998 and 1999 was based on the average
shares outstanding method.
(3) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
Total return reflects expense limitations in effect for the Series.

</TABLE>

<PAGE>

REIT Series

Our investment strategies

We do not normally acquire securities for short term purposes; however, we may
take advantage of short-term opportunities that are consistent with the Series'
investment objectives.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

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 a proportionate share of the expenses of a
fund and indirectly shares similar expenses of the REITs.

o ownership, development, construction, financing,
management or sale of commercial, industrial or
residential real estate; or

o products or services related to the real estate
industry, such as building supplies or mortgage
servicing.

Foreign securities and American Depositary Receipts: The Series' investments may from time to time include
Securities of foreign entities issued directly or, in the sponsored or unsponsored American Depositary Receipts that
case of American Depositary Receipts, through a U.S. bank. are actively traded in the United States.
ADRs represent the bank's holdings of a stated number of
shares of a foreign corporation. An ADR entitles the holder We may invest up to 10% of the Series' assets in foreign
to all dividends and capital gains earned by the underlying securities (not including ADRs).
foreign shares. ADRs are bought and sold the same as U.S.
securities.

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

REIT Series (continued)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------------------------------------------------------------------------
REIT Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Options and futures: Options represent a right to buy or If we have stocks that appreciated in price, we may want to
sell a security or group of securities at an agreed upon protect those gains when we anticipate adverse conditions.
price at a future date. The purchaser of an option may or We might use options or futures to neutralize the effect of
may not choose to go through with the transaction. any price declines, without selling the security. We might
also use options or future to gain exposure to a particular
Writing a covered call option on a security obligates the market segment without purchasing individual securities in
owner of the security to sell it at an agreed upon price on that segment. We might use this approach if we had excess
an agreed upon date (usually no more than nine months in the cash that we wanted to invest quickly.
future.) The owner of the security receives a premium
payment from the purchaser of the call, but if the security We might use covered call options if we believe that doing
appreciates to a price greater than the agreed upon selling so would help the Series to meet its investment objective.
price, the series would lose out on those gains.
Use of these strategies can increase the operating costs of
Futures contracts are agreements for the purchase or sale of the Series and can lead to loss of principal.
securities at a specified price, on a specified date. Unlike
an option, a futures contract must be executed unless it is
sold before the settlement date.

Options and futures are generally considered to be
derivative securities.

Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Series, and a seller of securities in which the seller investment for our cash position. In order to enter into
agrees to buy the securities back within a specified time at repurchase agreements, the Series must have collateral of at
the same price the buyer paid for them, plus an amount equal least 102% of the repurchase price. Except when we believe a
to an agreed upon interest rate. Repurchase agreements are temporary defensive approach is appropriate, the Series will
often viewed as equivalent to cash. not hold more than 5% of its total assets in cash or other
short-term investments. All short-term investments will be
rated AAA by S&P or Aaa by Moody's or if unrated, be of
comparable quality, based on our evaluation.The Series will
only enter into repurchase agreements in which the
collateral is U.S. government securities.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including
resale is restricted under securities law. those that are eligible for resale only among certain
institutional buyers without registration which are commonly
known as Rule 144A Securities. Restricted securities that
are determined to be illiquid may not exceed the Series' 15%
limit on illiquid securities, which is described below.

Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid
market, and cannot be easily sold within seven days at securities, including repurchase agreements with maturities
approximately the price that the Series has valued them. of over seven days.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

86
<PAGE>

<PAGE>

Industry and security risk is the risk that the value of In REIT Series we hold a number of different individual
securities in a particular industry or the value of an securities, seeking to manage security risk. However, we do
individual stock or bond will decline because of changing concentrate in the real estate industry. As a consequence,
expectations for the performance of that industry or for the the share price of the Series may fluctuate in response to
individual company issuing the stock or bond. factors affecting that industry, and may fluctuate more
widely than a portfolio that invests in a broader range of
industries. The Series may be more susceptible to any single
economic, political or regulatory occurrence affecting the
real estate industry.

Interest rate risk is the risk that securities will decrease REIT Series is subject to interest rate risk. If the Series
in value if interest rates rise and conversely rise in value invests in real estate investment trusts that hold fixed
when interest rates fall. rate obligations, we would expect the value of those trusts
to decrease if interest rates rise and increase if interest
rates decline. However, lower interest rates also tend to
increase the chances that a bond will be refinanced, which
can hurt the returns of REITs that hold fixed rate
obligations. We strive to manage this risk by monitoring
interest rates and evaluating their potential impact on
securities already in the portfolio or those we are
considering for purchase.

Real estate industry risks include among others: Since the Series invests principally in REITs, it is subject
o possible declines in the value of real estate; to the risks associated with the real estate industry. We
o risks related to economic conditions; will strive to manage these risks through careful selection
o possible shortage of mortgage funds; of individual REIT securities; however, investors should
o overbuilding and extended vacancies; carefully consider these risks before investing in the
o increased competition; Series.
o changes in property taxes, operating expenses or
zoning laws;
o costs of environmental clean-up, or damages from
natural disasters;
o limitations or fluctuations in rent payments;
o cashflow fluctuations; and
o defaults by borrowers.
REITs are also subject to the risk of failing to qualify for
tax-free pass-through of income under the Internal Revenue
Code and/or failing to qualify for an exemption from
registration as an investment company under the Investment
Company Act of 1940.

Non-diversified funds risk: Non-diversified investment REIT Series is a non-diversified fund and subject to this
companies have the flexibility to invest as much as 50% of risk. Nevertheless, we typically hold securities from a
their assets in as few as two issuers with no single issuer variety of different issuers, representing different sectors
accounting for more than 25% of the portfolio. The remaining of the real estate industry. We also perform extensive
50% of the portfolio must be diversified so that no more analysis on all securities. We are particularly diligent in
than 5% of a series' assets is invested in the securities of reviewing securities that represent a larger percentage of
a single issuer. Because a non-diversified fund may invest portfolio assets.
its assets in fewer issuers, the value of series shares may
increase or decrease more rapidly than if the series were
fully diversified.

Foreign risk is the risk that foreign securities may be We may invest up to 10% of the REIT Series' total assets in
adversely affected by political instability (including foreign securities; however we typically invest only a small
governmental seizures or nationalization of assets), changes portion of assets in foreign securities, so this is not
in currency exchange rates, foreign economic conditions or expected to be a major risk to the Series.
inadequate regulatory and accounting standards. Foreign
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

REIT Series (continued)

Futures and options risk is the possibility that a series REIT Series may use futures contracts and options on futures
may experience a loss if it employs an options or futures contracts, as well as options on securities for hedging
strategy related to a security or a market index and that purposes. We limit the amount of the Series' assets that may
security or index moves in the opposite direction from what be committed to these strategies.
the manager anticipated. Futures and options also involve
additional expenses, which could reduce any benefit or
increase any loss the series gains from using the strategy.

Investment manager The Series is managed by Delaware Management Company.
and sub-adviser Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. Lincoln
Investment Management, Inc. (Lincoln) is the Series'
sub-adviser. As sub-adviser, Lincoln provides Delaware
with investment recommendations, asset allocation
advice, research, economic analysis and other
investment services regarding the types of securities
in which we invest. For its services to the Series, the
manager and sub-adviser were paid an aggregate fee of
0.64% of average daily net assets for the last fiscal
year, reflecting a waiver of fees by the manager.

Lincoln is a wholly owned subsidiary of Lincoln
National Corporation and was incorporated in 1930.
Lincoln's primary activity is institutional
fixed-income investment management and consulting.
These activities include fixed-income portfolios,
private placements, real estate debt and equity, and
asset/liability management. Lincoln provides investment
management services to Lincoln National Corporation,
its principal subsidiaries and affiliated registered
investment companies, and acts as investment adviser to
other unaffiliated clients.

<PAGE>

Portfolio managers Christopher S. Beck, Vice President/Senior Portfolio
Manager, together with Thomas J. Trotman and Damon J.
Andres, both Vice Presidents, have primary
responsibility for making day-to-day investment
decisions for the REIT Series. Mr. Beck was named to
the REIT management team on May 6, 1999, joining Mr.
Trotman who has been on the team since 1998 and Mr.
Andres who has been on the team since 1997.

Christopher S. Beck, Vice President/Senior Portfolio
Manager, has 19 years of investment management
experience, 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 at Pitcairn Trust Company
for two years. Mr. Beck holds a BS from the University
of Delaware, an MBA from Lehigh University and is a CFA
charterholder.

Thomas J. Trotman, Vice President/Portfolio Manager,
earned a bachelor's degree in Accounting from
Muhlenberg College and an MBA from Widener University.
Prior to joining Delaware Investments in 1995, he was
Vice President and Director of Investment Research at
Independence Capital Management. Before that, he held
credit-related positions at Marine Midland Bank, U.S.
Steel Corporation, and Amerada Hess. Mr. Trotman is a
CFA charterholder.

Damon J. Andres, Vice President/Portfolio Manager,
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, he provided investment consulting services as a
Consulting Associate with Cambridge Associates, Inc. in
Arlington, Virginia.

88
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
REIT Series(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Period 5/4/98(2)
Year Ended through
The financial 12/31/99 12/31/99
highlights table is ----------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of period $9.100 $10.000
understand the Series'
financial performance. Income (loss) from investment operations
The total returns in the
table represent the rate Net investment income 0.334 0.217
that an investor would
have earned or lost on Net realized and unrealized loss on investments (0.574) (1.117)
an investment in the ------ ------
Series (assuming
reinvestment of all Total from investment operations (0.240) (0.900)
dividends and ------ ------
distributions). All "per Less dividends:
share" information Dividends from net investment income (0.190) none
reflects financial results
for a single Series Total dividends (0.190) none
share. This information
has been audited by Net asset value, end of period $8.670 $ 9.100
Ernst & Young LLP, ====== =======
whose report, along
with the Series' Total return(3) (2.61%) (9.00%)
financial statements, is
included in the Series' Ratios and supplemental data
annual report, which is
available upon request Net assets, end of period (000 omitted) $11,624 $5,562
by calling
800.523.1918. Ratio of expenses to average net assets 0.85% 0.85%

Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.96% 1.02%

Ratio of net investment income to average net assets 5.65% 6.42%

Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 5.54% 6.25%

Portfolio turnover 33% 39%
----------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares,
which are not subject to 12b-1 plan fees. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30% (currently set at 0.15%). Future data for the Service Class
will reflect its 12b-1 plan fees which will, among other things, lower performance.

(2) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.

(3) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for all
periods shown. Total return reflects expense limitations in effect for the Series.
</TABLE>

<PAGE>

Select Growth Series

Our investment strategies

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; and

o discounted cash flows that are high relative to other stocks.

We maintain a well-diversified portfolio, typically holding a mix of different
stocks, representing a wide array of industries and a mix of small companies,
medium-size companies and large companies.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid securities,
market, and cannot be easily sold within seven days at including repurchase agreements with maturities of over seven
approximately the price that a series has valued them. days.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Purchasing securities on a when-issued or delayed delivery basis Consistent with
its investment objective, the Series may invest in U.S. government securities
and corporate debt obligations on a when-issued or delayed delivery basis; that
is, paying for securities before delivery or taking delivery at a later date.
During the time between the commitment and settlement, the Series does not
accrue interest, but the market value of the bonds may fluctuate. This can
result in the Series' share value increasing or decreasing. The Series will
designate cash or securities in amounts sufficient to cover its obligations, and
will value the designated assets daily.

The risks of Investing in any mutual fund involves risk, including the
investing in Select risk that you may receive little or no return on your
Growth Series 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. Following are the chief risks you assume
when investing in Select Growth Series. Please see the
Statement of Additional Information for further discussion
of these risks and other risks not discussed here.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Select Growth 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 stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall stock market movements and though we may hold
confidence. securities for any amount of time, we typically do not trade
for short-term purposes.

Interest rate risk is the risk that securities will decrease We analyze each company's financial situation and its cash
in value if interest rates rise. The risk is generally flow to determine the company's ability to finance future
associated with bonds; however, because small and medium-size expansion and operations. The potential affect that rising
companies often borrow money to finance their operations, they interest rates might have on a stock is taken into
may be adversely affected by rising interest rates. consideration before the stock is purchased.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price that
a series values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

91
<PAGE>

Select Growth Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions for
the Series, manages the Series' business affairs and
provides daily administrative services. The Series will
pay the manager the following fee on an annual basis:
0.75% on the first $500 million of average daily net
assets; 0.70% on the next $500 million; 0.65% on the next
$1.5 billion and 0.60% on assets in excess of $2.5
billion.

Portfolio managers Gerald S. Frey has primary responsibility for making
day-to-day investment decisions for the Select Growth
Series. When making investment decisions for the Series,
Mr. Frey regularly consults with Marshall T. Bassett, John
A. Heffern, Jeffrey W. Hynoski, Steven T. Lampe and Lori
P. Wachs.

Gerald S. Frey, Senior Vice President/Senior Portfolio
Manager, has 23 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 for the Series since its inception.

John A. Heffern, Vice President, Portfolio Manager, earned
bachelors and MBA degrees at the University of North
Carolina at Chapel Hill. Prior to joining Delaware
Investments in 1997, he was a Senior Vice President,
Equity Research at NatWest Securities Corporation's
Specialty Financial Services unit. Before that, he was a
Principal and Senior Regional Bank Analyst at Alex. Brown
& Sons.

Jeffrey W. Hynoski, Vice President/Portfolio Manager,
joined Delaware Investments in 1998. Prior to joining
Delaware Investments, 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.

Steven T. Lampe, Vice President, Portfolio Manager,
received a bachelor's degree in Economics and an MBA
degree with a concentration in Finance from the University
of Pennsylvania's Wharton School. He joined Delaware
Investments in 1995 and covers the financial services and
business services sectors for small and mid-capitalization
growth stocks. He previously served as a tax/audit manager
at Price Waterhouse, specializing in financial services
firms. Mr. Lampe is a Certified Public Accountant.

Lori P. Wachs, Vice President/Portfolio Manager, 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.

92
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Select Growth Series(1)
(formerly Aggressive Growth Series)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Period 5/3/99(2)
through
The financial 12/31/99
highlights table is --------------------------------------------------------------------------------
intended to help you Net asset value, beginning of period $10.000
understand the Series'
financial performance. Income from investment operations
The total return in the
table represents the Net investment income 0.011
rate that an investor
would have earned on Net realized and unrealized gain on investments 4.289
an investment in the -------
Series (assuming
reinvestment of all Total from investment operations 4.300
dividends and -------
distributions). All "per
share" information Net asset value, end of period $14.300
reflects financial results =======
for a single Series
share. This information Total return(3) 42.90%
has been audited by
Ernst & Young LLP, Ratios and supplemental data
whose report, along
with the Series' Net assets, end of period (000 omitted) $53,529
financial statements,
is included in the Ratio of expenses to average net assets 0.80%
Series' annual report,
which is available upon Ratio of expenses to average net assets
request by calling prior to expense limitation and expenses paid indirectly 0.81%
800.523.1918.
Ratio of net investment income to average net assets 0.32%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.29%

Portfolio turnover 174%
--------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard
Class shares, which are not subject to 12b-1 plan fees. The Service Class
shares are subject to an annual 12b-1 fee of not more than 0.30% (currently
set at 0.15%). Future data for the Service Class will reflect its 12b-1
plan fees which will, among other things, lower performance.

(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.

(3) Total return does not reflect expenses that apply to Separate Accounts or
to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown. Total return reflects
expense limitations in effect for the Series.
</TABLE>

<PAGE>
Small Cap Value Series

Our investment strategies

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.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership Under normal market conditions, we will hold at least 65% of
in a corporation. Stockholders participate in the the Series' net assets in common stock of small companies that
corporation's profits and losses, proportionate to the number we believe are selling for less than their true value.
of shares they own. Generally, we invest 90% to 100% of net assets in these
stocks.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including those
resale is restricted under securities law. that are eligible for resale only among certain institutional
buyers without registration which 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.

94
<PAGE>

The risks of investing Investing in any mutual fund involves risk, including
in Small Cap Value the risk that you may receive little or no return on
Series 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. 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
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 of the We maintain a long-term investment approach and focus on
securities in a certain market--like the stock or bond stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall stock market movements and generally do not
confidence. trade for short-term purposes.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price that
a series values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

95
<PAGE>

Small Cap Value Series (continued)

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. For its services
to the Series, the manager was paid 0.75% of average
daily net assets for the last fiscal year.

Portfolio managers Christopher S. Beck has primary responsibility for making
day-to-day investment decisions for the Small Cap Value
Series. In making investment decisions for the Series,
Mr. Beck consults with Andrea Giles.

Christopher S. Beck, Vice President/Senior Portfolio
Manager, has 19 years of investment experience, 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. Mr. Beck holds a
BS from the University of Delaware, an MBA from Lehigh
University and is a CFA charterholder. Mr. Beck has been
managing the Small Cap Value Series since May 1997.

Andrea Giles, Vice President/Portfolio Manager, 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>

Financial highlights

<TABLE>
<CAPTION>
Small Cap Value Series(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 12/31
The financial 1999 1998 1997 1996 1995
highlights table is ----------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of year $16.450 $17.920 $14.500 $12.470 $10.290
understand the Series'
financial performance. Income (loss) from investment operations
The total returns in the
table represent the rate Net investment income 0.182 0.196 0.122 0.112 0.192
that an investor would
have earned or lost on Net realized and unrealized gain
an investment in the (loss) on investments (0.997) (1.036) 4.338 2.548 2.208
Series (assuming ------- ------- ------- ------- -------
reinvestment of all
dividends and Total from investment operations (0.815) (0.840) 4.460 2.660 2.400
distributions). All "per ------- ------- ------- ------- -------
share" information
reflects financial results Less dividends and distributions
for a single Series
share. This information Dividends from net investment income (0.195) (0.135) (0.110) (0.180) (0.150)
has been audited by
Ernst & Young LLP, Distributions from net realized
whose report, along gain on investments (0.080) (0.495) (0.930) (0.450) (0.070)
with the Series' ------- ------- ------- ------- -------
financial statements, is
included in the Series' Total dividends and distributions (0.275) (0.630) (1.040) (0.630) (0.220)
annual report, which is ------- ------- ------- ------- -------
available upon request
by calling Net asset value, end of year $15.360 $16.450 $17.920 $14.500 $12.470
800.523.1918. ======= ======= ======= ======= =======

Total return(2) (4.86%) (4.79%)(3) 32.91%(3) 22.55%(3) 23.85%(3)

Ratios and supplemental data

Net assets, end of period (000 omitted) $95,425 $103,989 $84,071 $23,683 $11,929

Ratio of expenses to average net assets 0.85% 0.83% 0.80% 0.80% 0.80%

Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 0.85% 0.85% 0.90% 0.99% 0.96%

Ratio of net investment income
to average net assets 1.16% 1.32% 1.24% 1.28% 2.13%

Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly 1.16% 1.30% 1.14% 1.09% 1.97%

Portfolio turnover 47% 45% 41% 84% 71%
----------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares,
which are not subject to 12b-1 plan fees. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30% (currently set at 0.15%). Future data for the Service Class
will reflect its 12b-1 plan fees which will, among other things, lower performance.
(2) Total return does not reflect expenses that apply to Separate Accounts or to the related
insurance policies and inclusion of these charges would reduce total return figures for all
periods shown.
(3) Total return reflects expense limitations in effect for the Series.

</TABLE>

<PAGE>

Social Awareness Series

Our investment strategies

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.

The securities we Stocks offer investors the potential for capital
typically invest in appreciation and may pay dividends as well.

<PAGE>

The risks of investing in Social Awareness 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. 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 other risks not discussed here.

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Social Awareness 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 stocks we believe can appreciate over an extended time frame
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall stock market movements and generally do not
confidence. trade for short-term purposes.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price that
the Series has valued them.

99
<PAGE>

Social Awareness Series (continued)

Investment manager The Series is managed by Delaware Management Company.
and sub-adviser Vantage Investment Advisors is the Series' sub-adviser.
As sub-adviser, Vantage 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. For their services to the
Series, the manager and sub-adviser were paid an
aggregate fee of 0.70% of average daily net assets for
the last fiscal year, reflecting a waiver of fees by the
manager.

Vantage Investment Advisors was founded in 1979. It
provides investment advice to pension plans, endowments,
insurance and commingled products.

Portfolio managers Enrique Chang and Christopher P. Harvey have primary
responsibility for making day-to-day investment decisions
for Social Awareness Series.

Enrique Chang, Senior Vice President and Chief Investment
Officer of Vantage Investment Advisors, became co-manager
of the Series 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 Advisors, became co-manager of the Series in
January 1999. Mr. Harvey manages portfolios, conducts
investment research and assists in equity trading. He
graduated from Bucknell University with a BS degree in
accounting. He received an MBA 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.

100
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Social Awareness Series(1)
- ---------------------------------------------------------------------------------------------------------------------------
Period 5/1/97(2)
Year Ended 12/31 through
The financial 1998 1999 12/31/97
highlights table ----------------------------------------------------------------------------------------------
is intended to <S> <C> <C> <C>
help you understand Net asset value, beginning of period $14.550 $12.840 $10.000
the Series'
financial performance. Income from investment operations
The total returns in
the table represent Net investment income 0.036 0.065 0.051
the rate that an
investor would have Net realized and unrealized gain on investments 1.834 1.880 2.789
earned or lost on ------- ------- -------
an investment in Total from investment operations 1.870 1.945 2.840
the Series (assuming ------- ------- -------
reinvestment of all Less dividends and distributions
dividends and
distributions). All Dividends from net investment income (0.060) (0.050) none
"per share" information
reflects financial Distributions from net realized gain on investments none (0.185) none
results for a single ------- ------- -------
Series share. This Total dividends and distributions (0.060) (0.235) none
information has been ------- ------- -------
audited by Ernst & Net asset value, end of period $16.360 $14.550 $12.840
Young LLP, whose ======= ======= =======
report, along with Total return(3) 12.91% 15.45% 28.40%
the Series' financial
statements, is Ratios and supplemental data
included in the
Series' annual Net assets, end of period (000 omitted) $36,739 $26,962 $7,800
report, which is
available upon Ratio of expenses to average net assets 0.85% 0.83% 0.80%
request by calling
800.523.1918. Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.90% 0.89% 1.40%

Ratio of net investment income to average net assets 0.30% 0.80% 1.13%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.25% 0.74% 0.53%

Portfolio turnover 22% 30% 52%
----------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard
Class shares, which are not subject to 12b-1 plan fees. The Service Class
shares are subject to an annual 12b-1 fee of not more than 0.30% (currently
set at 0.15%). Future data for the Service Class will reflect its 12b-1
plan fees which will, among other things, lower performance.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Total return does not reflect expenses that apply to Separate Accounts or
to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown. Total return reflects
expense limitations in effect for the Series.
</TABLE>

101

<PAGE>

Strategic Income Series

Our investment strategies

Following are the three key sectors we focus on as well as our general
investment approach in each sector:

The securities we Fixed-income securities offer the potential for
typically invest in greater income payments than stocks, and also may
provide capital appreciation.

<PAGE>

U.S. government securities: Direct U.S. obligations The Series may invest up to 60% of net assets in direct
including bills, notes, bonds as well as other debt U.S. government obligations; however, these securities will
securities issued by the U.S. Treasury or securities of typically be a smaller percentage of the portfolio because
U.S. government agencies or instrumentalities which are they generally do not offer as high a level of current
backed by the full faith and credit of the United States. income as other fixed-income securities the Series may
invest in.

Mortgage-backed securities: Fixed-income securities that We may invest up to 60% of net assets in government-related
represent pools of mortgages, with investors receiving mortgage-backed securities or fully collateralized
principal and interest payments as the underlying mortgage privately issued mortgage-backed 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
instrumentalities, such as the Federal Home Loan Mortgage securities issued by private companies if the securities
Corporation, Fannie Mae and the Government National are not collateralized by the U.S. government, or its
Mortgage Association. Others are issued by private agencies or instrumentalities. However, these securities
financial institutions, with some fully collateralized by must be rated at the time of purchase in one of the four
certificates issued or guaranteed by the U.S. government or highest categories by an NRSRO such as S&P or Moody's. They
its agencies or instrumentalities. must also represent interests in whole-loan mortgages,
multi-family mortgages, commercial mortgages and other
motgage collateral supported by a first mortgage lien on
real estate. The privately issued securities we invest in
are either CMOs or REMICs (see below).
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

102

<PAGE>

Asset-backed securities: Bonds or notes backed by accounts We invest only in asset-backed securities rated in one of
receivables including home equity, automobile or credit the four highest categories by an NRSRO.
loans.

Investment grade corporate bonds: Debt obligations issued The Series may invest up to 60% of net assets in investment
by a corporation rated in one of the four highest grade corporate bonds.
categories by an NRSRO (or, if unrated, that we believe are
of equal quality). Debt securities within the top three
categories by an NRSRO comprise what are known as
high-grade bonds and are regarded as having a strong
ability to pay principal and interest. Securities in the
fourth category by an NRSRO are known as medium-grade bonds
and are 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 and foriegn corporate bonds: We may invest in foreign government securities and
Foriegn government securities issued by foreign governments primarily focus on better quality bonds with
or supranational entities. A supranational entity is an investment-grade credit ratings. The Series may also invest
entity established or financially supported by the national in securities issued by supranational entities, which are
governments of one or more countries. The International typically of higher quality.
Bank for Reconstruction and Development (more commonly
known as the World Bank) is one example of a supranational We may invest in both rated and unrated foreign securities.
entity. We may invest both in investment grade securities and
non-investment grade (i.e., those rated BB or lower by S&P
Foreign corporate bonds are debt obligations issued by a or Fitch, Ba or lower by Moody's, or similarly rated by
foreign corporation. another NRSRO.)

However, up to 15% of the Series' assets may also be
invested in foreign securities issued by emerging or
developing countries, which may be lower rated, including
securities rated below investment grade.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------------------------------------------------------------------------
Strategic Income Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Zero coupon bonds and pay-in-kind bonds: Zero coupon We may invest in zero coupon bonds and payment in kind
securities are debt obligations which do not entitle the bonds, though we do not expect this to be a significant
holder to any periodic payments of interest prior to component of our strategy. The market prices of these bonds
maturity or a specified date when the securities begin 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
traded at a price lower than their face amounts or par react to changes in interest rates to a greater degree than
value. Payment-in-kind bonds pay interest or dividends in interest-paying bonds having similar maturities and credit
the form of additional bonds or preferred stock. quality. They may have certain tax consequences which,
under certain conditions, could be adverse to the Fund.

Equity securities: Common stocks, preferred stocks Up to 10% of the Series' assets may be invested in U.S.
(including adjustable rate preferred stocks) and other equity securities.
equity securities, such as convertible securities and
warrants. We would select only equity securities that were consistent
with the Series' objective of high current income and total
return.

Options and futures: Options represent a right to buy or At times when we anticipate adverse conditions, we may want
sell a security or group of securities at an agreed upon to protect gains on securities without actually selling
price at a future date. The purchaser of an option may or them. We might use options or futures to neutralize the
may not choose to go through with the transaction. effect of any price declines, without selling the bond or
bonds, or as a hedge against changes in interest rates.
Futures contracts are agreements for the purchase or sale
of securities at a specified price, on a specified date. Use of these strategies can increase the operating costs of
Unlike an option, a futures contract must be executed the Series and can lead to loss of principal.
unless it is sold before the settlement date.

Options and futures are generally considered to be
derivative securities.

Investment company securities: In some foreign countries, We may invest in closed-end investment companies consistent
investments by a mutual fund may only be made through with the 1940 Act requirements. These investments involve
investments in closed-end investment companies that in turn an indirect payment of a portion of the other investment
invest in the securities of such countries. companies' expenses, including advisory fees.

Brady Bonds: These are debt securities issued under the We may invest in Brady Bonds. We believe that the economic
framework of the Brady Plan, an initiative for debtor reforms undertaken by countries in connection with the
nations to restructure their outstanding external issuance of Brady Bonds makes the debt of countries that
indebtedness (generally, commercial bank debt). Brady Bonds have issued Brady Bonds or those that have announced plans
tend to be of lower quality and more speculative than to issue them a viable opportunity for investment.
securities of developed country issuers.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

103

<PAGE>

Strategic Income Series (continued)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ----------------------------------------------------------------------------------------------------------------------------------
Strategic Income Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign currency transactions: A forward contract involves We may invest in securities issued in any currency and may
an obligation to purchase or sell a specific currency at a hold foreign currency.
future date at a price set at the time of the contract.
Forward contracts are used to "lock-in" the price of a Although the Series values its assets daily in terms of
security that will be purchased or sold, in terms of U.S. U.S. dollars, we do not convert our holdings of foreign
dollars or other currencies. 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 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 may use forward
contracts for defensive hedging purposes to attempt to
protect the value of the Series' current security or
currency holdings. It may also use forward contracts if it
has agreed to sell a security and wants to "lock-in" the
price of that security, in terms of U.S. dollars. Investors
should be aware of the costs of currency conversion. The
Series will not use forward contracts for speculative
purposes.

These transactions may increase the Series' expenses.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including
resale is restricted under securities law. those that are eligible for resale only among certain
institutional buyers without registration which 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.

Interest rate swap and index swap agreements: In an We may use interest rate swaps to adjust the Series'
interest rate swap, a series receives payments from another sensitivity to interest rates, or to hedge against changes
party based on a floating interest rate in return for in interest rates.
making payments based on a fixed interest rate. An interest
rate swap can also work in reverse, with a series receiving Index swaps may be used to gain exposure to markets that
payments based on a fixed interest rate and making payments the Series invests in or as a substitute for futures
based on a floating interest rate. In an index swap, a options or forward contracts if such contracts are not
series receives gains or incurs losses based on the total directly available to the Series on favorable terms.
return of an index, in exchange for making fixed or
floating interest rate payments to another party. Interest rate swaps and index swaps will be considered
illiquid securities (see below).

<PAGE>

104

<PAGE>

The risks of investing Investing in any mutual fund involves risk, including
in Strategic Income the risk that you may receive little or no return on
Series 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. Following are
the chief risks you assume when investing in Strategic
Income Series. Please see the Statement of Additional
Information for further discussion of these risks and
other risks not discussed here.

<PAGE>

Index swaps are subject to the same market risks as the In evaluating the use of an index swap, we carefully
investment market or sector that the index represents. consider how market changes could affect the swap and how
Depending on the actual movements of the index and how well that compares to us investing directly in the market the
the portfolio managers forecast those movements, a series swap is intended to represent.
could experience a higher or lower return than anticipated.

Industry and security risk is the risk that the value of We diversify the Series assets across three distinct
securities in a particular industry or the value of an sectors of the bond market and among a wide variety of
individual stock or bond will decline because of changing individual issuers.
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 The Series is subject to interest rate risk. We cannot
decrease in value if interest rates rise. The risk is eliminate that risk, but we do strive to manage it by
greater for bonds with longer maturities than for those monitoring economic conditions.
with shorter maturities.
We will not invest in swaps with maturities of more than
Swaps may be particularly sensitive to interest rate two years. Each business day we will calculate the amount
changes. Depending on the actual movements of interest the Series must pay for any swaps it holds and will
rates and how well the portfolio managers anticipate them, segregate cash or other liquid securities to cover that
a series could experience a higher or lower return than amount.
anticipated.

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 not be able to make commitment to hold a diversified selection of high-yield
timely payments of interest and principal. bonds are designed to manage this risk.

Investing in so-called "junk" or "high-yield" bonds entails Our holdings of high quality investment grade bonds are
the risk of principal loss, which may be greater than the less subject to credit risk and may help to balance any
risk involved in investment grade bonds. High-yield bonds credit problems experienced by individual high-yield bond
are sometimes issued by companies whose earnings at the issuers or foreign issuers.
time the bond is issued are less than the projected debt
payments on the bonds. When selecting dealers with whom we would make interest
rate or index swap agreements, we focus on those with high
Some analysts believe a protracted economic downturn would quality ratings and do careful credit analysis before
severely disrupt the market for high-yield bonds, adversely investing.
affect the value of outstanding bonds and adversely affect
the ability of high-yield issuers to repay principal and
interest. It is likely that protracted periods of economic
uncertainty would cause increased volatility in the market
prices of high-yield bonds, an increase in the number of
high-yield bond defaults and corresponding volatility in a
series' net asset value.

If there were a national credit crisis or an issuer were to
become insolvent, principal values could be adversely
affected.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

105

<PAGE>

Strategic Income Series (continued)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------------------------------------------------------------------------------
Strategic Income Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Futures and options risk is the possibility that a series We will use options and futures for defensive purposes,
may experience a significant loss if it employs an option such as to protect gains in the portfolio without actually
or futures strategy related to a security or a market index selling the security or to neutralize the impact of
and that security or index moves in the opposite direction interest rate changes. We will not use futures and options
from what the portfolio managers anticipated. Futures and for speculative reasons or in an effort to enhance return.
options also involve additional expenses, which could
reduce any benefit or increase any loss to a series from
using the strategy.

Foreign risk is the risk that foreign securities may be The Series will attempt to reduce foreign investing risks
adversely affected by political instability (including through portfolio diversification, credit analysis and
governmental seizures or nationalization of assets), attention to trends in the world economies, industries and
changes in currency exchange rates, foreign economic financial markets.
conditions or inadequate regulatory and accounting
standards. Foreign markets may also be less efficient, less We carefully evaluate the political and economic situations
liquid, have greater price volatility, less regulation and in the countries where we invest and take these risks into
higher transaction costs than U.S. markets. account before we select securities for the portfolio.
However, there is no way to eliminate foreign risks when
investing internationally.

Foreign government securities risks involve the ability of Strategic Income Series attempts to reduce the risks
a foreign government or government related issuer to make associated with investing in foreign governments by
timely and ultimate payments on its external debt limiting the portion of portfolio assets that may be
obligations. This ability to make payments will be strongly invested in such securities.
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 investment We may try to hedge currency risk by purchasing foreign
may be negatively affected by changes in foreign currency currency exchange contracts. By agreeing to purchase or
exchange rates. Adverse changes in exchange rates may sell foreign securities at a pre-set price on a future
reduce or eliminate any gains produced by investments that date, the Series strives to protect the value of the stock
are denominated in foreign currencies and may increase any it owns from future changes in currency rates. We will use
losses. forward currency 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.

Emerging markets risk is the possibility that the risks While the Strategic Income Series may purchase securities
associated with international investing will be greater in of issuers in any foreign country, developed and emerging,
emerging markets than in more developed foreign markets no more than 15% of the Series' assets may be invested in
because, among other things, emerging markets may have less direct obligations of issuers located in emerging market
stable political and economic environments. countries.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ----------------------------------------------------------------------------------------------------------------------------------
Strategic Income Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Liquidity risk is the possibility that securities cannot be A less liquid secondary market may have an adverse effect
readily sold within seven days at approximately the price on our ability to dispose of particular issues, when
that a series values them. necessary, to meet the Series' liquidity needs or in
response to a specific event, such as the declining
The high-yield secondary market is particularly susceptible creditworthiness of the issuer. In striving to manage this
to liquidity problems when the institutions, such as mutual risk, we evaluate the size of a bond issuance as a way to
funds and certain financial institutions that dominate it, anticipate its likely liquidity level.
temporarily stop buying bonds for regulatory, financial or
other reasons. We may invest only 10% of net assets in illiquid
securities, excluding Rule 144A securities described above.

Valuation risk: A less liquid secondary market as described We will strive to manage this risk by carefully evaluating
above can make it more difficult for a series to obtain individual bonds and by limiting the amount of the
precise valuations of the high-yield securities in its portfolio that can be allocated to privately placed
portfolio. During periods of reduced liquidity, judgment high-yield securities.
plays a greater role in valuing high-yield securities.

Legislative and regulatory risk: The United States Congress We monitor the status of regulatory and legislative
has from time to time taken or considered legislative proposals to evaluate any possible effects they might have
actions that could adversely affect the high-yield bond on the Series' portfolio.
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. 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 a fund to attain its investment
objective.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Investment manager The Series is managed by Delaware Management Company.
and sub-adviser Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. Delaware
International Advisers Ltd. is the Series' sub-adviser.
Subject to the overall supervision of manager, the
sub-adviser manages the international sector of the
Series' portfolio and furnishes the manager with
investment recommendations, asset allocation advice,
research and other investment services regarding
foreign securities. For its services to the Series, the
Series paid the manager and sub-adviser an aggregate
fee of 0.65% of average daily net assets for the last
fiscal year.

106

<PAGE>

Portfolio managers Paul A. Matlack and Paul Grillo have primary
responsibility for making day-to-day investment
decisions for Strategic Income Series. Christopher A.
Moth and Joanna Bates have primary responsibility for
making day-to-day investment decisions for Strategic
Income Series regarding its investments in foreign
securities. In making investment decisions for the
Series, Mr. Moth and Ms. Bates regularly consult with
David G. Tilles and four global fixed-income team
members.

Paul A. Matlack, Vice President/Senior Portfolio
Manager, 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. 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. He
is a CFA charterholder. Mr. Matlack has been a member
of Strategic Income Series' management team since its
inception.

Paul Grillo, Vice President/Portfolio Manager, 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 the Series regarding its investments in
investment grade securities. Mr. Grillo has been a
member of Strategic Income Series' management team
since its inception.

Christopher A. Moth, Senior Portfolio Manager, Director
of Investment Strategy, Fixed Income and Currency and
Director of Delaware International Advisers Ltd., is a
graduate of The City University London. He 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 and Investment from
the Institute of Actuaries in London. At Delaware
International Advisers, he has been a key contributor
in developing the fixed-income product and establishing
in-house systems to control and faciliate the
investment process. He chairs the global fixed-income
and currency meeting. Mr. Moth became Co-Manager of the
Series in July 1999.

Joanna Bates, Senior Portfolio Manager, Credit and
Emerging Markets of Delaware International Advisers
Ltd., is a graduate of London University. She joined
the Fixed Income team at Delaware International
Advisers in June 1997. Prior to that she was Associate
Director, Fixed Interest at Hill Samuel Investment
Management Ltd. which she joined in 1990. She had
previously worked at Fidelity International and Save &
Prosper as a fund manager and analyst for global bond
markets. Ms. Bates is an associate of the Institute of
Investment Management and Research. Ms. Bates became
Co-Manager of the Series in July 1999.

David G. Tilles, Managing Director and Chief Investment
Officer of Delaware International Advisers Ltd., was
educated at the Sorbonne, Warwick University and
Heidelberg University. Prior to joining Delaware
International Advisers in 1990 as Managing Director and
Chief Investment Officer, he spent 16 years with Hill
Samuel Investment Management Group in London, serving
in a number of investment capacities. His most recent
position prior to joining Delaware International
Advisers was Chief Investment Officer of Hill Samuel
Investment Management Ltd.

107
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
Strategic Income Series(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Period 5/1/97(2)
Year Ended 12/31 through
1999 1998 12/31/97
-----------------------------------------------------------------------------------------------
The financial highlights Net asset value, beginning of period $10.600 $10.620 $10.000
table is intended to help
you understand the Series' Income (loss) from investment operations
financial performance.
All "per share" information Net investment income(3) 0.779 0.832 0.523
reflects financial results
for a single Series share. Net realized and unrealized gain (loss) on
The total returns in the investments and foreign currencies (1.109) (0.557) 0.097
table represent the rate ------- ------- -------
that an investor would Total from investment operations (0.330) 0.275 0.620
have earned or lost on an ------- ------- -------
investment in the Series Less dividends and distributions
(assuming reinvestment of
all dividends and Dividends from net investment income (0.610) (0.270) none
distributions).
This information has Distributions from net realized gain on investments none (0.025) none
been audited by Ernst & ------- ------- -------
Young LLP, whose report, Total dividends and distributions (0.610) (0.295) none
along with the Series' ------- ------- -------
financial statements, is Net asset value, end of period $9.660 $10.600 $10.620
included in the Series' ======= ======= =======
annual report, which is Total return(4) (3.29%) 2.63%(5) 6.20%(5)
available upon request by
calling 800.523.1918. Ratios and supplemental data

Net assets, end of period (000 omitted) $19,842 $20,571 $ 8,606

Ratio of expenses to average net assets 0.80% 0.80% 0.80%

Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.80% 0.81% 1.23%

Ratio of net investment income to average net assets 7.88% 7.90% 7.44%

Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 7.88% 7.89% 7.01%

Portfolio turnover 101% 143% 70%
-----------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard
Class shares, which are not subject to 12b-1 plan fees. The Service Class
shares are subject to an annual 12b-1 fee of not more than 0.30% (currently
set at 0.15%). Future data for the Service Class will reflect its 12b-1
plan fees which will, among other things, lower performance.
(2) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(3) Per share information was based on the average shares outstanding method.
(4) Total return does not reflect expenses that apply to Separate Accounts or
to the related insurance policies and inclusion of these charges would
reduce total return figures for all periods shown.
(5) Total return reflects expense limitations in effect for the Series.
</TABLE>

108

<PAGE>

Trend Series

Our investment strategies

o the operational history of the company;

o the strategic focus of the company; and

o the company's competitive environment.

<PAGE>

The securities we Stocks offer investors the potential for capital
typically invest in appreciation, and may pay dividends as well.

American Depositary Receipts (ADRs): ADRs are issued by a We may hold ADRs when we believe they offer greater
U.S. bank and represent the bank's holdings of a stated appreciation potential than U.S. securities.
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.

Restricted securities: Privately placed securities whose We may invest in privately placed securities, including
resale is restricted under securities law. those that are eligible for resale only among certain
institutional buyers without registration which 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.

109

<PAGE>

Trend Series (continued)

<PAGE>

Industry and security risk is the risk that the value of We limit the amount of Trend Series' assets invested in any
securities in a particular industry or the value of an one industry and in any individual security. We also follow
individual stock or bond will decline because of changing a rigorous selection process before choosing securities and
expectations for the performance of that industry or for continuously monitor them while they remain in the
the individual company issuing the stock. portfolio.

Small company risk is the risk that prices of smaller Trend Series maintains a well-diversified portfolio,
companies may be more volatile than larger companies selects stocks carefully and monitors them continuously.
because of limited financial resources or dependence on
narrow product lines.

Interest rate risk is the risk that securities will We analyze each company's financial situation and its cash
decrease in value if interest rates rise. The risk is flow to determine the company's ability to finance future
generally associated with bonds; however, because smaller expansion and operations. The potential effect that rising
companies often borrow money to finance their operations, interest rates might have on a stock is taken into
they may be adversely affected by rising interest rates. consideration before the stock is purchased.

Foreign risk is the risk that foreign securities may be We typically invest only a small portion of the Series'
adversely affected by political instability (including portfolio in foreign corporations through American
governmental seizures or nationalization of assets), Depositary Receipts. We do not presently intend to invest
changes in currency exchange rates, foreign economic directly in foreign securities. When we do purchase ADRs,
conditions or inadequate regulatory and accounting they are generally denominated in U.S. dollars and traded
standards. Foreign markets may also be less efficient, less on a U.S. exchange.
liquid, have greater price volatility, less regulation and
higher transaction costs than U.S. markets.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that a series has valued them.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

110

<PAGE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs
and provides daily administrative services. For its
services to the Series, the manager was paid 0.75% of
average daily net assets for the last fiscal year.

Portfolio managers Gerald S. Frey has primary responsibility for making
day-to-day investment decisions for the Trend Series.
When making investment decisions for the Series, Mr.
Frey regularly consults with Marshall T. Bassett, John
A. Heffern, Jeffrey W. Hynoski, Steven T. Lampe and
Lori P. Wachs.

Gerald S. Frey, Senior Vice President/Senior Portfolio
Manager, has 23 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 for the Series
since March 1997 and was Co-Manager from June 1996 to
March 1997.

Marshall T. Bassett, Vice President/Portfolio Manager,
joined Delaware Investments in 1997. Before joining
Delaware Investments, 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 a bachelor's degree and an
MBA from Duke University.

John A. Heffern, Vice President, Portfolio Manager,
earned bachelors and MBA degrees at the University of
North Carolina at Chapel Hill. Prior to joining
Delaware Investments in 1997, he was a Senior Vice
President, Equity Research at NatWest Securities
Corporation's Specialty Financial Services unit. Before
that, he was a Principal and Senior Regional Bank
Analyst at Alex. Brown & Sons.

Jeffrey W. Hynoski, Vice President/Portfolio Manager,
joined Delaware Investments in 1998. Prior to joining
Delaware Investments, 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.

Steven T. Lampe, Vice President, Portfolio Manager,
received a bachelor's degree in Economics and an MBA
degree with a concentration in Finance from the
University of Pennsylvania's Wharton School. He joined
Delaware Investments in 1995 and covers the financial
services and business services sectors for small and
mid-capitalization growth stocks. He previously served
as a tax/audit manager at Price Waterhouse,
specializing in financial services firms. Mr. Lampe is
a Certified Public Accountant.

111

<PAGE>

Financial highlights

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Trend Series(1)
- ------------------------------------------------------------------------------------------------------------------------------------
The financial Year Ended 12/31
highlights table is ----------------------------------------------------
intended to help you 1999 1998 1997 1996 1995
understand the Series' ----------------------------------------------------------------------------------------------------
financial performance. Net asset value, beginning of year $19.760 $17.380 $14.560 $14.020 $10.160
The total returns in the Income (loss) from investment operations
table represent the rate Net investment income(loss)(2) (0.043) 0.006 0.019 0.050 0.098
that an investor would Net realized and unrealized gain
have earned or lost on (loss) on investments 13.945 2.736 3.031 1.380 3.852
an investment in the ------ ----- ----- ----- -----
Series (assuming Total from investment operations 13.902 2.742 3.050 1.430 3.950
reinvestment of all ------ ----- ----- ----- -----
dividends and Less dividends and distributions
distributions). All "per Dividends from net investment income (0.002) (0.020) (0.050) (0.090) (0.090)
share" information
reflects financial results Distributions from net realized
for a single Series gain on investments none (0.342) (0.180) (0.800) none
share. This information ------ ------ ------ ------ ------
has been audited by Total dividends and distributions (0.002) (0.362) (0.230) (0.890) (0.090)
Ernst & Young LLP, ------ ------ ------ ------ ------
whose report, along Net asset value, end of year $33.660 $19.760 $17.380 $14.560 $14.020
with the Series' ======= ======= ======= ======= =======
financial statements, is Total return(3) 70.45% 16.04%(4) 21.37%(4) 11.00%(4) 39.21%(4)
included in the Series' Ratios and supplemental data
annual report, which is Net assets, end of period (000 omitted) $503,657 $168,251 $118,276 $56,423 $20,510
available upon request Ratio of expenses to average net assets 0.82% 0.81% 0.80% 0.80% 0.80%
by calling Ratio of expenses to average net assets
800.523.1918. prior to expense limitation and
expenses paid indirectly 0.82% 0.85% 0.88% 0.92% 0.96%
Ratio of net investment income to
average net assets (0.18%) 0.03% 0.16% 0.56% 1.03%
Ratio of net investment income to
average net assets prior to expense
limitation and expenses paid indirectly (0.18%) (0.01%) 0.08% 0.44% 0.87%
Portfolio turnover 82% 121% 125% 112% 76%
------------------------------------------------------------------------------------------------------
(1) The financial highlights data are derived from data of the Series' Standard Class shares, which
are not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee of
not more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect its
12b-1 plan fees which will, among other things, lower performance.
(2) Per share information for the year ended December 31, 1999 was based on the average shares
outstanding method.
(3) Total return does not reflect expenses that apply to Separate Accounts or to the related insurance
policies and inclusion of these charges would reduce total return figures for all periods shown.
(4) Total return reflects expense limitations in effect for the Series.

</TABLE>

112
<PAGE>

U.S. Growth Series

Our investment strategies

o low dividend yields;

o strong balance sheets; and

o high expected earnings growth rates relative to their industry.

o management changes;

o new products;

o structural changes in the economy; or

o corporate restructurings and turnaround situations.

Because our objective is capital appreciation, the amount of dividend income
that a stock provides is only an incidental consideration for us.

113

<PAGE>

The securities we Stocks offer investors the potential for capital
typically invest in appreciation.

Foreign securities and American Depositary Receipts: The Series may invest up to 20% of its assets in securities of
Securities of foreign entities issued directly or, in the foreign issuers. Such foreign securities may be traded on a foreign
case of American Depositary Receipts (ADRs), through a U.S. exchange, or they may be in the form of ADRs. Direct ownership of
bank. ADRs represent a bank's holding of a stated number of foreign securities will typically not be a significant part of our
shares of a foreign corporation. An ADR entitles the holder strategy. We may, however own ADRs when we think they offer greater
to all dividends and capital gains earned by the underlying appreciation potential than domestic stocks.
foreign shares. ADRs are bought and sold in the same way as
U.S. securities.

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 Series' cash position. In order to enter into these
agrees to buy the securities back within a specified time at repurchase agreements, the Series must have collateral of at least
the same price the buyer paid for them, plus an amount equal 102% of the repurchase price. The Series would only enter into
to an agreed upon interest rate. Repurchase agreements are repurchase agreements in which the collateral is U.S. government
often viewed as equivalent to cash. securities.

Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid securities.
market, and cannot be easily sold within seven days at
approximately the price that a series has valued them.

Fixed-income securities: Securities that may include debt We may invest up to 35% of the Series' assets in debt securities,
securities, bonds, convertible bonds, as well as, bonds, convertible bonds, preferred stocks and convertible
non-investment grade fixed-income securities. preferred stock. We may also invest up to 10% of this portion in
non-investment grade bonds if we believe that doing so would help
us to meet the Series' objective.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

114
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Growth Series
<S> <C>
Options and futures: Options represent a right to buy or We might use options or futures to neutralize the effect of any
sell a security or group of securities at an agreed upon anticipated price declines, without selling the security. We might
price at a future date. The purchaser of an option may or also use options or futures to gain exposure to a particular market
may not choose to go through with the transaction. segment without purchasing individual securities in that segment
particularly if we had excess cash that we wanted to invest
Writing a covered call option on a security obligates the quickly.
owner of the security to sell it at an agreed upon price on
an agreed upon date (usually no more than nine months in the When writing call options we will only write covered call options -
future.) The owner of the security receives a premium call options on securities we actually own.
payment from the purchaser of the call, but if the security
appreciates to a price greater than the agreed upon selling Use of these strategies can increase the operating costs of the
price, a series would lose out on those gains. Series and can lead to loss of principal.

Futures contracts are agreements for the purchase or sale of
securities at a specified price, on a specified date. Unlike
an option, a futures contract must be executed unless it is
sold before the settlement date.

Options and futures are generally considered to be
derivative securities.

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

115

<PAGE>

The risks of investing Investing in any mutual fund involves risk, including
in U.S. Growth Series 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. Following are
the chief risks you assume when investing in U.S. Growth
Series. Please see the Statement of Additional
Information for further discussion of these risks and
other risks not discussed here.

Industry and security risk is the risk that the value of We limit the amount of U.S. Growth Series' assets invested in any
securities in a particular industry or the value of an one industry and in any individual security.
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.

Foreign risk is the risk that foreign securities may be We are permitted to invest up to 20% of the Series' portfolio in
adversely affected by political instability (including foreign securities. When we do purchase foreign securities, they
governmental seizures or nationalization of assets), changes are generally ADRs which are denominated in U.S. dollars and traded
in currency exchange rates, foreign economic conditions or on U.S. stock exchanges.
inadequate regulatory and accounting standards. Foreign
markets may also be less efficient, less liquid, have
greater price volatility, less regulation and higher
transaction costs than U.S. markets.

Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities to 15% of net assets.
readily sold within seven days at approximately the price
that the Series values them.

Credit risk is the possibility that a bond's issuer (or an Fixed-income securities are not typically a significant component
entity that insures the bond) will be unable to make timely of our strategy. However, when we do invest in fixed-income
payments of interest and principal. securities, we will not hold more than 10% of net assets in
high-yield, non-investment grade bonds. This limitation, combined
with our careful, credit-oriented bond selection and our commitment
to hold a diversified selection of high-yield bonds are designed to
manage this risk.

Futures and options risk is the possibility that a series We will not use futures and options for speculative reasons. We may
may experience a loss if it employs an options or futures use options and futures to protect gains in the portfolio without
strategy related to a security or a market index and that actually selling a security. We may also use options and futures to
security or index moves in the opposite direction from what quickly invest excess cash so that the portfolio is generally fully
the manager anticipated. Futures and options also involve invested.
additional expenses, which could reduce any benefit or
increase any loss that a series gains from using the
strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

116
<PAGE>

Investment manager The Series is managed by Delaware Management Company.
Delaware Management Company makes investment decisions
for the Series, manages the Series' business affairs and
provides daily administrative services. The Series will
pay Delaware Management Company the following fee on an
annual basis: 0.65% on the first $500 million of average
daily net assets; 0.60% on the next $500 million; 0.55%
on the next $1.5 billion and 0.50% on assets in excess
of $2.5 billion.

Portfolio manager Frank Houghton has primary responsibility for making
investment decisions for U.S. Growth Series.

Frank Houghton, Vice President/Senior Portfolio Manager,
joined Delaware in March 2000. Prior to joining
Delaware, Mr. Houghton was President and Portfolio
Manager of Lynch & Mayer, Inc., which he joined in 1990
and became President in 1999. Prior to joining Lynch &
Mayer, Inc., Mr. Houghton was Chairman of BMI Capital
from 1984 to1990, a Portfolio Manager at Neuberger &
Berman from 1977 to 1984 and a Partner at Oppenheimer &
Co., Inc. from 1969-1977. Mr. Houghton received a BBA
from Manhattan College and attended New York University
Graduate School of Business Administration.

117
<PAGE>

Financial highlights

<TABLE>
<CAPTION>
<S> <C> <C>
U.S. Growth Series(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Period
11/15/99(2)
through
The financial Delaware Premium Fund 12/31/99
highlights table is --------------------------------------------------------------------------------------------------------
intended to help you Net asset value, beginning of period $10.000
understand the Series'
financial performance. Income from investment operations
The total return in the
table represents the rate Net investment income 0.026
that an investor would
have earned on Net realized and unrealized gain on investments 0.564
an investment in the
Series (assuming Total from investment operations 0.590
reinvestment of all
dividends and Net asset value, end of period $10.590
distributions). All "per
share" information Total return(3) 5.90%
reflects financial results
for a single Series Ratios and supplemental data
share. This information
has been audited by Net assets, end of period (000 omitted) $8,744
Ernst & Young LLP,
whose report, along Ratio of expenses to average net assets 0.75%
with the Series'
financial statements, is Ratio of expenses to average net assets
included in the Series' prior to expense limitation and expenses
annual report, which is paid indirectly 0.79%
available upon request
by calling Ratio of net investment income to average net assets 3.33%
800.523.1918.
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.29%

Portfolio turnover 0%
--------------------------------------------------------------------------------------------------------

(1) The financial highlights data are derived from data of the Series' Standard Class shares, which are
not subject to 12b-1 plan fees. The Service Class shares are subject to an annual 12b-1 fee of not
more than 0.30% (currently set at 0.15%). Future data for the Service Class will reflect its 12b-1
plan fees which will, among other things, lower performance.

(2) Date of commencement of operations; ratios have been annualized but total return has not been
annualized.

<PAGE>

Who's who? The following describes the various organizations
involved with managing, administering, and servicing the
Series.

Board of trustees A mutual fund is governed by a board
of trustees which has oversight responsibility for the
management of the fund's business affairs. Trustees
establish procedures and oversee and review the
performance of the investment manager, the distributor
and others that perform services for the series. At
least 40% of the board of trustees must be independent
of the fund's investment manager and distributor. These
independent fund trustees, in particular, are advocates
for shareholder interests.

Investment managers Delaware Management Company, One
Commerce Square, Philadelphia, PA 19103 Delaware
International Advisers Ltd., Third Floor, 80 Cheapside,
London, England EC2V 6EE

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.

Delaware Management Company and its predecessors have
been managing the funds in Delaware Investments since
1938. On December 31, 1999, Delaware Management Company
and its affiliates within Delaware Investments,
including Delaware International Advisers Ltd., were
managing in the aggregate more than $47 billion in
assets in the various institutional or separately
managed (approximately $27,783,710,000) and investment
company (approximately $19,579,950,000) accounts.
Delaware International Advisers began operating in 1990
and manages global and international institutional and
mutual fund accounts. Delaware Management Company is a
series of Delaware Management Business Trust, which is
an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc.

Sub-advisers Lincoln Investment Management, Inc., 200 E.
Berry Street, Fort Wayne, Indiana 46802 Vantage
Investment Advisors, 405 Lexington Avenue, New York, NY
10174 Delaware International Advisers Ltd., Third Floor,
80 Cheapside, London, England EC2V 6EE

A sub-adviser is a company generally responsible for the
management of the fund's assets and is selected and
supervised by the investment manager.

Portfolio managers Portfolio managers are employed by
the investment managers or sub-advisers to make
investment decisions for individual portfolios on a
day-to-day basis. See "Information about individual
Series" for information about the portfolio managers of
the various series.

Distributor Delaware Distributors, L.P., 1818 Market
Street, Philadelphia, PA 19103

Shares of the Series are only sold to separate accounts
of insurance companies used in connection with variable
annuity or variable life products.

Custodian The Chase Manhattan Bank, 4 Chase Metrotech
Center, Brooklyn, NY 11245

Mutual funds are legally required to protect their
portfolio securities and most funds place them with a
custodian, typically a qualified bank custodian, who
segregates fund securities from other bank assets.

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<PAGE>

Important information about all Series

Share classes Each Series has two classes of shares, Standard Class
and Service Class. Each class is identical except that
Service Class has a distribution plan or "Rule 12b-1"
plan. The 12b-1 plan allows the Fund to pay distribution
fees of up to 0.30% (currently 0.15%) per year to those
who sell and distribute Service Class shares and provide
services to shareholders and contract owners. Because
these fees are paid out of Service Class' assets on an
ongoing basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.

Purchase and Shares are sold only to separate accounts of life
redemption of companies at net asset value. (See "Valuation of
shares 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 Series shares.

Valuation of The price you pay for shares will depend on when we
shares receive your purchase order. If we or an authorized
agent receive your order before the close of regular
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 regular 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 regular 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 in 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. Foreign securities,
currencies and other assets denominated in foreign
currencies are translated into U.S. dollars at the
exchange rate of these currencies against the U.S.
dollar, as provided by an independent pricing service.
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 trustees. Any investments that
have a maturity of less than 60 days we price at
amortized cost. For all other securities, we use methods
approved by the board of trustees that are designed to
price securities at their fair market value.

A significant portion of the portfolio securities of the
Emerging Markets, Global Bond, International Equity and
Strategic Income Series is listed on foreign exchanges.
From time to time, other Series may also hold securities
that are listed on foreign exchanges. These foreign
exchanges may trade on weekends or days when the Series
do not price their shares. As a result, the NAV of these
Series may change on days when you will not be able to
purchase or redeem shares of the Series.

119
<PAGE>

Dividends, For the Capital Reserves and Cash Reserve Series,
distributions and dividends, if any, are declared daily and paid monthly.
taxes 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 Balanced 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 Convertible Securities, Devon, Emerging Markets,
Global Bond, Growth Opportunities, High Yield,
International Equity, REIT, Select Growth, Small Cap
Value, Social Awareness, Strategic Income, Trend and
U.S. Growth Series, dividends and capital gain
distributions, if any, are distributed annually.

We automatically reinvest all dividends and any capital
gains.

A Series will not be subject to federal income tax to
the extent its earnings are distributed. The Fund
intends to distribute substantially all of the
respective Series' net investment income and net capital
gains. Shareholders may be proportionately liable for
taxes on income and gains of the Series but shareholders
not subject to tax on their income will not be required
to pay tax on amounts distributed to them, and the Fund
will inform shareholders of the amount and nature of
income or gains.

Please refer to the prospectus for the variable
insurance contract for additional tax information
relevant to such contracts.

EURO Several European countries began participating in the
European Economic and Monetary Union, which has
established a common currency for participating
countries. This currency is commonly known as the
"Euro." The long-term consequences of the Euro
conversion for foreign exchange rates, interest rates
and the value of European securities in which the Series
may invest are unclear. The consequences may adversely
affect the value and/or increase the volatility of
securities held by the Series.

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Delaware Group Additional information about the Series' investments is
Premium Fund available in the Series' Annual and Semi-Annual Reports
to shareholders. In the Series' annual reports you will
find a discussion of the market conditions and
investment strategies that significantly affected the
Series' performance during the 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
the Statement of Additional Information by writing to us
at 1818 Market Street, Philadelphia, PA 19103, or call
toll-free 800.523.1918.

You can find reports and other information about the
Series on the EDGAR Database on the SEC web site
(http://www.sec.gov). You can also get copies of this
information, after payment of a duplicating fee, by
e-mailing the SEC at [email protected] or by writing to
the Public Reference Section of the SEC, Washington,
D.C. 20549-0102. 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
1.202.942.8090.

Investment Company Act File No. 811-5162

DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London

121

<PAGE>

DELAWARE GROUP
PREMIUM FUND

INVESTMENT MANAGERS
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103

Delaware International Advisers Ltd.
Third Floor PART B
80 Cheapside
London, England EC2V 6EE STATEMENT OF
ADDITIONAL INFORMATION
SUB-ADVISERS
Lincoln Investment Management, Inc.
200 E. Berry Street May 1, 2000
Fort Wayne, Indiana 46802

Vantage Global Advisors, Inc.

405 Lexington Avenue
New York, NY 10174

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 [GRAPHIC OMITTED]

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>

STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000

DELAWARE GROUP PREMIUM FUND

1818 Market Street
Philadelphia, PA 19103

Delaware Group Premium Fund ("Premium Fund" or the "Fund") is a
diversified, open-end management investment company that 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. Each Series
offers Standard Class shares and Service Class 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, 2000, 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 Fund's financial statements, the
notes relating thereto, the financial highlights and the report of independent
auditors are incorporated by reference from the Annual Reports into this Part B.
The Annual Reports will accompany any request for Part B. The Annual Reports can
be obtained, without charge, by calling 800-523- 1918.

TABLE OF CONTENTS Page

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 Trustees
General Information
Financial Statements
Appendix A--Descrption of Ratings

<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.

Balanced Series (formerly Delaware Balanced Series) seeks a balance of
capital appreciation, income and preservation of capital. As a
"balanced" fund, the Series invests at least 25% of its assets in
fixed-income securities and the remaining primarily in equity
securities. This Series has the same objective and investment
disciplines as Delaware Balanced Fund, 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 Cash Reserve Fund, 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.

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
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 Delaware
Devon Fund, 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 Delaware
Emerging Markets Fund, 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 Delaware Global Bond Fund, a separate fund in the
Delaware Investments family.

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<PAGE>

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. This
Series has the same objective and investment disciplines as Delaware
Growth and Income Fund, 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.

Growth Opportunities Series (formerly 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 Delaware
Growth Opportunities Fund , 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.

High Yield Series (formerly Delchester Series) seeks total return and,
as a secondary objective, high current income. It seeks to achieve its
objective by investing primarily in high-yield corporate bonds. These
are commonly known as junk bonds. An investment in the Series may
involve greater risks than an investment in a portfolio comprised
primarily of investment grade bonds.

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
Delaware International Equity Fund, 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
objective by investing in securities of companies primarily engaged in
the real estate industry. This Series has the same objective and
investment discipline as Delaware REIT Fund, a separate fund in the
Delaware Investments family, which also invest in securities of
companies primarily engaged in the real estate industry.

Select Growth Series (formerly Aggressive Growth Series) seeks
long-term capital appreciation which the Series attempts to achieve 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 Delaware Select Growth
Fund, a separate fund in the Delaware Investments family.

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 has the same objective and investment
disciplines as Delaware Small Cap Value Fund, a separate fund in the
Delaware Investments family.

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

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<PAGE>

Series has the same objective and investment disciplines as Delaware
Social Awareness Fund, 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 Delaware Strategic Income Fund, 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 Delaware Trend Fund, a separate fund in the Delaware
Investments family.

U.S. Growth Series seeks to maximize capital appreciation The Series
seeks to achieve its investment objective by investing in companies of
all sizes which have low dividend yields, strong balance sheets and
high expected earnings growth rates relative to their industry. This
Series has the same objective and investment disciplines as Delaware
U.S. Growth Fund, a separate fund in the Delaware Investments family.

<PAGE>

INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions -- The Fund has adopted the
following restrictions for each Series which cannot be changed without approval
by the holders of a "majority" of the respective Series' outstanding shares,
which is a vote by the holders of the lesser of a) 67% or more of the voting
securities present in person or by proxy at a meeting, if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy; or b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time a Series purchases securities.

Each Series may not:

1. With respect to each Series, except the REIT Series, make
investments that will result in the concentration (as that term may be defined
in the Investment Company Act of 1940 ("1940 Act"), any rule or order
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 tax-exempt securities or
certificates of deposit. The REIT Series will concentrate its investments in the
real estate industry. The REIT Series otherwise makes investments that will
result in the concentration (as that term may be defined in the 1940 Act, any
rule or order thereunder, or 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 tax-exempt securities or certificates of deposit. In
addition, the Cash Reserve Series may concentrate its investments in 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 ("S&P")
or P-2 or better by Moody's Investors Service, Inc. ("Moody's").

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 (the "1933 Act").

4. With respect to each Series, 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.

Non-fundamental Investment Restrictions - - In addition to the
fundamental policies and investment restrictions described above, and the
various general investment policies described in the Prospectuses, each Series
will be subject to the following investment restrictions, which are considered
non-fundamental and may

6
<PAGE>

be changed by the Board of Trustees without shareholder approval. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities.

1. The Series are 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, none of the Series, may 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. A 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.

Each Series (other than Select Growth, Strategic Income, Devon,
Emerging Markets, Convertible Securities, Social Awareness, REIT and U.S. Growth
Series) may 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
trustee who is an officer or trustee of the Fund, or an officer or
director/trustee 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
<PAGE>

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.

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 SEC 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 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 S&P or P-2 or better by 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 1933 Act.

13. 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.

14. The Money Market Series will not invest more than 25% of its assets
in foreign banks which are subject to the same regulation as United States banks
or to foreign branches of United States banks where such a bank is liable for
the obligations of the branch.

While 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.

In addition, the Global Bond Series will not invest more than 10% of
its net assets in repurchase agreements maturing in more than seven days and
other illiquid assets. Securities of foreign issuers which are

<PAGE>

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.

Strategic Income, Devon, Emerging Markets, Convertible Securities and
Social Awareness Series may not:

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. 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. 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. 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 1933 Act. No limit is placed on the proportion of the
Series' assets which may be invested in such securities.

5. 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. 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 REIT Series may not:

1. The Series will concentrate its investments in the real estate
industry. The Series may 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. 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.

9
<PAGE>

3. 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 1933 Act. No limit is placed on the proportion of the
Series' assets which may be invested in such securities.

4. 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. 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. 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.

7. Invest for the purpose of acquiring control of any company.

8. 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.

9. Invest in interests in oil, gas and other mineral leases or other
mineral exploration or development programs.

10. 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.

Equity Securities
Equity securities represent ownership interests in a company and
consist of common stocks, preferred stocks, warrants to acquire common stock and
securities convertible into common stock. Investments in equity securities in
general are subject to market risks that may cause their prices to fluctuate
over time. The value of convertible equity securities is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions. Fluctuations in the value of equity securities in which a Series
invests will cause the net asset value of the Series to fluctuate.

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 Trustees 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 Trustees 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 Trustees 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 Trustees, 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.

Additional Information on the Cash Reserve Series
Cash Reserve Series intends to achieve its objective by investing its
assets in a diversified portfolio of money market instruments. See Money Market
Instruments above and Appendix A--Description of Ratings.

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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 Trustees 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.

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 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.

Asset-Backed Securities
The Capital Reserves, Balanced, Cash Reserve, Strategic Income and
Devon Series may invest in securities which are backed by assets such as
receivables on home equity and credit loans, receivables regarding automobile,
mobile home and recreational vehicle loans, wholesale dealer floor plans and
leases (i.e., receivables on loans to car dealers for cars used in their
showrooms) or other loans or financial

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receivables currently available or which may be developed in the future. For the
Capital Reserves, Delaware, Strategic Income and Devon Series, all such
securities must be rated in one of the four highest rating categories by a
reputable rating agency (e.g., BBB or better by S&P or Baa or better by
Moody's). It is the Cash Reserve Series' current policy to limit asset-backed
investments to those rated in the highest rating category by a reputable rating
agency (e.g., AAA by S&P or Aaa by Moody's) and represented by interests in
credit card receivables, wholesale dealer floor plans, home equity loans and
automobile loans.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. 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. Such
receivables are securitized in either a pass-through or a pay-through structure.
Pass-through securities provide investors with an income stream consisting of
both principal and interest payments in respect of the receivables in the
underlying pool. Pay-through asset-backed securities are debt obligations issued
usually by a special purpose entity, which are collateralized by the various
receivables and in which the payments on the underlying receivables provide the
funds to pay the debt service on the debt obligations issued. 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.

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.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. Such asset-backed
securities do, however, involve certain risks not associated with
mortgage-backed securities, including the risk that security interests cannot be
adequately or in many cases ever established, and other risks which may be
peculiar to particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in a typical issuance and technical requirements
under state laws. Therefore, recoveries on repossessed collateral may not always
be available to support payments on the securities.

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

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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.

Mortgage-Backed Securities
The Capital Reserves, Balanced, Strategic Income, Devon and REIT Series
may invest in mortgage-backed securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or government sponsored
corporations or those issued by certain private, non-government corporations,
such as financial institutions. 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. The Series may
invest in such private-backed securities, but the REIT Series will do so (i)
only if the securities are 100% collateralized at the time of issuance by
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and (ii) currently, only if they are rated at the time of
purchase in the two highest grades by a nationally-recognized statistical rating
agency.

The Capital Reserves, Balanced, Strategic Income and Devon each may
invest up to 20% of its total assets in CMOs and REMICs issued by private
entities which are not collateralized by securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, so-called non-agency
mortgage-backed securities. Investments in these securities may be made only if
the securities (i) are rated at the time of purchase in the four top rating
categories by a nationally-recognized statistical rating organization (e.g., BBB
or better by S&P or Baa or better by Moody's) and (ii) represent interests in
whole-loan mortgages, multi-family mortgages, commercial mortgages and other
mortgage collateral supported by a first mortgage lien on real estate.
Non-agency mortgage-backed securities are subject to the interest rate and
prepayment risks, described above, to which other CMOs and REMICs issued by
private issuers are subject. Non-agency mortgage-backed securities may also be
subject to a greater risk of loss of interest and principal because they are not
collateralized by securities issued or guaranteed by the U.S. government. In
addition, timely information concerning the loans underlying these securities
may not be as readily available and the market for these securities may be less
liquid than other CMOs and REMICs.

REITs
The REIT Series invests in, and the Balanced, Strategic Income and
Devon Series may invest in, REITs. REITs are pooled investment vehicles which
invest primarily in income-producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and

<PAGE>

derive income from the collection of interest payments. Like investment
companies, REITs are not taxed on income distributed to shareholders provided
they comply with several requirements in the Code. REITs are subject to
substantial cash flow dependency, defaults by borrowers, self-liquidation, and
the risk of failing to qualify for tax-free pass through of income under the
Internal Revenue Code, and/or to maintain exemptions from the 1940 Act.

The Series' investments in REITs present certain further risks that are
unique and in addition to the risks associated with investing in the real estate
industry in general. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be affected by
the quality of any credit extended. REITs are dependent on management skills,
are not diversified, and are subject to the risks of financing projects. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be impacted by federal
regulations concerning the health care industry.

REITs (especially mortgage REITs) are also subject to interest rate
risks -- when interest rates decline, the value of a REIT's investment in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.

REITs may have limited financial resources, may trade less frequently
and in a limited volume, and may be subject to more abrupt or erratic price
movements than other securities.

Convertible, Debt and Non-Traditional Equity Securities

In addition to the Convertible Securities Series, the Balanced, Devon,
Strategic Income, Emerging Markets, Social Awareness, REIT, Select Growth and
U.S. Growth Series may invest in convertible and debt securities of issuers in
any industry. A convertible security is a security which may be converted at a
stated price within a specified period of time into a certain quantity of the
common stock of the same or a different issuer. Convertible securities rank
ahead of common stock in a corporation's capital structure and therefore entail
less risk than the corporation's common stock. However, convertible securities
typically rank behind non-convertible securities of the same issuer. Convertible
and debt securities provide a fixed-income stream and the opportunity, through
its conversion feature, to participate in the capital appreciation resulting
from a market price advance in the convertible security's underlying common
stock. 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.

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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.

Common stock acquired upon conversion of a convertible security will
generally be held for so long as the investment manager 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.

These Series may invest in convertible preferred stocks that offer
enhanced yield features, such as Preferred Equity Redemption Cumulative Stock
("PERCS"), which provide an investor with the opportunity to earn higher
dividend income than is available on a company's common stock. A PERCS is a
preferred stock which generally features a mandatory conversion date, as well as
a capital appreciation limit which is usually expressed in terms of a stated
price. Upon the conversion date, most PERCS convert into common stock of the
issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after a predetermined number of years the issuer's
common stock is trading at a price below that set by the capital appreciation
limit, each PERCS would convert to one share of common stock. If, however, the
issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a call
premium over the market price to the investor. This call premium declines at a
preset rate daily, up to the maturity date of the PERCS.

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The Series may also invest in other enhanced convertible securities.
These include but are not limited to ACES (Automatically Convertible Equity
Securities), PEPS (Participating Equity Preferred Stock), PRIDES (Preferred
Redeemable Increased Dividend Equity Securities), SAILS (Stock Appreciation
Income Linked Securities), TECONS (Term Convertible Notes), QICS (Quarterly
Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock. An investment in such securities may involve additional risks. Unlike
conventional convertible securities, enhanced convertible securities do not
usually have a fixed maturity (par) value. Rather, such securities generally
provide only for a mandatory conversion into cash or common stock. As a result,
a Series risks loss of principal if the cash received or the price of the
underlying common stock at the time of conversion is less than the price paid
for the enhanced convertible security. Such securities may be more or less
liquid than conventional convertible securities or non-convertible debt
securities.

Private Placements
Private placement securities are securities which have not been
registered with the SEC and which are usually only sold to large, institutional
investors. For various reasons, an issuer may prefer or be required as a
practical matter to obtain private financing. Adverse conditions in the public
securities markets may preclude a public offering of an issuer's securities. An
issuer is often willing to provide more attractive features in securities issued
privately, because it has avoided the expense and delay involved in a public
offering. Private placements of debt securities have frequently resulted in
higher yields and restrictive covenants that provide greater protection for the
purchaser, such as longer call or refunding protection than would typically be
available with publicly offered securities of the same type. Securities acquired
through private placements may also have special features not usually
characteristic of similar securities offered to the public, such as contingent
interest or warrants for the purchase of the issuer's stock.

What portion of the Convertible Securities Series' portfolio is
invested in convertible securities purchased in private placements depends upon
the relative attractiveness of those securities compared to convertible
securities, which are publicly offered. Ordinarily, the Series expects that 50%
of its portfolio may be invested in convertible securities purchased in private
placements, but the percentage may be substantially greater or less than 50%,
depending upon prevailing market conditions.

The Series anticipates that substantially all of the private placements
it purchases will be subject to Rule 144A under the 1933 Act and therefore, may
be traded freely among qualified institutional buyers. Subject to procedures
approved by the Series' Board of Trustees, Rule 144A securities may be treated
as liquid and therefore not subject to the Series' 15% limitation on illiquid
securities. The private placements the Series purchases will typically include
registration rights for the convertible security and the underlying common
stock. This 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.

Zero Coupon Bonds and Pay-In-Kind Bonds
The Global Bond, Strategic Income, Convertible Securities and REIT
Series may invest in zero coupon bonds. The market prices of zero coupon
securities are generally more volatile than the market prices of securities that
pay interest periodically and are likely to respond to changes in interest rates
to a greater degree

<PAGE>

than do non-zero coupon securities having similar maturities and credit quality.
Current federal income tax law requires that a holder of a taxable zero coupon
security report as income each year the portion of the original issue discount
of such security that accrues that year, even though the holder receives no cash
payments of interest during the year. The Series have qualified as regulated
investment companies under the Code. Accordingly, during periods when the Series
receive no interest payments on their zero coupon securities, they will be
required, in order to maintain their desired tax treatment, to distribute cash
approximating the income attributable to such securities. Such distribution may
require the sale of portfolio securities to meet the distribution requirements
and such sales may be subject to the risk factor discussed above.

The Strategic Income Series may invest in pay-in-kind ("PIK") bonds.
PIK bonds pay interest through the issuance to holders of additional securities.
PIK bonds are generally considered to be more interest-sensitive than income
bearing bonds, to be more speculative than interest-bearing bonds, and to have
certain tax consequences similar to zero coupon bonds which could, under certain
circumstances, be adverse to the Series.

Interest Rate and Index Swaps

Balanced Series and Strategic Income Series may invest in interest rate
and index swaps to the extent consistent with their respective investment
objectives and strategies. Capital Reserves Series and Global Bond Series may
invest in interest rate swaps to the extent consistent with their respective
investment objectives and strategies. A Series will only invest in swaps in
which all the reference rates are related to or derived from instruments or
markets in which the Series is otherwise eligible to invest, and subject to the
investment limitations on the instruments to which the purchased reference rate
relates.

Swaps are agreements to exchange payment streams over a period of time
with another party, called a counterparty. Each payment stream is based on a
specified rate, which could be a fixed or variable interest rate, the rate of
return on an index, or some other reference rate. The payment streams are
calculated with reference to a hypothetical principal amount, called the
notional principal or the notional amount. For example, in an interest rate swap
one party may agree to pay a fixed interest rate to a counterparty and to
receive in return variable interest rate payments from the counterparty. The
amount that each party pays is calculated by multiplying the fixed and variable
rates, respectively, by the notional amount. The payment streams may thus be
thought of as interest payments on the notional amount. The notional amount does
not actually change hands at any point in the swap transaction; it is used only
to calculate the value of the payment streams.

When two counterparties each wish to swap interest rate payments, they
typically each enter into a separate interest rate swap contract with a
broker/dealer intermediary, who is the counterparty in both transactions, rather
than entering into a swap contract with each other directly. The broker/dealer
intermediary enters into numerous transactions of this sort, and attempts to
mange its portfolio of swaps so as to match and offset its payment receipts and
obligations.

The typical minimum notional amount is $5 million. Variable interest
rates are usually set by reference to the London Inter-Bank Offered Rate
(LIBOR). The typical maximum term of an interest rate swap agreement ranges from
one to twelve years. Index swaps tend to be shorter term, often for one year.
The Manager presently intends to purchase swaps with maturities of six to twelve
months, and in no event greater than two years.

The Balanced and Strategic Income Series may also engage in index
swaps, also called total return swaps. In an index swap, a Series may enter into
a contract with a counterparty in which the counterparty will make payments to
the Series based on the positive returns of an index, such as a corporate bond
index, in return for the Fund paying to the counterparty a fixed or variable
interest rate, as well as paying to the counterparty any negative returns on the
index. In a sense, the Series is purchasing exposure to an index in the amount
of the notional principal in return for making interest rate payments on the
notional principal. As with interest rate swaps, the notional principal does not
actually change hands at any point in the transaction. The counterparty,

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typically an investment bank, manages its obligations to make total return
payments by maintaining an inventory of the fixed income securities that are
included in the index.

Swap transactions provide several benefits to the Series. Interest rate
swaps may be used as a duration management tool. Duration is a measure of a
bond's interest-rate sensitivity, expressed in terms of years because it is
related to the length of time remaining on the life of a bond. In general, the
longer a bond's duration, the more sensitive the bond's price will be to changes
in interest rates. The average duration of a fund is the weighted average of the
durations of the fund's fixed income securities.

If a Series wishes to shorten the duration of certain of its assets,
longer term assets could be sold and shorter term assets acquired, but these
transactions have potential tax and return differential consequences. By using
an interest rate swap, the Series could agree to make semi-annual fixed rate
payments and receive semi-annual floating rate LIBOR payments adjusted every six
months. The duration of the floating rate payments received by the fund will now
be six months. In effect, a Series has reduced the duration of the notional
amount invested from a longer term to six months over the life of the swap
agreement.

The Series may also use swaps to gain exposure to specific markets. For
example, suppose bond dealers have particularly low inventories of corporate
bonds, making it difficult for a fixed income fund to increase its exposure to
the corporate bond segment of the market. It is generally not possible to
purchase exchange-traded options on a corporate bond index. A Series could
replicate exposure to the corporate bond market, however, by engaging in an
index swap in which the Series gains exposure to a corporate bond index in
return for paying a LIBOR-based floating interest rate.

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Other uses of swaps could help permit the Series to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against an increase in the price of securities the Series anticipates purchasing
at a later date. Interest rate swaps may also be considered as a substitute for
interest rate futures in many cases where the hedging horizon is longer than the
maturity of the typical futures contract, and may be considered to provide more
liquidity than similar forward contracts, particularly long-term forward
contracts.

The primary risk of swap transactions is the creditworthiness of the
counterparty, since the integrity of the transaction depends on the willingness
and ability of the counterparty to maintain the agreed upon payment stream. This
risk is often referred to as counterparty risk. If there is a default by a
counterparty in a swap transaction, the Series' potential loss is the net amount
of payments the Series is contractually entitled to receive for one payment
period (if any - the Series could be in a net payment position), not the entire
notional amount, which does not change hands in a swap transaction. Swaps do not
involve the delivery of securities or other underlying assets or principal as
collateral for the transaction. The Series will have contractual remedies
pursuant to the swap agreement but, as with any contractual remedy, there is no
guarantee that the Series would be successful in pursuing them -- the
counterparty may be judgement proof due to insolvency, for example. The Series
thus assume the risk that they will be delayed or prevented from obtaining
payments owed to them. The standard industry swap agreements do, however, permit
the Series to terminate a swap agreement (and thus avoid making additional
payments) in the event that a counterparty fails to make a timely payment to the
Series.

In response to this counterparty risk, several securities firms have
established separately capitalized subsidiaries that have a higher credit
rating, permitting them to enter into swap transactions as a dealer. The Series
will not be permitted to enter into any swap transaction unless, at the time of
entering into such transaction, the unsecured long-term debt of the actual
counterparty, combined with any credit enhancements, is rated at least A by S&P
or Moody's or is determined to be of equivalent credit quality by the Manager.
In addition, the Manager will closely monitor the ongoing creditworthiness of
swap counterparties in order to minimize the risk of swaps.

In addition to counterparty risk, the use of swaps also involves risks
similar to those associated with ordinary portfolio security transactions. If
the portfolio manager is incorrect in his or her forecast of market values or
interest rates, the investment performance of a Series which has entered into a
swap transaction could be less favorable than it would have been if this
investment technique were not used. It is important to note, however, that there
is no upper limit on the amount the Series might theoretically be required to
pay in a swap transaction.

In order to ensure that a Series will only engage in swap transactions
to the extent consistent with its investment objectives and strategies, the
Series will only engage in a swap transaction if all of the reference rates used
in the swap are related to or derived from securities, instruments or markets
that are otherwise eligible investments for the Series. Similarly, the extent to
which the Series may invest in a swap, as measured by the notional amount, will
be subject to the same limitations as the eligible investments to which the
purchased reference rate relates.

A Series will, consistent with industry practice, segregate and
mark-to-market daily cash or other liquid assets having an aggregate market
value at least equal to the net amount of the excess, if any, of the Series'
payment obligations over its entitled payments with respect to each swap
contract. To the extent that the Series is obligated by a swap to pay a fixed or
variable interest rate, the Series may segregate securities that are expected to
generate income sufficient to meet the Series' net payment obligations. For
example, if a Series holds interest rate swaps and is required to make payments
based on variable interest rates, it will have to make increased payments if
interest rates rise, which will not be necessarily be offset by the fixed-rate
payments it is entitled to receive under the swap agreement.

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There is not a well developed secondary market for interest rate or
index swaps. Most interest rate swaps are nonetheless relatively liquid because
they can be sold back to the counterparty/dealer relatively quickly at a
determinable price. Most index swaps, on the other hand, are considered to be
illiquid because the counterparty/dealer will typically not unwind an index swap
prior to its termination (and, not surprisingly, index swaps tend to have much
shorter terms). A Series will therefore treat all swaps as subject to its
limitation on illiquid investments. For purposes of calculating these percentage
limitations, a Series will refer to the notional amount of the swap.

Swaps will be priced using fair value pricing. The income provided by a
swap should be qualifying income for purposes of Subchapter M of the Internal
Revenue Code. Swaps should not otherwise result in any significant
diversification or valuation issues under Subchapter M.

When-Issued, "When, As and If Issued" and Delayed Delivery Securities and
Forward Commitments
Consistent with their respective objectives, 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. A
Series will designate cash or securities in amounts sufficient to cover its
obligations, and will value the designated assets daily.

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.

Liquidity and Rule 144A Securities

In order to assure that each Series has sufficient liquidity, no Series
may invest more than 10% of its net assets in illiquid assets (except
Convertible Securities, High Yield, REIT, Select Growth and U.S. Growth Series,
which may invest up to 15% of their net assets in illiquid securities). For all
Series, other than the International Equity, Small Cap Value, Trend, Global
Bond, High Yield, Strategic Income, Emerging Markets, Convertible Securities,
REIT, Select Growth and U.S. Growth Series, this policy shall extend to all
restricted securities, including securities eligible for resale without
registration pursuant to Rule 144A ("Rule 144A Securities") (described below),
and repurchase agreements maturing in more than seven days. With respect to the
International Equity, Small Cap Value, Trend, Global Bond, High Yield, Strategic
Income, Emerging Markets, Convertible Securities, REIT, Select Growth and U.S.
Growth Series and subject to the following paragraphs, this policy shall not
limit the acquisition of securities purchased in reliance upon Rule 144A of the
1933 Act. Rule 144A permits many privately placed and legally restricted
securities to be freely traded among certain institutional buyers such as the
Series. Investing in Rule 144A Securities could have the effect of increasing
the level of illiquidity of a Series to the extent that qualified institutional
buyers become uninterested, for a time, in purchasing these securities.

While maintaining oversight, the Board of Trustees has delegated to the
respective investment manager the day-to-day functions of determining whether or
not individual Rule 144A Securities are liquid for purposes of the 10%
limitation on investments in illiquid assets (15% in the case of Convertible
Securities, High Yield,

<PAGE>

REIT, Select Growth and U.S. Growth Series). The Board has instructed the
managers to consider the following factors in determining the liquidity of a
Rule 144A Security: (i) the frequency of trades and trading volume for the
security; (ii) whether at least three dealers are willing to purchase or sell
the security and the number of potential purchasers; (iii) whether at least two
dealers are making a market in the security; (iv) the nature of the security and
the nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).

If the respective manager determines that a Rule 144A Security which
was previously determined to be liquid is no longer liquid and, as a result, the
applicable Series' holdings of illiquid securities exceed the Series' 10% limit
on investment in such securities (15% in the case of Convertible Securities,
High Yield, REIT, Select Growth and U.S. Growth Series), the respective manager
will determine what action shall be taken to ensure that the Series continues to
adhere to such limitation.

Repurchase Agreements

Each Series may, from time to time, enter into repurchase transactions
which are at least 102% collateralized by U.S. government securities, except
that the International Equity, Global Bond and Emerging Markets Series may
accept as collateral any securities in which such Series may invest. 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 (other than
International Equity, Global Bond and Emerging Markets Series) may invest cash
balances in a joint repurchase agreement in accordance with the terms of the
Order and subject generally to the conditions described above.

Portfolio Loan Transactions

Each 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 SEC 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

<PAGE>

custodian fees in connection with the loan; 6) the voting rights on the lent
securities may pass to the borrower; however, if the Trustees of the Fund know
that a material event will occur affecting an investment loan, they must either
terminate the loan in order to vote the proxy or enter into an alternative
arrangement with the borrower to enable the Trustees 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 Trustees, 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 that each Series is authorized and intents to invest in
foreign securities, investors should recognize that investing in securities of
foreign issuers involves certain considerations, including those described in
the Prospectuses, which are not typically associated with investing in United
States issuers. Since the stocks of foreign companies are frequently denominated
in foreign currencies, and since the Series may temporarily hold uninvested
reserves in bank deposits in foreign currencies, the Series will be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies. The investment policies of certain of the Series permit them to
enter into forward foreign currency exchange contracts and various related
currency transactions in order to hedge the Series' holdings and commitments
against changes in the level of future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract.

There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by a Series. Payment of
such interest equalization tax, if imposed, would reduce such Series' rate of
return on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Series by United States
corporations. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instruments other than
any "regulated futures contract" or "nonequity option" marked to market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However, foreign
currency-related regulated futures contracts and non-equity options are
generally not subject to the special currency rules, if they are or would be
treated as sold for their fair market value at year-end under the marking to
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

<PAGE>

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.

Emerging Markets. Compared to the United States and other developed
countries, emerging countries may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade a
small number of securities. Prices on these exchanges tend to be volatile and,
in the past, securities in these countries have offered greater potential for
gain (as well as loss) than securities of companies located in developed
countries. Further, investments by foreign investors (such as the Series) are
subject to a variety of restrictions in many emerging countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, and limits on the types of
companies in which foreigners may invest. Additional restrictions may be imposed
at any time by these or other countries in which a Series invests. In addition,
the repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including, in
some cases, the need for certain governmental consents. Although these
restrictions may in the future make it undesirable to invest in emerging
countries, Delaware International does not believe that any current repatriation
restrictions would affect its decision to invest in such countries. Countries
such as those in which a Series may invest have historically experienced and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations or currency depreciation, large amounts of external debt,
balance of payments and trade difficulties and extreme poverty and unemployment.
Additional factors which may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, its
government's policy towards the International Monetary Fund, the World Bank and
other international agencies and the political constraints to which a government
debtor may be subject.

With respect to investment in debt issues of foreign governments,
including Brady Bonds, the ability of a foreign government or government-related
issuer to make timely and ultimate payments on its external debt obligations
will also be strongly influenced by the issuer's balance of payments, including
export performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves. A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. To the extent that a country receives
payment for its exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely affected.

The issuers of the emerging market country government and
government-related high yield securities in which a Series may invest have in
the past experienced substantial difficulties in servicing their external debt
obligations, which have led to defaults on certain obligations and the
restructuring of certain indebtedness. Restructuring arrangements have included,
among other things, reducing and rescheduling interest and principal payments by
negotiating new or amended credit agreements or converting outstanding principal
and unpaid interest to Brady Bonds, and obtaining new credit to finance interest
payments. Holders of certain foreign government and government-related high
yield securities may be requested to participate in the restructuring of such
obligations and to extend further loans to their issuers. There can be no
assurance that the Brady Bonds and other foreign government and
government-related high yield securities in which a Series may invest will not
be subject to similar defaults or restructuring arrangements which may adversely
affect the value of such investments. Furthermore, certain participants in the
secondary market for such debt may be directly involved in negotiating the terms
of these arrangements and may therefore have access to information not available
to other market participants.

Depositary Receipts. Each Series (other than Cash Reserve Series) may
make foreign investments through the purchase and sale of sponsored or
unsponsored American, European and Global Depositary Receipts ("Depositary
Receipts"). Depositary Receipts are receipts typically issued by a U.S. or
foreign bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. "Sponsored" Depositary Receipts are issued
jointly by the issuer of the underlying security and a depository,

<PAGE>

whereas "unsponsored" Depositary Receipts are issued without participation of
the issuer of the deposited security. Holders of unsponsored Depositary Receipts
generally bear all the costs of such facilities and the depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored Depositary Receipt.

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.

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, Select Growth and U.S. Growth Series may
enter into futures contracts relating to securities, securities indices or
interest rates. In addition, International Equity, Global Bond, Devon, Strategic
Income, Emerging Markets, Convertible Securities and Social Awareness 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

<PAGE>

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.

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, 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--Each of Devon, International Equity,
Small Cap Value, Trend, Global Bond, Strategic Income, Emerging Markets,
Convertible Securities, REIT, Select Growth, Social Awareness and U.S. Growth
Series may purchase and write options on the types of futures contracts that
Series could invest in.

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The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities in the Series'
portfolio. If the futures price at expiration of the option is below the
exercise price, a Series will retain the full amount of the option premium,
which provides a partial hedge against any decline that may have occurred in the
Series' portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the securities or other
instruments required to be delivered under the terms of the futures contract. If
the futures price at expiration of the put option is higher than the exercise
price, a Series will retain the full amount of the option premium, which
provides a partial hedge against any increase in the price of securities which
the Series intends to purchase. If a put or call option a Series has written is
exercised, the Series will incur a loss which will be reduced by the amount of
the premium it receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value of its options
on futures positions, a Series' losses from exercised options on futures may to
some extent be reduced or increased by changes in the value of portfolio
securities.

The Series may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected marketwide decline or changes in interest or exchange
rates, a Series could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such decrease occurs, it may be offset, in
whole or in part, by a profit on the option. If the market decline does not
occur, the Series will suffer a loss equal to the price of the put. Where it is
projected that the value of securities to be acquired by a Series will increase
prior to acquisition, due to a market advance or changes in interest or exchange
rates, a Series could purchase call options on futures contracts, rather than
purchasing the underlying futures contracts. If the market advances, the
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 U.S. 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.

27
<PAGE>

Similarly, instead of purchasing a call option to hedge against the
anticipated increase in the dollar cost of securities to be acquired, the Series
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Series to hedge such
increased costs up to the value of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Series would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Series also may be required to forego all or
a portion of the benefit which might otherwise have been obtained from favorable
movements in exchange rates.

Each Series intends to write covered call options on foreign
currencies. A call option written on a foreign currency by a Series is "covered"
if the Series owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the Series' custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Series has a call on the same foreign currency and in the same principle amount
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.

Options

Each 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, Select Growth and U.S. Growth
Series may also purchase call options. These 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 Devon, International Equity,
Global Bond, Emerging Markets, Convertible Securities, REIT, Select Growth
Social Awareness and U.S. 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. Certain
over-the-counter options may be illiquid. 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. The
Devon, International Equity, Global Bond, Emerging Markets, Convertible
Securities, REIT, Select Growth, Social Awareness and U.S. Growth Series will
only enter into such options to the extent consistent with its limitation on
investments in illiquid 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

<PAGE>

which is additional income. However, if the security rises in value, the Series
may not fully participate in the market appreciation.

During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.

With respect to such options, the Series may enter into closing
purchase transactions. A closing purchase transaction is one in which the
Series, when obligated as a writer of an option, terminates its obligation by
purchasing an option of the same series as the option previously written.

Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Series may realize a
net gain or loss from a closing purchase transaction depending upon whether the
net amount of the original premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. Any loss incurred
in a closing purchase transaction may be partially or entirely offset by the
premium received from a sale of a different call option on the same underlying
security. Such a loss may also be wholly or partially offset by unrealized
appreciation in the market value of the underlying security. Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part by a decline in the market value of the underlying security.

If a call option expires unexercised, the Series will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Series will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.

The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.

A Series will write call options only on a covered basis, which means
that the Series will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Series would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold.
Options written by the Series will normally have expiration dates between one
and nine months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.

B. Purchasing Put Options--A Series may invest up to 2% of its total
assets in the purchase of put options. The Series will, at all times during
which it holds a put option, own the security covered by such option.

A put option purchased by the Series gives it the right to sell one of
its securities for an agreed price up to an agreed date. The Series intend to
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

<PAGE>

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, Select Growth and U.S. 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
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 Devon, Growth Opportunities,
International Equity, Small Cap Value, Trend, Global Bond, Emerging Markets,
Convertible Securities, REIT, Select Growth and U.S. 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

<PAGE>

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, Devon, Growth Opportunities, International
Equity, Small Cap Value, Trend, Global Bond, Emerging Markets, Convertible
Securities, REIT, Select Growth and U.S. 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 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.

Growth Opportunities, International Equity, Small Cap Value, Trend,
Global Bond, Emerging Markets, Convertible Securities, REIT, Select Growth and
U.S. 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, Select Growth
and U.S. 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

<PAGE>

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.

Investment Company Securities

Any investments that International Equity, Strategic Income, Emerging
Markets and Social Awareness Series makes in either closed-end or open-end
investment companies (in the case of Emerging Markets and Social Awareness
Series) 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 Emerging Markets and Social Awareness 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.

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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 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 Investment Advisors ("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.

Lower-Rated Debt Securities
U.S. Growth, High Yield, Strategic Income, Convertible Securities and
Emerging Markets Series may purchase high yield, high risk securities, commonly
known as "junk bonds." These securities are rated lower than Baa by Moody's or
lower than BBB by S&P and are often considered to be speculative and involve
significantly higher risk of default on the payment of principal and interest or
are more likely to experience significant price fluctuation due to changes in
the issuer's creditworthiness. Market prices of these securities may fluctuate
more than higher-rated debt securities and may decline significantly in periods
of general economic difficulty which may follow periods of rising interest
rates. While the market for high yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
market in recent years has experienced a dramatic increase in the large-scale
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Accordingly, past experience may not provide an accurate
indication of future performance of the high yield bond market, especially
during periods of economic recession. See Appendix A - Description of Ratings in
this Part B.

The market for lower-rated securities may be less active than that for
higher-rated securities, which can adversely affect the prices at which these
securities can be sold. If market quotations are not available, these securities
will be valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment plays a
greater role in valuing high yield corporate debt securities than is the case
for securities for which more external sources for quotations and last-sale
information are available. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services used by the Series to value
its portfolio securities and the Series' ability to dispose of these lower-rated
debt securities.

Since the risk of default is higher for lower-quality securities, the
investment manager's and/or sub-adviser's research and credit analysis is an
integral part of managing any securities of this type held by the Series. In
considering investments for the Series, the investment manager and/or
sub-adviser will attempt to identify those issuers of high-yielding securities
whose financial condition is adequate to meet future obligations, has improved,
or is expected to improve in the future. The investment manager's and/or

<PAGE>

sub-adviser's analysis focuses on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer. There can be no assurance that
such analysis will prove accurate.

The Series may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of shareholders.

Mortgage Dollar Rolls
U.S. Growth Series may enter into mortgage "dollar rolls" in which the
Series sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. Dollar roll transactions
consist of the sale by the Series of mortgage-backed securities, together with a
commitment to purchase similar, but not necessarily identical, securities at a
future date. Any difference between the sale price and the purchase price is
netted against the interest income foregone on the securities to arrive at an
implied borrowing (reverse repurchase) rate. Alternatively, the sale and
purchase transactions which constitute the dollar roll can be executed at the
same price, with the Series being paid a fee as consideration for entering into
the commitment to purchase. Dollar rolls may be renewed prior to cash settlement
and initially may involve only a firm commitment agreement by the Fund to buy a
security. If the broker/dealer to whom the Series sells the security becomes
insolvent, the Series' right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Series is required to repurchase may be worth
less than the security that the Series originally held, and the return earned by
the Series with the proceeds of a dollar roll may not exceed transaction costs.
The Series will place U.S. government or other liquid, high quality assets in a
segregated account in an amount sufficient to cover its repurchase obligation.

Combined Transactions

U.S. Growth Series may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single transaction, as
part of a single or combined strategy when, in the opinion of the investment
manager, it is in the best interests of the Series to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the investment manager's judgment that the combined strategies
will reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the portfolio management objective.

Swaps, Caps, Floors and Collars
U.S. Growth Series may enter into interest rate, currency and index
swaps and the purchase or sale of related caps, floors and collars. The Series
expects to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Series anticipates
purchasing at a later date. The Series intends to use these transactions as
hedges and not speculative investments and will not sell interest rate caps or
floors where it does not own securities or other instruments providing the
income stream the Series may be obligated to pay. Interest rate swaps involve
the exchange by the Series with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate payments for fixed
rate payments with respect to a nominal amount of principal. A currency swap is
an agreement to exchange cash flows on a notional amount of two or more
currencies based on the relative

<PAGE>

value differential among them and an index swap is an agreement to swap cash
flows on a notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling such cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase of
a floor entitles the purchaser to receive payments on a notional principal
amount from the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is a combination
of a cap and a floor that preserves a certain return within a predetermined
range of interest rates or values.

The Series will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Series receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the
investment manager and the Series believe such obligations do not constitute
senior securities under the 1940 Act and, accordingly, will not treat them as
being subject to its borrowing restrictions. The Series will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or is determined to
be of equivalent credit quality by the investment manager and/or sub-adviser. If
there is a default by the counterparty, the Series may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agent utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid. Caps,
floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, accordingly, they are less
liquid than swaps.

Eurodollar Instruments
U.S. Growth Series may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The
Series might use Eurodollar futures contracts and options thereon to hedge
against changes in LIBOR, to which many interest rate swaps and fixed-income
instruments are linked.

Reverse Repurchase Agreements
U.S. Growth Series is authorized to enter into reverse repurchase
agreements. A reverse repurchase agreement is the sale of a security by the
Series and its agreement to repurchase the security at a specified time and
price. The Series will maintain in a segregated account with the Custodian cash,
cash equivalents or U.S. government securities in an amount sufficient to cover
its obligations under reverse repurchase agreements with broker/dealers (but no
collateral is required on reverse repurchase agreements with banks). Under the
1940 Act, reverse repurchase agreements may be considered borrowings by the
Series; accordingly, the Series will limit its investments in reverse repurchase
agreements, together with any other borrowings, to no more than one-third of its
total assets. The use of reverse repurchase agreements by the Series creates
leverage which increases the Series' investment risk. If the income and gains on
securities purchased with the proceeds of reverse repurchase agreements exceed
the costs of the agreements, the Series' earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the costs, earnings or net asset value would decline faster
than otherwise would be the case.

"Roll" Transactions
U.S. Growth Series may engage in "roll" transactions. A "roll"
transaction is the sale of securities together with a commitment (for which the
Series may receive a fee) to purchase similar, but not identical, securities at
a future date. Under the 1940 Act, these transactions may be considered
borrowings by the Series; accordingly, the Series will limit its use of these
transactions, together with any other borrowings, to no more than one-fourth of
its total assets. The Series will segregate liquid assets such as cash, U.S.
government

<PAGE>

securities or other high grade debt obligations in an amount sufficient to meet
its payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the Series' aggregate
commitments under these transactions exceed its holdings of cash and securities
that do not fluctuate in value (such as short-term money market instruments),
the Series temporarily will be in a leveraged position (i.e., it will have an
amount greater than its net assets subject to market risk). Should the market
value of the Series' portfolio securities decline while the Series is in a
leveraged position, greater depreciation of its net assets would likely occur
than were it not in such a position. As the Series' aggregate commitments under
these transactions increase, the opportunity for leverage similarly increases.

Variable and Floating Rate Notes
Variable rate master demand notes, in which U.S. Growth Series may
invest, are unsecured demand notes that permit the indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate according to the
terms of the instrument. The Series will not invest over 5% of its assets in
variable rate master demand notes. Because master demand notes are direct
lending arrangements between the Series and the issuer, they are not normally
traded. Although there is no secondary market in the notes, the Series may
demand payment of principal and accrued interest at any time. While the notes
are not typically rated by credit rating agencies, issuers of variable amount
master demand notes (which are normally manufacturing, retail, financial, and
other business concerns) must satisfy the same criteria as set forth above for
commercial paper. In determining average weighted portfolio maturity, a variable
amount master demand note will be deemed to have a maturity equal to the period
of time remaining until the principal amount can be recovered from the issuer
through demand.

A variable rate note is one whose terms provide for the adjustment of
its interest rate on set dates and which, upon such adjustment, can reasonably
be expected to have a market value that approximates its par value. A floating
rate note is one whose terms provide for the adjustment of its interest rate
whenever a specified interest rate changes and which, at any time, can
reasonably be expected to have a market value that approximates its par value.
Such notes are frequently not rated by credit rating agencies; however, unrated
variable and floating rate notes purchased by the Series will be determined by
the Series' investment manager under guidelines established by the Series' Board
of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Series' investment policies. In
making such determinations, the investment manager will consider the earning
power, cash flow and other liquidity ratios of the issuers of such notes (such
issuers include financial, merchandising, bank holding and other companies) and
will continuously monitor their financial condition. Although there may be no
active secondary market with respect to a particular variable or floating rate
note purchased by the Series, the Series may re-sell the note at any time to a
third party. The absence of such an active secondary market, however, could make
it difficult for the Series to dispose of the variable or floating rate note
involved in the event the issuer of the note defaulted on its payment
obligations, and the Series could, for this or other reasons, suffer a loss to
the extent of the default. Variable or floating rate notes may be secured by
bank letters of credit.

Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements providing for settlement more than seven
days after notice), exceed 10% of the Series' total assets only if such notes
are subject to a demand feature that will permit the Series to demand payment of
the principal within seven days after demand by the Series. If not rated, such
instruments must be found by the Series' investment manager under guidelines
established by the Fund's Board of Trustees, to be of comparable quality to
instruments that are rated high quality. A rating may be relied upon only if it
is provided by a nationally recognized statistical rating organization that is
not affiliated with the issuer or guarantor of the instruments. See Appendix A
for a description of the rating symbols of S&P and Moody's. The Series may also
invest in Canadian Commercial Paper, which is commercial paper issued by a
Canadian corporation or a Canadian counterpart of a U.S. corporation, and in
Europaper which is U.S. dollar denominated commercial paper of a foreign issuer.

36
<PAGE>

Concentration

In applying a 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.

<PAGE>

ACCOUNTING AND TAX ISSUES

When a Series writes a call, or purchases a put option, an amount equal
to the premium received or paid by it is included in the Series' assets and
liabilities as an asset and as an equivalent liability.

In writing a call, the amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Series has written
expires on its stipulated expiration date, a Series recognizes a capital gain.
If a Series enters into a closing purchase transaction with respect to an option
which a Series has written, a Series realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option which a
Series has written is exercised, a Series realizes a capital gain or loss from
the sale of the underlying security and the proceeds from such sale are
increased by the premium originally received.

The premium paid by a Series for the purchase of a put option is
recorded in the Series' assets and liabilities as an investment and subsequently
adjusted daily to the current market value of the option. For example, if the
current market value of the option exceeds the premium paid, the excess would be
unrealized appreciation and, conversely, if the premium exceeds the current
market value, such excess would be unrealized depreciation. The current market
value of a purchased option is the last sale price on the principal Exchange on
which such option is traded or, in the absence of a sale, the mean between the
last bid and asked prices. If an option which a Series has purchased expires on
the stipulated expiration date, a Series realizes a short-term or long-term
capital loss for federal income tax purposes in the amount of the cost of the
option. If a Series exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid.

Options on Certain Stock Indices--Accounting for options on certain
stock indices will be in accordance with generally accepted accounting
principles. The amount of any realized gain or loss on closing out such a
position will result in a realized gain or loss for tax purposes. Such options
held by the Growth Opportunities, International Equity, Small Cap Value, Trend,
Global Bond, Emerging Markets, Convertible Securities, REIT, Select Growth and
U.S. 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 has qualified, or intends to
qualify, as a regulated investment company under Subchapter M of the Internal
Revenue Code (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:

(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;

<PAGE>

(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:

<PAGE>

Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time the Series accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time the Series actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of the Series' net investment company taxable income, which, in turn, will
affect the amount of income to be distributed to you by the Series.

If the Series' Section 988 losses exceed the Series' other net
investment company taxable income during a taxable year, the Series generally
will not be able to make ordinary dividend distributions to you for that year,
or distributions made before the losses were realized will be recharacterized as
return of capital distributions of federal income tax purposes, rather than as
an ordinary dividend or capital gain distribution. If a distribution is treated
as a return of capital, your tax basis in your Series shares will be reduced by
a like amount (to the extent of such basis), and any excess of the distribution
over your tax basis in your Series shares will be treated as capital gain to
you.

The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require the
Series to track and record adjustments to foreign taxes paid on foreign
securities in which it invests. Under the Series' current reporting procedure,
foreign security transactions are recorded generally at the time of each
transaction using the foreign currency spot rate available for the date of each
transaction. Under the new law, the Series will be required to record a fiscal
year end (and at calendar year end for excise tax purposes) an adjustment that
reflects the difference between the spot rates recorded for each transaction and
the year-end average exchange rate for all of the Series' foreign securities
transactions. There is a possibility that the mutual fund industry will be given
relief from this new provision, in which case no year-end adjustments will be
required.

The Series may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of the
Series at the end of its fiscal year are invested in securities of foreign
corporations, the Series may elect to pass-through to you your pro rata share of
foreign taxes paid by the Series. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by the Series) and (ii) entitled to
either deduct your share of such foreign taxes in computing your taxable income
or to claim a credit for such taxes against your U.S. income tax, subject to
certain limitations under the Code. You will be informed by the Fund at the end
of each calendar year regarding the availability of any such foreign tax credits
and the amount of foreign source income (including any foreign taxes paid by the
Series). If the Series elects to pass-through to you the foreign income taxes
that it has paid, you will be informed at the end of the calendar year of the
amount of foreign taxes paid and foreign source income that must be included on
your federal income tax return. If the Series invests 50% or less of its total
assets in securities of foreign corporations, it will not be entitled to
pass-through to you your pro-rata shares of foreign taxes paid by the Series. In
this case, these taxes will be taken as a deduction by the Series, and the
income reported to you will be the net amount after these deductions. The 1997
Act also simplifies the procedures by which investors in funds that invest in
foreign securities can claim tax credits on their individual income tax returns
for the foreign taxes paid by the Series. These provisions will allow investors
who pay foreign taxes of $300 or less on a single return or $600 or less on a
joint return during any year (all of which must be reported on IRS Form 1099-DIV
from the Series to the investor) to claim a tax credit against their U.S.
federal income tax for the amount of foreign taxes paid by the Series. This
process will allow you, if you qualify, to bypass the burdensome and detailed
reporting requirements on the foreign tax credit schedule (Form 1116) and report
your foreign taxes paid directly on page 2 of Form 1040. This simplified
procedure was not available until calendar year 1998.

<PAGE>

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.

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.

<PAGE>

PERFORMANCE INFORMATION

Contract owners and prospective investors will be interested in
learning from time to time the current yield of High Yield, 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 Capital Reserves and Cash Reserve Series
are declared daily from net investment income, dividends for Global Bond Series
are declared quarterly and dividends for High Yield and Strategic Income Series
are declared annually. Yield will fluctuate as income earned fluctuates. On May
1, 2000, the Delchester Series' name was changed High Yield Series and the
Series' investment objective changed from high current income to total return
and, as a secondary objective, high current income. Performance shown in this
section is that of the Standard Class shares of the Series, which do not carry a
12b-1 fee.

The Service Class shares of the Series are subject to an annual 12b-1
fee of not more than 0.30% (currently set at 0.15%). Performance shown in this
section is the performance of the Standard Class shares of the Series, which do
not carry a 12b-1 fee. Performance of the Service Class shares will be lower
than the Standard Class and will differ from the Standard Class to the extent of
the 12b-1 fee.

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-year period, five-year
period and ten-year period or lifetime period, if applicable. 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:

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.

<PAGE>

The performance , as shown below, is the average annual total return
quotations through December 31, 1999. Securities prices fluctuated during the
periods covered and past results should not be considered as representative of
future performance. The average annual total return performance is the
performance of the Standard Class shares of the Series, which do not carry a
12b-1 fee. Performance of the Service Class shares will be lower than the
Standard Class and will differ from the Standard Class to the extent of the
12b-1 fee noted above.

Average Annual Total Return
- -------------------------------------------------------------------------------------------------------------------------------
Series* 1 year ended 3 years ended 9 years ended 10 years ended Life of Fund
12/31/99 12/31/99 12/31/99 12/31/99
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced -7.85% 11.38% 15.18% 12.16% 12.21%
(Inception 7/28/88)
- -------------------------------------------------------------------------------------------------------------------------------
Capital Reserves 0.28% 4.83% 6.46% 6.13% 6.40%
(Inception 7/28/88)
- -------------------------------------------------------------------------------------------------------------------------------
Cash Reserve 4.81% 5.00% 5.08% 4.79% 5.22%
(Inception 7/28/88)
- -------------------------------------------------------------------------------------------------------------------------------
Convertible Securities 6.97% N/A N/A N/A 8.18%
(Inception 5/1/97)
- -------------------------------------------------------------------------------------------------------------------------------
Devon -10.13% N/A N/A N/A 14.00%
(Inception 5/1/97)
- -------------------------------------------------------------------------------------------------------------------------------
Emerging Markets 48.28% N/A N/A N/A -4.31%
(Inception 5/1/97)
- -------------------------------------------------------------------------------------------------------------------------------
Global Bond -3.60% 1.59% N/A N/A 4.43%
(Inception 5/2/96)
- -------------------------------------------------------------------------------------------------------------------------------
Growth and Income -2.98% 12.27% 18.39% 11.95% 11.73%
(Inception 7/28/88)
- -------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities 62.94% 30.54% 26.95% N/A 17.75%
(Inception 7/12/91)
- -------------------------------------------------------------------------------------------------------------------------------
High Yield -2.64% 2.79% 7.19% 8.77% 8.37%
(Inception 7/28/88)
- -------------------------------------------------------------------------------------------------------------------------------
International Equity
(Inception 10/29/92 15.76% 10.83% 13.24% N/A 11.77%
- -------------------------------------------------------------------------------------------------------------------------------
REIT Series -2.61% N/A N/A N/A -7.00%
(Inception 5/4/98)
- -------------------------------------------------------------------------------------------------------------------------------
Small Cap Value -4.86% 6.38% 12.81% N/A 11.07%
(Inception 12/27/93)
- -------------------------------------------------------------------------------------------------------------------------------
Social Awareness 12.91% N/A N/A N/A 21.27%
(Inception 5/1/97)
- -------------------------------------------------------------------------------------------------------------------------------
Strategic Income -3.29% N/A N/A N/A 1.99%
(Inception 5/1/97)
- -------------------------------------------------------------------------------------------------------------------------------
Trend 70.45% 33.89% 29.97% N/A 24.68%
(Inception 12/27/93)
- -------------------------------------------------------------------------------------------------------------------------------
</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.

High Yield, Capital Reserves, Global Bond and Strategic Income Series
may also quote its current yield, calculated as described below, in
advertisements and investor communications.

<PAGE>

The yield computation for High Yield, 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 High Yield, Capital Reserves and Strategic Income Series as of
December 31, 1999 using this formula were 11.72%, 6.39% and 8.37%, respectively.
The yield shown is that of the Standard Class shares of the Series, which do not
carry a 12b-1 fee. Performance of the Service Class shares will be lower than
the Standard Class and will differ from the Standard Class to the extent of the
12b-1 fee noted above.

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.

<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, 1999. Yield shown below is that of the
Standard Class shares of the Series, which do not carry a 12b-1 fee. Performance
of the Service Class shares will be lower than the Standard Class and will
differ from the Standard Class to the extent of the 12b-1 fee noted above.

<TABLE>
<CAPTION>
<S> <C>
Value of a hypothetical account with one share at the beginning of the period $10.00000000

Value of the same account at the end of the period 10.01010474

Net change in account value .01010474*

Base period return = net change in account value/beginning account value .001010474

Current yield [base period return x (365/7)] 5.27%**

Effective yield (1 + base period)365/7 - 1 5.41%***

Weighted average life to maturity of the portfolio on December 31, 1999 was 48 days.

</TABLE>

* This represents the net income per share for the seven calendar days ended
December 31, 1999.
** This represents the average of annualized net investment income per share
for the seven calendar days ended December 31, 1999.
*** This represents the current yield for the seven calendar days ended December
31, 1999 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.

Investors should note that income earned and dividends paid by High
Yield, 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, High Yield, 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.

<PAGE>

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 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.

<PAGE>

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.

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

<PAGE>

include a discussion of certain attributes or benefits to be derived by an
investment in a Series 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.

<PAGE>

The following table is an example, for purposes of illustration only,
of cumulative total return performance through December 31, 1999. For these
purposes, the calculations assume the reinvestment of any realized securities
profits distributions and income dividends paid during the indicated periods.
Cumulative total return is based on the Standard Class shares of the Series,
which do not carry a 12b-1 fee. Performance of the Service Class shares will be
lower than the Standard Class and will differ from the Standard Class to the
extent of the 12b-1 fee noted above.
<TABLE>
<CAPTION>

Cumulative Total Return
- ------------------------------------------------------------------------------------------------------------------------------------
Series* 3 months 6 months 9 months ended 1 year 3 years 5 years 10 years Life of Fund
ended ended 12/31/99 ended ended ended ended
12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced 1.52% -7.73% -1.81% -7.85% 38.16% 102.71% 214.98% 273.14%
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Reserves 0.12% 0.91% 0.11% 0.28% 15.21% 36.75% 81.24% 103.28%
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Reserve 1.29% 2.49% 3.64% 4.81% 15.75% 28.12% 59.60% 78.94%
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible Securities 8.70% 4.45% 8.40% 6.97% N/A N/A N/A 23.37%
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Devon 2.33% -10.04% -1.94% -10.13% N/A N/A N/A 41.91%
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets 22.99% 17.16% 43.10% 48.28% N/A N/A N/A -11.10%
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Global Bond -2.19% -1.99% -2.84% -3.60% 4.86% N/A N/A 17.22%
(Inception 5/2/96)
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and Income 1.50% -8.29% -2.17% -2.98% 41.52% 132.55% 209.19% 255.07%
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities 46.48% 44.12% 61.03% 62.94% 122.44% 229.78% N/A 299.23%
(Inception 7/12/91)
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield 0.04% -3.18% -3.95% -2.64% 8.61% 41.49% 131.70% 150.69%
(Inception 7/28/88)
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity 8.76% 6.88% 13.18% 15.76% 36.14% 86.25% N/A 122.21%
(Inception 10/29/92)
- ------------------------------------------------------------------------------------------------------------------------------------
REIT 0% -7.47% 3.22% -2.61% N/A N/A N/A -11.38%
(Inception 5/4/98)
- ------------------------------------------------------------------------------------------------------------------------------------
Select Growth 42.47% 40.65% N/A N/A N/A N/A N/A 42.90%
(Inception 5/1/99)
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value 1.45% -8.24% 5.64% -4.86% 20.39% 82.72% N/A 88.02%
(Inception 12/27/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Social Awareness 14.81% 7.92% 13.22% 12.91% N/A N/A N/A 67.38%
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Income -0.21% -1.13% -3.69% -3.29% N/A N/A N/A 5.41%
(Inception 5/1/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Trend 34.16% 40.90% 66.22% 70.45% 140.04% 270.92% N/A 276.86
(Inception 12/27/93)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Growth Series N/A N/A N/A N/A N/A N/A N/A 5.90%
(Inception 11/15/99)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* The respective investment manager elected to waive voluntarily the portion of
its annual compensation under its Investment Management Agreement with each
Series to limit operating expenses of the Series to the amounts noted under
Investment Management Agreements and Sub-Advisory Agreements. In the absence
of such voluntary waiver, performance would have been affected negatively.

49
<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.

Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Prices of securities such as stocks and bonds tend to move up and down over
various market cycles and are generally intended for longer term investing.
Money market funds, which typically maintain stable prices, are generally
intended for your short-term investment needs and can often be used as a basis
for building a long-term investment plan.

Though logic says to invest when prices are low, even experts can't
always pick the highs and the lows. By using a strategy known as dollar-cost
averaging, you schedule your investments ahead of time. If you invest a set
amount on a regular basis, that money will always buy more shares when the price
is low and fewer when the price is high. You can choose to invest at any regular
interval--for example, monthly or quarterly--as long as you stick to your
regular schedule.

Dollar-cost averaging looks simple and it is, but there are important
things to remember. Dollar-cost averaging works best over longer time periods,
and it doesn't guarantee a profit or protect against losses in declining
markets. If you need to sell your investment when prices are low, you may not
realize a profit no matter what investment strategy you utilize. That's why
dollar-cost averaging can make sense for long-term goals. Since the potential
success of a dollar-cost averaging program depends on continuous investing, even
through periods of fluctuating prices, you should consider your dollar-cost
averaging program a long-term commitment and invest an amount you can afford and
probably won't need to withdraw.

The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.

Number
Investment Price Per of Shares
Amount Share Purchased

Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
- -------------------------------------------------------------------------
$400 $37.50 48

Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)

This example is for illustration purposes only. It is not intended to
represent the actual performance of a Series.

50
<PAGE>

THE POWER OF COMPOUNDING

As part of your Variable Annuity contract, any earnings from your
investment selection are automatically reinvested to purchase additional shares
of a Series. This gives your investment yet another opportunity to grow. It's
called the Power of Compounding. Each Series may included illustrations showing
the Power of Compounding in advertisements and other types of literature.

<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 execution. Best 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 the investment manager's trading department as to rates paid and
charged for similar transactions throughout the securities industry. In some
instances, the Fund pays a minimal share transaction cost when the transaction
presents no difficulty. 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, 1997, 1998 and 1999, the
aggregate dollar amounts of brokerage commissions were paid by the Series noted
below:

- --------------------------------------------------------------------------------
1997 1998 1999
- --------------------------------------------------------------------------------
Balanced Series $120,307 $165,591 $393,756
- --------------------------------------------------------------------------------
Convertible Securities Series(1) $5,517 $10,155 $4,891
- --------------------------------------------------------------------------------
Devon Series(1) $21,022 $83,285 $244,079
- --------------------------------------------------------------------------------
Emerging Markets Series(1) $28,640 $21,763 $15,994
- --------------------------------------------------------------------------------
Growth and Income Series $518,762 $1,020,668 $1,371,136
- --------------------------------------------------------------------------------
Growth Opportunities Series $270,393 $308,645 $262,630
- --------------------------------------------------------------------------------
International Equity Series $215,242 $121,978 $143,149
- --------------------------------------------------------------------------------
REIT Series(2) N/A $13,326 $24,542
- --------------------------------------------------------------------------------
Select Growth Series(3) N/A N/A $35,470
- --------------------------------------------------------------------------------
Small Cap Value Series $119,689 $198,194 $194,772
- --------------------------------------------------------------------------------
Social Awareness Series(1) $7,416 $25,636 $18,920
- --------------------------------------------------------------------------------
Trend Series $182,867 $269,355 $233,253
- --------------------------------------------------------------------------------
U.S. Growth Series(4) N/A N/A $3,285
- --------------------------------------------------------------------------------

(1) Commenced operations on May 1, 1997.
(2) Commenced operations on May 4, 1998.
(3) Commenced operations on May 1, 1999.
(4) Commenced operations on November 15, 1999.

The respective investment manager may allocate out of all commission
business generated by all of the funds and accounts under management by the
respective investment manager, brokerage business to brokers or dealers who
provide brokerage and research services. These services include advice, either
directly or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers; securities or industries; providing
information on economic factors and trends; assisting in determining portfolio
strategy; providing computer software and hardware used in security analyses;
and providing portfolio performance evaluation and technical market analyses.
Such services are used by the respective investment manager in connection with
its investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.

52
<PAGE>

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
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
Balanced Series $102,012,726 $152,619
- ------------------------------------------------------------------------------
Convertible Securities Series $814,380 $1,333
- ------------------------------------------------------------------------------
Devon Series $60,928,285 $94,548
- ------------------------------------------------------------------------------
Growth and Income Series $262,429,255 $322,247
- ------------------------------------------------------------------------------
Growth Opportunities Series $10,190,304 $17,292
- ------------------------------------------------------------------------------
International Equity Series $2,868,580 $5,717
- ------------------------------------------------------------------------------
REIT Series $4,172,451 $10,160
- ------------------------------------------------------------------------------
Small Cap Value Series $41,069,657 $116,137
- ------------------------------------------------------------------------------
Social Awareness Series $2,795,366 $5,581
- ------------------------------------------------------------------------------
Trend Series $4,595,581 $6,702
- ------------------------------------------------------------------------------
U.S. Growth Series (1) $1,973,176 $1,773
- ------------------------------------------------------------------------------

(1) Commenced operations on November 15, 1999.

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 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 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 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 Trustees that the advantages of combined orders
outweigh the possible disadvantages of separate transactions.

53
<PAGE>

Consistent with the Rules of Fair Practice of the NASD Regulation,
Inc., and subject to seeking best 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 Convertible Securities,
Growth and Income, International Equity, Emerging Markets, Small Cap Value,
Social Awareness and REIT Series, 200% for the Capital Reserves Series, and may
exceed 100% for the Balanced, Devon, Global Bond, Growth Opportunities, High
Yield, Select Growth, Strategic Income, Trend and U.S. Growth Series . It is
possible that in any particular year market conditions or other factors might
result in portfolio activity at a greater rate than anticipated. The portfolio
turnover rate of each Series is calculated by dividing the lesser of purchases
or sales of portfolio securities for the particular fiscal year by the monthly
average of the value of the portfolio securities owned by the Series during the
particular fiscal year, exclusive of securities whose maturities at the time of
acquisition are one year or less.

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.

<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, 1999 December 31, 1998
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
Balanced Series 107% 94%
- -------------------------------------------------------------------------------
Capital Reserves Series 129% 166%
- -------------------------------------------------------------------------------
Convertible Securities Series 35% 77%
- -------------------------------------------------------------------------------
Devon Series 101% 34%
- -------------------------------------------------------------------------------
Emerging Markets Series 20% 38%
- -------------------------------------------------------------------------------
Global Bond Series 100% 79%
- -------------------------------------------------------------------------------
Growth and Income Series 92% 81%
- -------------------------------------------------------------------------------
Growth Opportunities Series 132% 142%
- -------------------------------------------------------------------------------
High Yield Series 110% 86%
- -------------------------------------------------------------------------------
International Equity Series 9% 5%
- -------------------------------------------------------------------------------
REIT Series 33% 39%*
- -------------------------------------------------------------------------------
Select Growth Series 174%** N/A
- -------------------------------------------------------------------------------
Small Cap Value Series 47% 45%
- -------------------------------------------------------------------------------
Social Awareness Series 22% 30%
- -------------------------------------------------------------------------------
Strategic Income Series 101% 143%
- -------------------------------------------------------------------------------
Trend Series 82% 121%
- -------------------------------------------------------------------------------
U.S. Growth Series 0%*** N/A
- -------------------------------------------------------------------------------

* Annualized. Commenced operations on May 4, 1998.
** Annualized. Commenced operations on May 1, 1999.
*** Commenced operations on November 15, 1999.

55
<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 SEC 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. 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 , currencies and other assets denominated in
foreign currencies are translated into U.S. dollars at the exchange rate of
these currencies against the U.S. dollar, as provided by an independent pricing
service. Use of a pricing service has been approved by the Board of Trustees.
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.
For all other securities, we use methods approved by the Board of Trustees that
are designed to price securities at their fair market value.

In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Series of securities owned by it is not reasonably
practical, or it is not reasonably practical for a Series fairly to value its
assets, or in the event that the Securities and Exchange Commission has provided
for such suspension for the protection of shareholders, the Fund may postpone
payment or suspend the right of redemption or repurchase. In such case, the
shareholder may withdraw a request for redemption or leave it standing as a
request for redemption at the net asset value next determined after the
suspension has been terminated.

56
<PAGE>

Money Market Series
The Board of Trustees 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 Trustees believes would result in a material dilution to shareholders
or purchasers, the Board of Trustees will promptly consider what action, if any,
should be initiated, such as changing the price to more or less than $10 per
share.

<PAGE>

DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS

Dividends for the Capital Reserves 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 Balanced and Growth and Income 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 Select Growth, Convertible Securities, Global Bond, Growth
Opportunities, Devon, High Yield, International Equity, Small Cap Value, Trend,
Emerging Markets, Social Awareness, Strategic Income, REIT and U.S. Growth
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. 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 Trustees will consider temporarily reducing or suspending payment
of daily dividends, or making a distribution of realized securities profits or
other distributions at the time the net asset value per share has changed.

<PAGE>

TAXES

Each Series has qualified, or intends to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code (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"), as revised by
the Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998
Act") and the Omnibus Consolidated and Emergency Supplemental Appropriations
Act, a Series is required to track its sales of portfolio securities and to
report its capital gain distributions to you according to the following
categories:

Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holder are taxed at the 20% rate when distributed to shareholders
(10% for individual investors in the 15% tax bracket).

"Short -term capital gains": Gains on securities sold by a Series that
do not meet the long-term holdings period are considered short term
capital gains and are taxable as ordinary income.

"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-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 five-year gains are net gains
on securities which are purchased after December 31, 2000 and are held
for more than five years. Taxpayers subject to tax at a higher rate
brackets may also make an election for shares held on January 1, 2001
to recognize gain on their shares in order to qualify such shares as
qualified five-year property. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the five-year
holding period.

<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, High Yield, Capital
Reserves, Cash Reserve, Growth Opportunities, Balanced, Small Cap Value, Trend,
Strategic Income, Devon, Convertible Securities, Social Awareness, REIT, Select
Growth and U.S. Growth 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 Trustees. 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, 1999, Delaware Management and
its affiliates within Delaware Investments, including Delaware International,
were supervising in the aggregate more than $47 billion in assets in the various
institutional or separately managed (approximately $27,783,710,000) and
investment company ($19,579,950,000) 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 each Series are dated December
15, 1999 and were approved the initial shareholder on that date. The Agreements
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 Trustees 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 Trustees 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 Trustees of the Fund or by
the respective investment manager. The Agreements will terminate automatically
in the event of their assignments.

<PAGE>

Under the Investment Management Agreement, Delaware Management or
Delaware International is entitled to receive an annual fee equal to the
following percentage rates of the average daily net assets of a Series:

- --------------------------------------------------------------------------------
Series Management Fee Rate

- --------------------------------------------------------------------------------
Capital Reserves Series 0.50% on the first $500 million
0.475% on the next $500 million
0.45% in the next $1.5 billion
0.425% on assets in excess of $2.5 billion

- --------------------------------------------------------------------------------
Cash Reserve Series 0.45% on the first $500 million
0.40% on the next $500 million
0.35% on the next $1.5 billion
0.30% on assets in excess of $2.5 billion

- --------------------------------------------------------------------------------
Convertible Securities Series 0.75% on the first $500 million
Global Bond Series 0.70% on the next $500 million
Growth Opportunities Series 0.65% in the next $1.5 billion
REIT Series 0.60% on assets in excess of $2.5 billion
Select Growth Series
Small Cap Value Series
Social Awareness Series
Trend Series

- --------------------------------------------------------------------------------
Balanced Series 0.65% on the first $500 million
Devon Series 0.60% on the next $500 million
Growth and Income Series* 0.55% in the next $1.5 billion
High Yield Series 0.50% on assets in excess of $2.5 billion
Strategic Income Series
U.S. Growth Series

- --------------------------------------------------------------------------------
Emerging Markets Series 1.25% on the first $500 million
1.20% on the next $500 million
1.15% in the next $1.5 billion
1.10% on assets in excess of $2.5 billion

- --------------------------------------------------------------------------------
International Equity Series 0.85% on the first $500 million
0.80% on the next $500 million
0.75% in the next $1.5 billion
0.70% on assets in excess of $2.5 billion
- --------------------------------------------------------------------------------

* Delaware Management has agreed to voluntarily waive its management fee so as
not to exceed an annual rate of 0.60% of average daily net assets.

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 Trustees, officers and employees who are
affiliated with both it and the Fund.

61
<PAGE>

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 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 on the next $30
million; and (iii) 0.40% of average daily net assets over $50 million. Vantage's
address is 405 Lexington Avenue, New York, NY 10174.

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.

<PAGE>

On December 31, 1999, the total net assets of the Fund were $2,241,511,798,
broken down as follows:

- -------------------------------------------------------------------
Balanced Series $172,002,302
- -------------------------------------------------------------------
Capital Reserves Series $36,701,085
- -------------------------------------------------------------------
Cash Reserve Series $57,420,796
- -------------------------------------------------------------------
Convertible Securities Series $9,636,517
- -------------------------------------------------------------------
Devon Series $77,929,317
- -------------------------------------------------------------------
Emerging Markets Series $13,348,843
- -------------------------------------------------------------------
Global Bond Series $20,230,856
- -------------------------------------------------------------------
Growth and Income Series $501,928,454
- -------------------------------------------------------------------
Growth Opportunities Series $216,061,845
- -------------------------------------------------------------------
High Yield Series $102,633,484
- -------------------------------------------------------------------
International Equity Series $304,060,051
- -------------------------------------------------------------------
REIT Series $11,623,505
- -------------------------------------------------------------------
Select Growth Series $53,528,553
- -------------------------------------------------------------------
Small Cap Value Series $95,424,882
- -------------------------------------------------------------------
Social Awareness Series $36,738,618
- -------------------------------------------------------------------
Strategic Income Series $19,841,819
- -------------------------------------------------------------------
Trend Series $503,657,291
- -------------------------------------------------------------------
U.S. Growth Series $8,743,580
- -------------------------------------------------------------------

Investment management fees were incurred for the last three fiscal
years for the following Series:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Series December 31, 1999 December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Series $1,236,740 paid $968,768 paid $595,126 paid
- --------------------------------------------------------------------------------------------------------------------------------
Capital Reserves Series $216,148 paid $208,577 paid $166,300 paid
- --------------------------------------------------------------------------------------------------------------------------------
Cash Reserve Series $246,155 paid $212,479 paid $149,023 paid
- --------------------------------------------------------------------------------------------------------------------------------
Convertible Securities Series(1) $65,656 paid $46,042 earned $14,026 earned
$46,042 paid -0- paid
-0- waived $14,026 waived
- --------------------------------------------------------------------------------------------------------------------------------
Devon Series(1) $533,852 paid $218,772 earned $31,110 earned
$216,267 paid $25,236 paid
$2,505 waived $5,8874 waived
- --------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Series(1) $98,475 earned $71,160 earned $26,327 earned
$93,686 paid $61,148 paid $8,587 paid
$4,789 waived $10,012 waived $27,740 waived
- --------------------------------------------------------------------------------------------------------------------------------
Global Bond Series(2) $163,185 paid $141,939 earned $109,310 earned
$125,844 paid $68,076 paid
$16,095 waived $41,234 waived
- --------------------------------------------------------------------------------------------------------------------------------
Growth and Income Series $3,414,163 paid $3,018,521 paid $1,640,377 paid
- --------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities Series $1,088,438 paid $846,793 earned $716,228 earned
$781,882 paid $646,908 paid
$64,911 waived $69,320 waived
- --------------------------------------------------------------------------------------------------------------------------------
High Yield Series $739,669 paid $689,099 paid $483,877 paid
- --------------------------------------------------------------------------------------------------------------------------------
International Equity Series $2,071,821 earned $1,679,911 earned $1,304,340 earned
$2,028,030 paid $1,651,181 paid $1,207,677 paid
$43,791 waived $28,730 waived $96,663 waived
- --------------------------------------------------------------------------------------------------------------------------------
REIT Series(3) $64,478 earned $15,449 earned N/A
$55,268 paid $11,895 paid
$9,210 waived $3,554 waived
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

63
<PAGE>

- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Growth Series(4) $97,202 earned N/A N/A
$96,242 paid
$960 waived
- --------------------------------------------------------------------------------------------------------------------------------
Small Cap Value Series $727,190 paid $706,066 earned $380,405 earned
$680,359 paid $328,056 paid
$25,707 waived $252,349 waived
- --------------------------------------------------------------------------------------------------------------------------------
Social Awareness Series(1) $241,011 earned $117,271 earned $20,293 earned
$226,354 paid $108,502 paid $3,692 paid
$14,657 waived $8,769 waived $16,601 waived
- --------------------------------------------------------------------------------------------------------------------------------
Strategic Income Series(1) $138,695 paid $101,453 earned $21,320 earned
$100,002 paid $7,271 paid
$1,451 waived $14,049 waived
- --------------------------------------------------------------------------------------------------------------------------------
Trend Series $1,858,141 earned $1,025,600 earned $622,149 earned
$1,848,151 paid $977,521 paid $558,331 paid
$9,990 waived $48,079 waived $63,818 waived
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Growth Series (5) $4,141 earned N/A N/A
$3,889 paid
$252 waived
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commenced operations on May 1, 1997.
(2) Commenced operations on May 2, 1996.
(3) Commenced operations on May 4, 1998.
(4) Commenced operations on May 1, 1999.
(5) Commenced operations on November 15, 1999.

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 $33,334 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 $39,620 for such services.
During the period May 4, 1998 (date of commencement of operations through
December 31, 1998, Lincoln received $4,635 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.

<PAGE>

Beginning May 1, 1998 (May 1, 1999 for Select Growth Series and October
15, 1999 for U.S. Growth Series) through April 30, 2001, 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 12b-1 Plan fees, taxes, interest, brokerage commissions and extraordinary
expenses, do not exceed the following percentages of average daily net assets:

- ------------------------------------------------------------
Balanced Series 0.80%
- ------------------------------------------------------------
Capital Reserves Series 0.80%
- ------------------------------------------------------------
Cash Reserve Series 0.80%
- ------------------------------------------------------------
Convertible Securities Series 0.85%
- ------------------------------------------------------------
Devon Series 0.80%
- ------------------------------------------------------------
Growth and Income Series 0.80%
- ------------------------------------------------------------
Growth Opportunities Series 0.85%
- ------------------------------------------------------------
High Yield Series 0.80%
- ------------------------------------------------------------
REIT Series 0.85%
- ------------------------------------------------------------
Select Growth Series 0.85%
- ------------------------------------------------------------
Small Cap Value Series 0.85%
- ------------------------------------------------------------
Social Awareness Series 0.85%
- ------------------------------------------------------------
Strategic Income Series 0.80%
- ------------------------------------------------------------
Trend Series 0.85%
- ------------------------------------------------------------
U.S. Growth Series 0.75%
- ------------------------------------------------------------

Beginning May 1, 1998 through April 30, 2001, 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 12b-1 Plan fees, taxes, interest, brokerage commissions and extraordinary
expenses, do not exceed the following percentages of average daily net assets:

- ------------------------------------------------------------
Emerging Markets Series 1.50%
- ------------------------------------------------------------
Global Bond Series 0.85%
- ------------------------------------------------------------
International Equity Series 0.95%
- ------------------------------------------------------------

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
High Yield, 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, Balanced and Growth
Opportunities 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.

65
<PAGE>

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 pursuant to
Distribution Agreements.

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.

Plan under Rule 12b-1 - Pursuant to Rule 12b-1 under the 1940 Act,
Premium Fund has adopted a separate plan for Service Class shares of each Series
(the "Plan"). The Plan permits the Fund to pay for certain distribution,
promotional and related expenses involved in the marketing of only the Class of
shares to which the Plan applies. The Plan is designed to benefit the Fund and
its shareholders and, ultimately the Fund's beneficial contract owners.

The Plan permit the Fund, pursuant to its Distribution Agreement, to
pay out of the assets of Service Class shares monthly fees to the Distributor
for its services and expenses in distributing and promoting sales of shares of
such classes. These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses and reports used
for sales purposes, compensating sales and marketing personnel and paying
distribution and maintenance fees to insurance company sponsors, brokers,
dealers and others. In addition, the Fund may make payments from the 12b-1 Plan
fees of Service Class shares directly to others, such as insurance company
sponsors, who aid in the distribution of Class shares or provide services in
respect of the Class, pursuant to service agreements with Premium Fund.

The maximum aggregate fee payable by the Fund under the Plan, and a
Fund's Distribution Agreements, is on an annual basis, up to 0.30% of average
daily net assets of Service Class shares (up to 0.25% of which are service fees
to be paid to the Distributor, insurance company sponsors, dealers and others
for providing personal service and/or maintaining shareholder accounts). The
Fund's Board of Trustees has initially set the fee at an annual rate of 0.15% of
Service Class' average daily net assets.

While payments pursuant to the Plans currently may not exceed 0.15%
annually (and may never exceed 0.30% annually) with respect to Service Class
shares, the Plan does not limit fees to amounts actually expended by the
Distributor. It is therefore possible that the Distributor may realize a profit
in any particular year. However, the Distributor currently expects that its
distribution expenses will likely equal or exceed payments to it under the Plan.
The Distributor may, however, incur such additional expenses and make additional
payments to dealers from its own resources to promote the distribution of shares
of the Class. The monthly fees paid to the Distributor under the Plan are
subject to the review and approval of Fund's unaffiliated trustees, who may
reduce the fees or terminate the Plan at any time.

All of the distribution expenses incurred by the Distributor and
others, such as insurance company sponsors or broker/dealers, in excess of the
amount paid on behalf of Service Class shares would be borne by such persons
without any reimbursement from such Class.

66
<PAGE>

From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.

The Plan and the Distribution Agreement, as amended, have all been
approved by the Board of Trustees of Premium Fund, including a majority of the
trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the Plan by vote
cast in person at a meeting duly called for the purpose of voting on the Plan
and such Agreement. Continuation of the Plan and the Distribution Agreement, as
amended, must be approved annually by the Board of Trustees in the same manner
as specified above.

Each year, the trustees must determine whether continuation of the Plan
is in the best interest of shareholders of Service Class shares and that there
is a reasonable likelihood of the Plan providing a benefit to that Class. The
Plan and the Distribution Agreement, as amended, may be terminated with respect
to the Class at any time without penalty by a majority of those trustees who are
not "interested persons" or by a majority vote of the Class' outstanding voting
securities. Any amendment materially increasing the percentage payable under the
Plans must likewise be approved by a majority vote of the Class' outstanding
voting securities, as well as by a majority vote of those trustees who are not
"interested persons." Also, any other material amendment to the Plan must be
approved by a majority vote of the trustees including a majority of the
noninterested trustees of the Fund having no interest in the Plans. In addition,
in order for the Plan to remain effective, the selection and nomination of
trustees who are not "interested persons" of Premium Fund must be made by the
trustees who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plan. Persons authorized to make payments
under the Plan must provide written reports at least quarterly to the Board of
Trustees for their review.

Delaware Service Company, Inc. (the "Transfer Agent"), another
affiliate of Delaware Management and Delaware International, is the Fund's
shareholder servicing, dividend disbursing and transfer agent for each Series
pursuant to a Shareholders Services Agreement. 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.

<PAGE>

OFFICERS AND TRUSTEES

The business and affairs of the Fund are managed under the direction of
its Board of Trustees.

Certain officers and Trustees of the Fund hold identical positions in
each of the other funds in the Delaware Investments family.

DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), 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. , Retirement
Financial Services, Inc. and Delaware General Management, 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. 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.

<PAGE>

Trustees 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 Trustee is One Commerce Square,
Philadelphia, PA 19103.

- -------------------------------------------------------------------------------------------------------------------------------
Trustee and Officer Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (62) Chairman, Director/Trustee of the Fund and each of the other 32 investment
companies in the Delaware Investments family

Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital Management,
Inc.; Chairman, President and Chief Executive Officer and Director/Trustee 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
and Chief Executive Officer of Delaware International Advisers Ltd.; Chairman,
Chief Executive Officer and Director of Delaware International Holdings Ltd.;
Chief Executive Officer of Delaware Management Holdings, Inc.; President and
Chief Executive Officer of Delvoy, Inc Director of Delaware Service Company, Inc.
and Retirement Financial Services, Inc. Prior to January 1, 2000, Mr. Stork was
Chairman and Director of Delaware Management Holdings, Inc. and a Director of
Delaware International Advisers Ltd.

In addition, during the five years prior to January 1, 1999, Mr. Stork has served
in various executive capacities at different times within the Delaware
organization.

- -------------------------------------------------------------------------------------------------------------------------------
- ----------------------
* Trustee affiliated with the Fund's investment manager and considered an "interested person" as defined in the 1940 Act.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

- -------------------------------------------------------------------------------------------------------------------------------
Trustee and Officer Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
*David K. Downes (60) President, Chief Executive Officer, Chief Financial Officer and Director/Trustee
of the Fund and each of the other 32 investment companies in the Delaware
Investments family

President and Director of Delaware Management Company, Inc.

President of Delaware Management Company (a series of Delaware Management
Business Trust)

President, Chief Executive Officer and Director of Delaware Capital Management,
Inc.

Chairman, President, Chief Executive 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 Delaware Management Trust Company and Retirement
Financial Services, Inc.

Executive Vice President, Chief Operating Officer, Chief Financial Officer of
Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.

Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.

Executive Vice President and Trustee of Delaware Management Business Trust

Director of Delaware International Advisers Ltd.

President/Chief Operating Officer and Director of Delaware General Management,
Inc.

During the past five years, Mr. Downes has served in various executive capacities
at different times within the Delaware organization.

<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Walter P. Babich (72) Director/Trustee the Fund and each of the other 32 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.

- ------------------------------------------------------------------------------------------------------------------------------
John H. Durham (62) Director/Trustee of the Fund and 18 other investment companies in the Delaware
Investments family

Private Investor.

P.O. Box 819, Gwynedd Valley, PA 19437

Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to 1990;
and Chief Executive Officer of each fund from 1984 to 1990. Prior to 1992, with
respect to Delaware Management Holdings, Inc., Delaware Management Company,
Delaware Distributors, Inc. and Delaware Service Company, Inc., Mr. Durham served
as a director and in various executive capacities at different times. He was also
a Partner of Complete Care Services from 1995 to 1999.

- ------------------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr (61) Director/Trustee of the Fund and each of the 32 other 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 (59) Director/Trustee of the Fund and each of the other 32 other investment companies
in the Delaware Investments family

785 Park Avenue, New York, NY 10021

Retired Treasurer, National Gallery of Art

From 1994 to 1999, Ms. Leven was the Treasurer of the National Gallery of Art and
from 1990 to 1994, Ms. Leven was Deputy Treasurer of the National Gallery of Art.
In addition, 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.

- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
71

<PAGE>

- -------------------------------------------------------------------------------------------------------------------------------
Director Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Thomas F. Madison (64) Director/Trustee of the Funds and each of the other 32 investment companies in
the Delaware Investments family

200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402

President and Chief Executive Officer, MLM Partners, Inc.

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 (74) Director/Trustee of the Fund and each of the other 32 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.

- -------------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans (51) Director/Trustee of the Fund and 32 other investment companies in the Delaware
Investments family

Building 220-13W-37, St. Paul, MN 55144

Vice President and Treasurer, 3M Corporation.

From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial Markets
for the 3M Corporation; Manager of Benefit Fund Investments for the 3M
Corporation, 1985-1987; Manager of Pension Funds for the 3M Corporation,
1983-1985; Consultant--Investment Technology Group of Chase Econometrics,
1982-1983; Consultant for Data Resources, 1980-1982; Programmer for the Federal
Reserve Bank of Chicago, 1970-1974.

- -------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

- -------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience

- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equity of the Fund, each
of the other 32 investment companies in the Delaware Investments family

Chief Executive Officer/Chief Investment Officer of Delaware Investment Advisers
(a series of Delaware Management Business Trust)

Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.

Executive Vice President/Chief Investment Officer of Delaware Management Company
(a series of Delaware Management Business Trust)

Executive Vice President and Trustee of Delaware Management Business Trust

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.
- -------------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President/Chief Investment Officer, Fixed Income of the Fund and
each of the other 32 investment companies in the Delaware Investments family

Director of Founders CBO Corporation.

Executive Vice President/Chief Investment Officer, DMC-Fixed Income of Delaware
Management Company (a series of Delaware Management Business Trust)

Executive Vice President/Chief Investment Officer, DIA-Fixed Income of Delaware
Investment Advisers (a series of Delaware Management Business Trust)

Executive Vice President and Director of Delaware Management Holdings, Inc. and
Founders Holdings, Inc.

Executive Vice President of Delaware Management Business Trust and Delaware
Capital Management, Inc.

Mr. McMeekin joined Delaware Investments in 1999. During the past five years, he
has also served in various executive capacities for Lincoln National Corporation.

- -------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery (42) Executive Vice President/General Counsel of the Fund and each of the other 32
investment companies in the Delaware Investments family, Delaware Management
Holdings, Inc., 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 Founders CBO Corporation.

Executive Vice President/General Counsel and Director of Delaware International
Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Retirement Financial Services, Inc., Delaware Distributors,
Inc., Delaware General Management, Inc. and Delaware Management Trust Company.

Executive Vice President and Trustee of Delaware Management Business Trust.

Director of Delaware International Advisers Ltd.

Director of HYPPCO Finance Company Ltd.

During the past five years, Mr. Flannery has served in various executive
capacities at different times within the Delaware organization.

- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

- ------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Eric E. Miller (46) Senior Vice President/Deputy General Counsel and Secretary of the Fund and each
of the other 32 investment companies in Delaware Investments.

Senior Vice President/Deputy General Counsel and Assistant Secretary of Delaware
Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware Management Company,
Inc., Delaware Management Business Trust, Delaware Management Company (a series
of Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware Service Company, Inc., Delaware
Capital Management, Inc., Retirement Financial Services, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware General Management,
Inc. and Founders Holdings, Inc.

During the past five years, Mr. Miller has served in various executive capacities
at different times within Delaware Investments.

- ------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings (50) Senior Vice President/Corporate Controller of the Fund and each of the other 32
investment companies in the Delaware Investments family and Delaware Investment
Advisers (a series of Delaware Management Business Trust)

Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management Company, Inc.,
Delaware Management Business Trust, Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Capital Management,
Inc., Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
General Management, Inc. and Delaware Management Business Trust

Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management
Trust Company

Senior Vice President/Assistant Treasurer of Founders CBO Corporation

Chief Financial Officer of Retirement Financial Services, Inc.

During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.

- -------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof (37) Senior Vice President and Treasurer of the Fund and each of the other 32
investment companies in the Delaware Investments family

Senior Vice President/Investment Accounting of Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Delaware Distributors, L.P. and Founders
Holdings, Inc.

Senior Vice President/Treasurer/ Investment Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust)

Senior Vice President/Manager of Investment Accounting of Delaware International
Holdings, Inc.

Senior Vice President/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.

- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

74
<PAGE>

- -------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Gerald S. Frey (54) Senior Vice President/Senior Portfolio Manager of the Fund, of the other 32
investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware Capital
Management, 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.

- ------------------------------------------------------------------------------------------------------------------------------
Frank X. Morris (39) Vice President/Senior Portfolio Manager of the Fund, the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of Delaware Management Business Trust)

Before joining Delaware Investments in 1997, Mr. Morris served as Vice President
and Director of Equity Research at PNC Asset Management.

- ------------------------------------------------------------------------------------------------------------------------------
John B. Fields (54) Senior Vice President/Senior Portfolio Manager of the Fund, the other 32
investment companies in the Delaware Investments family, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware Capital
Management, Inc.

Trustee of Delaware Management Business Trust.

During the past five years, Mr. Fields has served in various capacities within
the Delaware organization.

- ------------------------------------------------------------------------------------------------------------------------------
Gary A. Reed (45) Vice President/Senior Portfolio Manager of the Fund, the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of series of Delaware Management Business Trust) and Delaware Capital
Management, Inc.

During the past five years, Mr. Reed has served in such capacities within the
Delaware organization.

- ------------------------------------------------------------------------------------------------------------------------------
Gerald T. Nichols (42) Vice President/Senior Portfolio Manager of the Fund, the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of series of Delaware Management Business Trust) and Founders Holdings,
Inc.

Treasurer/Assistant Secretary 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.

- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paul A. Matlack (40) Vice President/Senior Portfolio Manager of the Fund, the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of series of Delaware Management Business Trust) and 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 (42) Vice President/Senior Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of series of Delaware Management Business Trust).

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.

- ------------------------------------------------------------------------------------------------------------------------------
Damon J. Andres (30) Vice President/Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of series of Delaware Management Business Trust) and Delaware Capital
Management, Inc.

Prior to joining Delaware Investments in 1994, Mr. Andres performed investment
counseling services as a Consulting Associate with Cambridge Associates, Inc. in
Arlington Virginia.

- ------------------------------------------------------------------------------------------------------------------------------
Marshall T. Bassett (46) Vice President/Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of series of Delaware Management Business Trust).

Prior to joining Delaware Investments in 1997, Mr. Bassett served as Vice
President in Morgan Stanley Asset Management's Emerging Growth Group. Prior to
that, he was a trust officer at Sovran Bank and Trust Company.

- ------------------------------------------------------------------------------------------------------------------------------
John A. Heffern (38) Vice President/Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of series of Delaware Management Business Trust).

Prior to joining Delaware Investments in 1997, Mr. Heffern 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.

- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Jeffrey W. Hynoski (37) Vice President/Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of series of Delaware Management Business Trust).

Prior to joining Delaware Investments in 1998, Mr. Hynoski served as a Vice
President at Bessemer Trust Company. Prior to that, Mr. Hynoski held positions at
Lord Abbett & Co. and Cowen Asset Management.

- ------------------------------------------------------------------------------------------------------------------------------
Lori P. Wachs (31) Vice President/Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of series of Delaware Management Business Trust).

During the past five years, Ms. Wachs has served in various capacities at
different times within the Delaware organization.

- ------------------------------------------------------------------------------------------------------------------------------
Paul Grillo (40) Vice President/Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of series of Delaware Management Business Trust) and Delaware Capital
Management, Inc.

During the past five years, Mr. Grillo has served in various capacities at
different times within the Delaware organization.

- ------------------------------------------------------------------------------------------------------------------------------
Thomas J. Trotman (49) Vice President/Portfolio Manager of the Fund, and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of series of Delaware Management Business Trust).

Prior joining Delaware Investments in 1995, Mr. Trotman was Vice President and
Director of Investment Research at Independence Capital Management. Before that,
he held credit-related positions at Marine Midland Bank, U.S. Steel Corporation,
and Amerada Hess.

- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

The following is a compensation table listing for each Trustee 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, 1999 and an estimate of annual benefits to be received
upon retirement under the Delaware Investments Retirement Plan for
Directors/Trustees as of December 31, 1999. Only the independent Trustees of the
Fund receive compensation from the Fund.

- ------------------------------------------------------------------------------------------------------------------------------------
Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Accrued Annual from the Investment
Compensation as Part of Benefits Companies
received from Fund Upon in Delaware
Name(3) the Fund Expenses Retirement(1) Investments(2)
- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ann R. Leven $4,807 None $38,000 $66,001
Walter P. Babich $4,226 None $38,000 $57,691
Anthony D. Knerr $4,713 None $38,000 $65,001
Charles E. Peck $4,634 None $38,000 $64,168
Thomas F. Madison $4,713 None $38,000 $65,001
John H. Durham $4,147 None $32,180 $43,038
Janet L. Yeomans (4) $3,348 None $38,000 $50,501
- ------------------------------------------------------------------------------------------------------------------------------------
</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 December
31, 1999, 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 $38,000 for serving as a director or
trustee for all 33 investment companies in Delaware Investments, plus $3,143
for each Board Meeting attended. John H. Durham currently receives a total
annual retainer fee of $32,180 for serving as a director or trustee for 19
investment companies in Delaware Investments, plus $1,810 for each Board
Meeting attended Ann R. Leven, Charles E. Peck, 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) W. Thacher Longstreth served as an independent Trustee of the Fund during
the period January 1, 1999 through March 17, 1999, the date on which he
retired. For this period, Mr. Longstreth received $989 from the Fund and
$12,643 from all investment companies in the Delaware Investments family.

(4) Janet L. Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April 1999
for other funds.

<PAGE>

As of April 10, 2000, 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 20,196,855.865 70.89%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln National Life Company 6,100,335.862 21.41%
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
High Yield Series SMA Life Assurance Company 10,699,411.033 86.73%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln Life Variable 982,194.211 7.96%
Annuity Account N
1300 South Clinton Street
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
Capital Reserves Series SMA Life Assurance Company 3,084,521.988 92.57%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Balanced Series SMA Life Assurance Company 9,155,815.279 95.80%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Cash Reserve Series SMA Life Assurance Company 4,907,646.618 92.47%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities Series SMA Life Assurance Company 8,120,475.924 96.00%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
International Equity Series SMA Life Assurance Company 16,430,473.350 95.67%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trend Series Lincoln National Life Company 14,657,205.625 69.47%
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
SMA Life Assurance Company 4,895,923.025 23.20%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Small Cap Value Series SMA Life Assurance Company 5,067,313.240 80.72%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
The Travelers Sep Account TM2 323,934.733 5.16%
For Variable Annuities of
The Travelers Insurance Company
One Tower Square 5MS
Hartford, CT 06183

- --------------------------------------------------------------------------------------------------------------------------------
Global Bond Series Lincoln National Life Company 1,330,016.140 70.05%
Separate Account - C
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
SMA Life Assurance Company 542,631.100 28.58%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Strategic Income Series SMA Life Assurance Company 1,817,131.952 89.92%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
SMA Life Assurance Company 203,684.663 10.08%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Devon Series SMA Life Assurance Company 4,000,316.046 83.89%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Devon Series Lincoln Life Variable Annuity 588,985.180 12.35%
Account N
1300 S. Clinton Street
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------

Emerging Markets Series SMA Life Assurance Company 1,408,501.495 75.61%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln Life Variable Annuity Account N 235,058.062 12.62%
1300 S Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
Convertible Securities Series SMA Life Assurance Company 604,463.824 69.08%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln National Life Company 223,221.943 25.51%
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
Chicago Trust Company 47,269.883 5.40%
For the Sole Benefit of
Lincoln National Corp
Employee Ret. Plan
c/o Marshall and lsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201

- --------------------------------------------------------------------------------------------------------------------------------
Social Awareness Series SMA Life Assurance Company 1,719,729.217 76.94%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln National Life Company 477,007.436 21.34%
Separate Account N
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REIT Series The Travelers SEP Acct. TM2 for 671,989.869 44.80%
Variable Annuities of
The Travelers Insurance Co.
One Tower Square 5MS
Hartford, CT 06183

- --------------------------------------------------------------------------------------------------------------------------------
SMA Life Assurance Company 268,149.159 17.88%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln National Life Company 211,237.822 14.08%
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
The Travelers SEP Acct. ABD2 for 141,400.393 9.43%
Variable Annuities of
The Travelers Insurance Co.
One Tower Square 5MS
Hartford, CT 06183

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln Life Variable Annuity Account N 132,835.938 8.86%
1300 S Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

- --------------------------------------------------------------------------------------------------------------------------------
Select Growth Series SMA Life Assurance Company 5,508,687.878 92.66
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
U.S. Growth Series SMA Life Assurance Company 2,020,553.901 86.88%
Separate Account VA-K
Attn: Jay Burke N344
440 Lincoln Street
Worcester, MA 01653

- --------------------------------------------------------------------------------------------------------------------------------
Lincoln National Life Company 250,238.923 10.76%
Separate Account - C Seed Account
1300 South Clinton Street
P.O. Box 2340
Fort Wayne, IN 46801

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</TABLE>

<PAGE>

GENERAL INFORMATION

The Fund, which was organized as a Maryland corporation in 1987 and
reorganized as a Delaware business trust on December 15, 1999, 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 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, also 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 by certain covered persons in certain securities 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. (the Transfer Agent"), 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. The Transfer Agent is paid an annual fee equal to
0.01% of the average daily net assets of each Series. Compensation is approved
each year by the Board of Trustees, including a majority of the disinterested
Trustees. 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.

83
<PAGE>

The initial public offering date for the Growth and Income, High Yield,
Capital Reserves, Cash Reserve and Balanced Series was July 28, 1988. The
initial public offering date for Growth Opportunities 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 4, 1998. Select Growth
Series commenced operations on May 1, 1999. U.S. Growth Series commenced
operations on November 15, 1999.

EURO

On January 1, 1999, the European Economic and Monetary Union
implemented a new currency unit, the Euro, for eleven participating European
countries. The countries that initially converted or tied their currencies to
the Euro are Austria, Belgium, France, Germany, Luxembourg, the Netherlands,
Ireland, Finland, Italy, Portugal and Spain. Each participating country is
currently phasing in use of the Euro for major financial transactions. In
addition, each participating country will begin using the Euro for currency
transactions beginning July 1, 2002. Implementation of this plan means that
financial transactions and market information, including share quotations and
company accounts, in participating countries will be denominated in Euros.
Participating governments will issue their bonds in Euros, and monetary policy
for participating countries will be uniformly managed by a new central bank, the
European Central Bank. The transition to the Euro is expected to reshape
financial markets, banking systems and monetary policies in Europe and other
parts of the world.

Although it is not possible to predict the impact of the Euro implementation
plan on the Fund, the transition to the Euro presents unique uncertainties,
including: (i) the legal treatment of certain outstanding financial contracts
after January 1, 1999 that refer to existing currencies rather than the Euro;
(ii) the establishment and maintenance of exchange rates for currencies being
converted into the Euro; (iii) the fluctuation of the Euro relative to non-Euro
currencies during the transition period from January 1, 1999 to December 31,
2001 and beyond; (iv) whether the interest rate, tax and labor regimes of
European countries participating in the Euro will converge over time; and (iv)
whether the conversion of the currencies of other countries in the European
Union ("EU"), such as the United Kingdom and Denmark, into the Euro and the
admission of other non-EU countries such as Poland, Latvia and Lithuania as
members of the EU may have an impact on the Euro or on the computer systems used
by the Fund's service providers to process the Fund's transactions.

Further, the process of implementing the Euro may adversely affect financial
markets outside of Europe and may result in changes in the relative strength and
value of the U.S. dollar or other major currencies. The transition to the Euro
is likely to have a significant impact on fiscal and monetary policy in the
participating countries and may produce unpredictable effects on trade and
commerce generally. These resulting uncertainties could create increased
volatility in financial markets world-wide.

These or other factors could cause market disruptions, and could
adversely affect the value of securities held by the Fund. Because of the number
of countries using this single currency , a significant portion of the assets of
the Fund may be denominated in the Euro.

84
<PAGE>

Capitalization

Each Series offers two classes of shares, Standard Class and Service
Class. Additional classes of shares may be offered in the future.

The Fund has a present unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class. 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.
Each class of each Series represents a proportionate interest in the assets of
that Series, and each has the same voting and other rights and preferences,
except the Standard Class of a Series may not vote on any matter affecting the
Plan under Rule 12b-1 that applies to the Service Class 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
Trustees can elect all the Trustees if they choose to do so, and, in such event,
the holders of the remaining shares will not be able to elect any Trustees.

This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC. Shareholders may obtain a
copy of the Registration Statement by contacting the SEC in Washington, DC.

FINANCIAL STATEMENTS

Ernst & Young LLP serves as the independent auditors for Delaware Group Premium
Fund and, in its capacity as such, audits the annual financial statements of the
Series. Each Series' Statement of Net Assets, Statement of Assets and
Liabilities (as applicable), Statement of Operations, Statement of Changes in
Net Assets, Financial Highlights and Notes to Financial Statements, as well as
the report of Ernst & Young LLP, for the fiscal year ended December 31, 1999 are
included in each Series' Annual Report 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.

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

85
<PAGE>

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 IBCA, Inc.'s description of its two highest
ratings: F-1--Highest grade commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment. F-2--Very good
grade issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than the strongest issues.

Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.

Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.

<PAGE>

PART C
------
Other Information
-----------------

Item 23 Exhibits

(a) Agreement and Declaration of Trust.

(1) Agreement and Declaration of Trust (December 17, 1998) incorporated
into this filing by reference to Post-Effective Amendment No. 29
filed December 14, 1999.

(2) Certificate of Trust (December 17, 1998) incorporated into this
filing by reference to Post-Effective Amendment No. 29 filed
December 14, 1999.

(b) By-Laws. By-Laws (December 17, 1998) incorporated into this filing by
reference to Post-Effective Amendment No. 29 filed December 14, 1999.

(1) Agreement and Declaration of Trust. Articles III, V, and VI of the
Agreement and Declaration of Trust incorporated into this filing by
reference to Post-Effective Amendment No. 29 filed December 14,
1999.

(2) By-Laws. Article II of By-Laws incorporated into this filing by
reference to Post-Effective Amendment No. 29 filed December 14,
1999.

(d) Investment Management Agreements.

(1) Form of Investment Management Agreement (December 1999) between
Delaware Management Company (a series of Delaware Management
Business Trust) and the registrant incorporated into this filing by
reference to Post-Effective Amendment No. 29 filed December 14,
1999.

(2) Form of Investment Management Agreement (December 1999) between
Delaware International Advisers, Ltd. and the Registrant
incorporated into this filing by reference to Post-Effective
Amendment No. 29 filed December 14, 1999.

(3) Form of Sub-Advisory Agreement (December 1999) between Delaware
Management Company (a series of Delaware Management Business Trust)
and Delaware International Advisers Ltd. on behalf of Strategic
Income Series incorporated into this filing by reference to
Post-Effective Amendment No. 29 filed December 14, 1999.
<PAGE>

(4) Form of Sub-Advisory Agreement (December 1999) between Delaware
Management Company (a series of Delaware Management Business Trust)
and Vantage Global Advisors, Inc. on behalf of Social Awareness
Series incorporated into this filing by reference to Post-Effective
Amendment No. 29 filed December 14, 1999.

(5) Form of Sub-Advisory Agreement (December 1999) between Delaware
Management Company (a series of Delaware Management Business Trust)
and Lincoln Investment Management, Inc. on behalf of REIT Series
incorporated into this filing by reference to Post-Effective
Amendment No. 29 filed December 14, 1999.

(e) Distribution Agreement.

(1) Form of Distribution Agreement (2000) between Delaware
Distributors, L.P. and the Registrant on behalf of each Series
incorporated into this filing by reference to Post-Effective
Amendment No. 30 filed February 24, 2000.

(f) Not applicable.

(g) Custodian Agreements.

(1) Form of Custodian Agreement (December 1999) (Module) between The
Chase Manhattan Bank and the Registrant incorporated into this
filing by reference to Post-Effective Amendment No. 18 filed
October 29, 1996.

(i) Form of Amendment (December 1999) 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.

(2) Form of Securities Lending Agreement (December 1999) between The
Chase Manhattan Bank and the Registrant incorporated into this
filing by reference to Post-Effective Amendment No. 18 filed
October 29, 1996.

(h) Other Material Contracts.

(1) Form of Shareholders Services Agreement (December 1999) 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) Form of Amended and Restated Shareholder Services Agreement
(December 1999) between Delaware Service Company, Inc. and the
Registrant on behalf of High Yield Series, Capital Reserves Series,
Equity/Income Series (renamed Growth and Income Series), Multiple

<PAGE>

Strategy Series (renamed Delaware Balanced Series and to be renamed
Balanced Series), Growth Series (renamed DelCap Series and to be
renamed Growth Opportunities 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, Aggressive Growth Series (to be renamed
Select Growth Series) and U.S. Growth Series incorporated into this
filing by reference to Post-Effective Amendment No. 27 filed July
30, 1999.

(5) Form of 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) Opinion of Counsel. Incorporated into this filing by reference to
Post-Effective Amendment No. 29 filed December 14, 1999.

(j) Consent of Auditors. Attached as Exhibit.

(k-l) Not applicable.

(m) Plan under Rule 12b-1. Form of Plan under Rule 12b-1 (2000)
incorporated into this filing by reference to Post-Effective
Amendment No. 30 filed February 24, 2000.

(n) Rule 18f-3 Plan. Form of Rule 18f-3 Plan (2000) incorporated into this
filing by reference to Post-Effective Amendment No. 30 filed February
24, 2000.

(o) Not applicable.

(p) Code of Ethics. Attached as Exhibit.

(p) Other: Trustees' Power of Attorney. Incorporated into this filing by
reference to Post-Effective Amendment No. 22 to the Registration
Statement of Delaware Group Global & International Funds filed November
22, 1999.

Item 24. Persons Controlled by or under Common Control with Registrant. None.

Item 25. Indemnification. Article VI of the By-Laws incorporated into this
filing by reference to Post-Effective Amendment No. 29 filed December
14, 1999.
<PAGE>

Item 26. Business and Other Connections of Investment Adviser.

(a) Delaware Management Company ("Delaware Management"), 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, Delaware Group Equity Funds II, Delaware Group Equity Funds III,
Delaware Group Equity Funds IV, Delaware Group Equity Funds V, Delaware Group
Government Fund, Delaware Group Income Funds, Delaware Group Limited-Term
Government Funds, Inc., Delaware Group Cash Reserve, Delaware Group Tax-Free
Fund, Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free Money
Fund, Delaware Group Global & International Funds, Delaware Pooled Trust,
Delaware Group Adviser Funds, Delaware Group Dividend and Income Fund, Inc.,
Delaware Group Global Dividend and Income Fund, Inc., Delaware Group Foundation
Funds, Voyageur Tax-Free Funds, Voyageur Intermediate Tax-Free Funds, Voyageur
Insured Funds, Voyageur Funds, Voyageur Investment Trust, Voyageur Investment
Trust II, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual Funds
III, 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 Delaware Management 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 Delaware Management's indirect parent
company acts as principal underwriter to the mutual funds in the Delaware
Investments family (see Item 27 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>
The following persons serving as directors or officers of
Delaware Management Company have held the following positions during the past
two years:

<TABLE>
<CAPTION>
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Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Charles E. Haldeman, Jr. (1) Chief Executive Officer of Delaware Management Company (a series of Delaware
Management Business Trust); President, Chief Executive Officer and Director
of Delaware Management Holdings, Inc.; Chief Executive Officer and Director
of DMH Corp.; Chief Executive Officer and Director of Delvoy, Inc.; Chief
Executive Officer and Director of Delaware Management Company, Inc.; Chief
Executive Officer and Trustee of Delaware Management Business Trust,
Director of Delaware Service Company, Inc.; Director of Delaware Capital
Management, Inc.; Director of Retirement Financial Services, Inc.; Director
of Delaware Distributors, Inc.; Chairman and Director of Delaware
International Advisers Ltd.; Chief Executive Officer of Delaware General
Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
David K. Downes President of Delaware Management Company (a series of Delaware Management
Business Trust); President and Director of Delaware Management Company,
Inc.; President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.; Chairman, President, Chief Executive Officer and Director
of Delaware Service Company, Inc.; President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware International Holdings Ltd.;
President, Chief Operating Officer and Director of Delaware General
Management, Inc.; Chairman and Director of Delaware Management Trust
Company; Chairman and Director of Retirement Financial Services, Inc.;
Executive Vice President, Chief Operating Officer, Chief Financial Officer
of Delaware Management Holdings, Inc.; Executive Vice President, Chief
Operating Officer, Chief Financial Officer of Founders CBO Corporation;
Executive Vice President, Chief Operating Officer, Chief Financial Officer
of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of DMH Corp.; Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Director of Delaware Distributors,
Inc.; Executive Vice President, Chief Operating Officer and Chief Financial
Officer of Delaware Distributors, L.P.; Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Director of Founders
Holdings, Inc.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of Delvoy, Inc.; Executive Vice President,
Chief Operating Officer, Chief Financial Officer and Trustee of Delaware
Management Business Trust; Director of Delaware International Advisers Ltd.;
President, Chief Executive Officer, Chief Financial Officer and
Trustee/Director of each fund in the Delaware Investments family

Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton
Place, Newtown Square, PA

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</TABLE>

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William E. Dodge (2) Executive Vice President and Chief Investment Officer, DMC -- Equity of
Delaware Management Company (a series of Delaware Management Business
Trust); Executive Vice President of Delaware Management Business Trust;
President and Chief Investment Officer, DIA -- Equity of Delaware
Investment Advisers (a series of Delaware Management Business Trust);
Executive Vice President of Delaware Capital Management, Inc.

- --------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management
Company (a series of Delaware Management Business Trust); Executive Vice
President and General Counsel of Delaware Management Holdings, Inc.;
Executive Vice President and General Counsel of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Executive Vice
President and General Counsel of Founders CBO Corporation; Executive Vice
President/General Counsel and Director of Delaware International Holdings
Ltd.; Executive Vice President/General Counsel and Director of Founders
Holdings, Inc.; Executive Vice President/General Counsel and Director of
Delvoy, Inc.; Executive Vice President/General Counsel and Director of
DMH Corp.; Executive Vice President/General Counsel and Director of
Delaware Management Company, Inc.; Executive Vice President/General
Counsel and Trustee of Delaware Management Business Trust; Executive Vice
President/General Counsel and Director of Delaware Service Company, Inc.;
Executive Vice President/General Counsel and Director of Delaware Capital
Management, Inc.; Executive Vice President/General Counsel and Director
of Retirement Financial Services, Inc.; Executive Vice President/General
Counsel and Director of Delaware Distributors, Inc.; Executive Vice
President/General Counsel of Delaware Distributors, L.P.; Executive Vice
President/General Counsel and Director of Delaware Management Trust
Company; Executive Vice President/General Counsel and Director of
Delaware General Management, Inc.; Director of Delaware International
Advisers Ltd.; Director of HYPPCO Finance Company Ltd.; Executive Vice
President and General Counsel of each fund in the Delaware Investments
family

Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd.,
Elverson, PA; Director and Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverson, PA
- --------------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (3) Executive Vice President/Chief Investment Officer, DMC-Fixed Income of
Delaware Management Company (a series of Delaware Management Business
Trust); Executive Vice President/Chief Investment Officer, DIA-Fixed Income
of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President and Director of Delaware Management
Holdings, Inc.; Executive Vice President of Delaware Management Business
Trust; Executive Vice President of Delaware Capital Management, Inc.;
Executive Vice President and Chief Investment Officer, Fixed Income of each
fund in the Delaware Investments family.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------

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
- --------------------------------------------------------------------------------------------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of
Delaware Management Business Trust; Senior Vice President/Operations of
Delaware Service Company, Inc.; Senior Vice President/Operations of
Retirement Financial Services, Inc.; Senior Vice President/Operations of
Delaware Management Trust Company.
- --------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company
(a series of Delaware Management Business Trust), Delaware Service Company,
Inc. and Delaware Capital Management, Inc., Delaware Distributors L.P. and
Founders Holdings, Inc.; Senior Vice President and Treasurer of the
Registrant and each of the other investment companies in the Delaware
Investments family; Senior Vice President and Treasurer/ Investment
Accounting of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Manager of Investment Accounting of
Delaware International Holdings, Inc.; Senior Vice President and Assistant
Treasurer of Founders CBO Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley Senior Vice President/Compliance Director of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice
President/Compliance Director of Delaware Management Holdings, Inc.; Senior
Vice President/Compliance Director of DMH Corp.; Senior Vice
President/Compliance Director of Delvoy, Inc.; Senior Vice
President/Compliance Director of Delaware Management Company, Inc.; Senior
Vice President/Compliance Director of Delaware Management Business Trust;
Senior Vice President/Compliance Director of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Senior Vice
President/Compliance Director of Delaware Service Company, Inc.; Senior Vice
President/Compliance Director of Delaware Capital Management, Inc.; Senior
Vice President/Compliance Director of Retirement Financial Services, Inc.;
Senior Vice President/Compliance Director and Assistant Secretary of
Delaware Management Trust Company; Senior Vice President/Compliance Director
of Delaware Distributors, Inc.; Senior Vice President/Compliance Director of
Delaware Distributors, L.P.; Senior Vice President/Compliance Director of
Delaware General Management, Inc.; Senior Vice President/Compliance Director
of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company
(a series of Delaware Management Business Trust); Senior Vice President/Head
of Equity Trading of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President/Head of Equity Trading of
Delaware Capital Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management
Company (a series of Delaware Management Business Trust); Trustee of
Delaware Management Business Trust; Senior Vice President/Senior Portfolio
Manager of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Senior Portfolio Manager of Delaware
Capital Management, Inc.; Senior Vice President/Senior Portfolio Manager of
each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Gerald S. Frey Senior Vice President/Senior Portfolio Manager of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice
President/Senior Portfolio Manager of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Senior Vice President/Senior
Portfolio Manager of Delaware Capital Management, Inc.; Senior Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments
family
- --------------------------------------------------------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing & Client Services of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President/Global Marketing & Client Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc.; Senior Vice President/Corporate Controller and Treasurer of
DMH Corp.; Senior Vice President/Corporate Controller and Treasurer of
Delaware Management Company, Inc.; Senior Vice President/Corporate
Controller and Treasurer of Delaware Distributors, L.P.; Senior Vice
President/Corporate Controller and Treasurer of Delaware Distributors, Inc.;
Senior Vice President/Corporate Controller and Treasurer of Delaware Service
Company, Inc.; Senior Vice President/Corporate Controller and Treasurer of
Delaware Capital Management, Inc.; Senior Vice President/Corporate
Controller and Treasurer of Delaware International Holdings Ltd.; Senior
Vice President/Corporate Controller and Treasurer of Delvoy, Inc.; Senior
Vice President/Corporate Controller and Treasurer of Founders Holdings,
Inc.; Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Business Trust; Senior Vice President/Corporate Controller and
Treasurer of Delaware General Management, Inc.; Executive Vice
President/Chief Financial Officer/Treasurer of Delaware Management Trust
Company; Chief Financial Officer of Retirement Financial Services, Inc.;
Senior Vice President/Assistant Treasurer of Founders CBO Corporation;
Senior Vice President/Corporate Controller of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Senior Vice
President/Corporate Controller of each fund in the Delaware Investments
family
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Human
Resources of Delaware Management Holdings, Inc.; Senior Vice President/Human
Resources of DMH Corp.; Senior Vice President/Human Resources of Delvoy,
Inc.; Senior Vice President/Human Resources of Delaware Management Company,
Inc.; Senior Vice President/Human Resources of Delaware Management Business
Trust; Senior Vice President/Human Resources of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Senior Vice
President/Human Resources of Delaware Service Company, Inc.; Senior Vice
President/Human Resources of Delaware Capital Management, Inc.; Senior Vice
President/Human Resources of Retirement Financial Services, Inc.; Senior
Vice President/Human Resources of Delaware Management Trust Company; Senior
Vice President/Human Resources of Delaware Distributors, Inc.; Senior Vice
President/Human Resources of Delaware Distributors, L.P.; Senior Vice
President/Human Resources of Delaware General Management, Inc.; Senior Vice
President/Human Resources of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Karina J. Istvan Senior Vice President/Strategic Planning of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice
President/Strategic Planning of Delaware Management Holdings, Inc.; Senior
Vice President/Strategic Planning of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Senior Vice President/Strategic
Planning of Delaware Service Company, Inc.; Senior Vice President/Strategic
Planning of Delaware Capital Management, Inc.; Senior Vice
President/Strategic Planning of Retirement Financial Services, Inc.; Senior
Vice President/Strategic Planning of Delaware Management Trust Company;
Senior Vice President/Strategic Planning of Delaware Distributors, L.P.;
Senior Vice President/Strategic Planning of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President, Secretary and Deputy General Counsel of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President, Secretary and Deputy General Counsel of Delaware Management
Holdings, Inc.; Senior Vice President, Secretary and Deputy General Counsel
of DMH Corp.; Senior Vice President, Secretary and Deputy General Counsel of
Delvoy, Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Secretary and
Deputy General Counsel of Delaware Management Business Trust; Senior Vice
President, Secretary and Deputy General Counsel of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Senior Vice
President, Secretary and Deputy General Counsel of Delaware Service Company,
Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Capital Management, Inc.; Senior Vice President, Secretary and
Deputy General Counsel of Retirement Financial Services, Inc.; Senior Vice
President, Secretary and Deputy General Counsel of Delaware Distributors,
Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Distributors, L.P.; Senior Vice President and Secretary of Delaware
International Holdings Ltd.; Senior Vice President, Secretary and Deputy
General Counsel of Founders Holdings, Inc.; Secretary of Founders CBO
Corporation; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Management Trust Company; Senior Vice President, Secretary and
Deputy General Counsel of Delaware General Management, Inc.; Senior Vice
President, Assistant Secretary and Deputy General Counsel of each fund in
the Delaware Investments family

General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------

Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Eric E. Miller Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Senior Vice President/Deputy General Counsel and Assistant Secretary
of Delaware Management Holdings, Inc.; Senior Vice President/Deputy General
Counsel and Assistant Secretary of DMH Corp.; Senior Vice President/Deputy
General Counsel and Assistant Secretary of Delvoy, Inc.; Senior Vice
President/Deputy General Counsel and Assistant Secretary of Delaware
Management Company, Inc.; Senior Vice President/Deputy General Counsel and
Assistant Secretary of Delaware Management Business Trust; Senior Vice
President/Deputy General Counsel and Assistant Secretary of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior
Vice President/Deputy General Counsel and Assistant Secretary of Delaware
Service Company, Inc.; Senior Vice President/Deputy General Counsel and
Assistant Secretary of Delaware Capital Management, Inc.; Senior Vice
President/Deputy General Counsel and Assistant Secretary of Retirement
Financial Services, Inc.; Senior Vice President/Deputy General Counsel and
Assistant Secretary of Delaware Distributors, Inc.; Senior Vice
President/Deputy General Counsel and Assistant Secretary of Delaware
Distributors, L.P.; Senior Vice President/Deputy General Counsel and
Assistant Secretary of Founders Holdings, Inc.; Senior Vice President/Deputy
General Counsel and Assistant Secretary of Delaware General Management,
Inc.; Senior Vice President/Deputy General Counsel and Secretary of each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Paul M. Ross Senior Vice President/Global Marketing & Client Services of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President/Global Marketing & Client Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice
President, Chief Information Officer of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Senior Vice President, Chief
Information Officer of Delaware Service Company, Inc.; Senior Vice
President, Chief Information Officer of Delaware Capital Management Company,
Inc.; Senior Vice President, Chief Information Officer of Retirement
Financial Services, Inc.; Senior Vice President, Chief Information Officer
of Delaware Distributors, L.P.
- --------------------------------------------------------------------------------------------------------------------------------
Gary T. Abrams Vice President/Equity Trader of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Trader of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Christopher S. Adams Vice President/Equity Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Damon J. Andres Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of Delaware Capital Management,
Inc.; Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Robert L. Arnold Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Capital Management, Inc., Vice President/Senior Portfolio Manager
of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family

Trustee of New Castle County Pension Board since October 1992, Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------------------
Richard E. Biester Vice President/Trading Operations of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Trading Operations of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Vincent A. Brancaccio Vice President/Senior Equity Trader of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Equity Trader
of Delaware Investment Advisers (a series of Delaware Management Business
Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Michael P. Buckley Vice President/Portfolio Manager and Senior Municipal Bond Analyst of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager and Senior Municipal Bond Analyst
of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager and Senior Municipal Bond Analyst
of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Client Services of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Client Services of Delaware Distributors, Inc.; Vice
President/Client Services of Delaware General Management, Inc.; Vice
President/Client Services of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager for each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Capital Management, Inc.; Vice President/Senior Portfolio Manager
of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Director of Delaware International Advisers
Ltd.; Vice President/Senior Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
James Paul Dokas Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Taxation of Delaware Management
Holdings, Inc.; Vice President/Taxation of DMH Corp.; Vice
President/Taxation of Delvoy, Inc.; Vice President/Taxation of Delaware
Management Company, Inc.; Vice President/Taxation of Delaware Management
Business Trust; Vice President/Taxation of Delaware Investment Advisers (a
series of Delaware Management Business Trust);Vice President/Taxation of
Delaware Service Company, Inc.; Vice President/Taxation of Delaware Capital
Management, Inc.; Vice President/Taxation of Retirement Financial Services,
Inc.; Vice President/Taxation of Delaware Distributors, Inc.; Vice
President/Taxation of Delaware Distributors, L.P.; Vice President/Taxation
of Founders Holdings, Inc.; Vice President/Taxation of Founders CBO
Corporation; Vice President/Taxation of Delaware General Management, Inc.;
Vice President/Taxation of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Senior Business Analyst of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Business Analyst of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Charles E. Fish Vice President/Senior Equity Trader of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Senior Equity Trader
of Delaware Investment Advisers (a series of Delaware Management Business
Trust)
- --------------------------------------------------------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Investment
Accounting of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Investment Accounting of Delaware Service
Company, Inc.; Vice President/Investment Accounting of each fund in the
Delaware Investments family.
- --------------------------------------------------------------------------------------------------------------------------------
Thomas C. Gariepy(4) Vice President/Director of Corporate Communications of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Director of Corporate Communications of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trader of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Equity Trader of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Andrea Giles Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of Delaware Capital Management,
Inc.; Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Barry Gladstein Vice President/Business Manager, Equity of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Business
Manager, Equity of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of Delaware Capital Management,
Inc.; Vice President/Portfolio Manager of each fund in the Delaware
Investments family.
- --------------------------------------------------------------------------------------------------------------------------------
Brian T. Hannon Vice President/Equity Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Stuart N. Hosansky Vice President/Senior Credit Analyst of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior Credit
Analyst of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Senior Credit Analyst of each fund in the
Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Frances J. Houghton, Jr.(5) Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family; Executive Vice President of
Delaware General Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family.
- --------------------------------------------------------------------------------------------------------------------------------
Jeffrey Hynoski Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
John B. Jares(6) Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Audrey E. Kohart Vice President/Assistant Controller, Corporate Accounting of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President/Assistant Controller, Corporate Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of Delaware Capital Management,
Inc.; Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President, Assistant Secretary and Associate General Counsel of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Assistant Secretary and Associate General Counsel of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President, Assistant Secretary and Associate General Counsel of
Delaware Service Company, Inc.; Vice President, Assistant Secretary and
Associate General Counsel of Delaware Capital Management, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Retirement
Financial Services, Inc.; Vice President, Assistant Secretary and Associate
General Counsel of Delaware Management Trust Company; Vice President,
Assistant Secretary and Associate General Counsel of Delaware Distributors,
L.P.; Vice President, Assistant Secretary and Associate General Counsel of
each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President, Assistant Secretary and Associate General Counsel of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Assistant Secretary and Associate General Counsel of
Delaware Management Holdings, Inc.; Vice President, Assistant Secretary and
Associate General Counsel of Delvoy, Inc.; Vice President, Assistant
Secretary and Associate General Counsel of Delaware Investment Advisers (a
series of Delaware Management Business Trust);Vice President, Assistant
Secretary and Associate General Counsel of Delaware Service Company, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of
Delaware Capital Management, Inc.; Vice President, Assistant Secretary and
Associate General Counsel of Retirement Financial Services, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Delaware
Distributors, L.P.; Vice President, Assistant Secretary and Associate
General Counsel of each fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Founders Holdings, Inc., President and Director of Founders CBO Corporation;
Vice President/Senior Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Francis X. Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Assistant Controller
of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Assistant Controller of Delaware Management Trust
Company; Vice President/Assistant Controller of Delaware Management Business
Trust; Vice President/Assistant Controller of Delaware Service Company,
Inc.; Vice President/Assistant Controller of Delaware Capital Management,
Inc.; Vice President/Assistant Controller of Retirement Financial Services,
Inc.; Vice President/Assistant Controller of Delaware Distributors, L.P.;
Vice President/Assistant Controller of Delaware Management Trust Company;
Vice President/Assistant Controller of Delaware Distributors, Inc.; Vice
President/Assistant Controller of Delaware International Holdings Ltd.; Vice
President/Assistant Controller of Delaware General Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Robert D. Schwartz(7) Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/ Portfolio Manager of each fund in the Delaware
Investments family; Vice President/Assistant Secretary of Delaware General
Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Richard D. Seidel Vice President/Assistant Controller/Manager, Payroll of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Assistant Controller/Manager, Payroll of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- --------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administrative Services of Delaware Management
Company (a series of Delaware Management Business Trust);Vice
President/Facilities and Administrative Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice
President/Facilities and Administrative Services of Delaware Service
Company, Inc.; Vice President/Facilities and Administrative Services of
Delaware Distributors, L.P.
- --------------------------------------------------------------------------------------------------------------------------------
Thomas J. Trotman Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Business Address is 1818 Market Street, Philadelphia, PA 19103.

- --------------------------------------------------------------------------------
(1) PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR, United Asset Management,
Boston, MA March 1998-January 2000.
(2) PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to present.
EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln National
Corporation 1992 to present.
(3) PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin &
Palmer Associates, Wilmington, DE 1996-1998.
(4) VICE PRESIDENT AND DIRECTOR OF PUBLIC RELATIONS, Liberty Funds Distributor,
Inc. Boston, MA, 1996-1998.
(5) PRESIDENT AND PORTFOLIO MANAGER, Lynch and Mayer, Inc., New York, NY January
1990-February 2000.
(6) VICE PRESIDENT AND PORTFOLIO MANAGER, Berger Funds, LLC, Denver, CO,
1997-February 2000.
(7) VICE PRESIDENT, Lynch and Mayer, Inc., New York, NY, February 1993-February
2000.
- --------------------------------------------------------------------------------

<PAGE>

(b) Delaware International Advisers Ltd. ("Delaware International") serves
as sub-investment adviser to Strategic Income Series of the Registrant and also
serves as investment manager or sub-investment adviser to certain of the other
funds in the Delaware Investments family (Delaware Group Global Dividend and
Income Fund, Inc., Delaware Group Global & International Funds, Delaware Pooled
Trust, Delaware Group Income Funds, and Delaware Group Adviser Funds) 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.

- ---------------------------------------------------------------------------------------------------------------------
David G. Tilles* Managing Director/Chief Investment Officer and Director of Delaware
International Advisers Ltd.

- ---------------------------------------------------------------------------------------------------------------------
Elizabeth A. Desmond* Senior Portfolio Manager and Director of Delaware International Advisers
Ltd.

- ---------------------------------------------------------------------------------------------------------------------
John Emberson* Finance Director/Company Secretary/Compliance Officer and Chief Operating
Officer of Delaware International Advisers Ltd.

- ---------------------------------------------------------------------------------------------------------------------
Clive A. Gillmore* Senior Portfolio Manager/Deputy Managing Director and Director of Delaware
International Advisers Ltd.

- ---------------------------------------------------------------------------------------------------------------------
Nigel G. May* Senior Portfolio Manager and Director of Delaware International Advisers
Ltd.

- ---------------------------------------------------------------------------------------------------------------------
Hamish O. Parker* Senior Portfolio Manager and Director of Delaware International Advisers
Ltd.

- ---------------------------------------------------------------------------------------------------------------------
Robert Akester* 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 H. Brooks* Senior Portfolio Manager of Delaware International Advisers Ltd.

- ---------------------------------------------------------------------------------------------------------------------
Gavin A. Hall* Senior Portfolio Manager of Delaware International Advisers Ltd.

- ---------------------------------------------------------------------------------------------------------------------
John Kirk* Senior Portfolio Manager and Director of Delaware International Advisers
Ltd.

- ---------------------------------------------------------------------------------------------------------------------

<PAGE>

W. Hywel Morgan* Senior Portfolio Manager of Delaware International Advisers Ltd.

- ---------------------------------------------------------------------------------------------------------------------
Christopher A. Moth* Senior Portfolio Manager and Director 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. Serjeant* Portfolio Manager of Delaware International Advisers Ltd.

- ---------------------------------------------------------------------------------------------------------------------
John C. E. Campbell** Director of Delaware International Advisers Ltd.; Executive Vice
President/Global Marketing & Client Services of Delaware Management Company
(a series of Delaware Management Business Trust) and Delaware Investment
Advisers (a series of Delaware Management Business Trust)

- ---------------------------------------------------------------------------------------------------------------------
George E. Deming** Director of Delaware International Advisers Ltd.; Vice President/Senior
Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Investment Advisers (a series of
Delaware Management Business Trust)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address Positions and Offices with Delaware International and its Affiliates and
Other Positions and Offices Held
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
David K. Downes** Director of Delaware International Advisers Ltd.; President, Chief
Executive Officer, Chief Financial Officer and Director/Trustee of the
Registrant and each of the other investment companies in the Delaware
Investments family; President and Director of Delaware Management Company,
Inc.; President of Delaware Management Company (a series of Delaware
Management Business Trust); President, Chief Executive Officer and Director
of Delaware Capital Management, Inc.; Chairman, President, Chief Executive
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 Delaware Management
Trust Company and Retirement Financial Services, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer of Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.; Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of DMH Corp., Delaware Distributors,
Inc., Founders Holdings, Inc. and Delvoy, Inc.; Executive Vice President
and Trustee of Delaware Management Business Trust

Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8
Clayton Place, Newtown Square, PA
- ---------------------------------------------------------------------------------------------------------------------
Richard J. Flannery** Director of Delaware International Advisers Ltd.; Executive Vice
President/General Counsel of the Registrant and each of the other
investment companies in the Delaware Investments family, Delaware
Management Holdings, Inc., 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
Founders CBO Corporation; Executive Vice President/General Counsel and
Director of Delaware International Holdings Ltd., Founders Holdings, Inc.,
Delvoy, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Service Company, Inc., Delaware Capital Management, Inc., Retirement
Financial Services, Inc., Delaware Distributors, Inc. and Delaware
Management Trust Company.; Executive Vice President and Trustee of Delaware
Management Business Trust; Director of 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

- ---------------------------------------------------------------------------------------------------------------------
Richard G. Unruh** Director of Delaware International Advisers Ltd.; Executive Vice
President/Chief Investment Officer of Delaware Management Company (a series
of Delaware Management Business Trust); Executive Vice President and Chief
Investment Officer, Equity of the Registrant and each of the other
investment companies in the Delaware Investments family; Chief Executive
Officer/Chief Investment Officer of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Executive Vice President of
Delaware Management Holdings, Inc. and Delaware Capital Management, Inc.;
Executive Vice President and Trustee of Delaware Management Business Trust

- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

* Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
** Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

(c) 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.

- ---------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Vantage Global Advisors, Inc. and its
Address Principal Affiliates and Other Positions and Offices Held
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Roger Sayler(1) President and Chief Executive Officer 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
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Kevin S. Lee Vice President/Controller/Compliance Officer
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Christopher P. Harvey Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Michael Rose Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Florence Leong Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Evelyn M. Poy Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Pamela L. Friedman Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Christopher J. Rowe Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Yi Feng Yang Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Perry D. Keck Senior Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Enrique DeJesus Chang Senior Vice President
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
**H. Thomas McMeekin Director of Vantage Global Advisers, Inc.

Executive Vice President of Delaware Management Business Trust;
Executive Vice President /Chief Investment Officer DMC-Fixed Income of
Delaware Management Company (a series of Delaware Management Business
Trust); Executive Vice President of Delaware Capital Management, Inc.;
Executive Vice President and Director of Delaware Management Holdings,
Inc.; Executive Vice President and Chief Investment Officer , Fixed
Income of each Fund in the Delaware Investments family.
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Bruce D. Barton(2) Director of Vantage Global Advisors Inc.

President and Chief Executive Officer of Delaware Distributors, L.P.
since 1996, 1818 Market Street, Philadelphia, PA

- ---------------------------------------------------------------------------------------------------------------------
1 MANAGING DIRECTOR/GLOBAL HEAD OF DERIVATIVES, J.P. Morgan Investment Management prior to 1999.
2 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.
</TABLE>

<PAGE>

(d) 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.

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 Business Positions and Offices with Lincoln Investment Management Company, Inc. and
Address its Affiliates and Other Positions and Offices Held
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
***H. Thomas McMeekin President & Director of Lincoln Investment Management, Inc.; Executive Vice
President (previously Senior Vice President) and Chief Investment Officer
of Lincoln National Corporation; and Director of The Lincoln National Life
Insurance Company, Lincoln National Investments, Inc., Delaware Management
Holdings, Inc., Lincoln National Investment Companies, Inc. and Vantage
Global Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*Dennis A. Blume Vice President of Lincoln Investment Management, Inc.; and Director of
Vantage Global Advisors, Inc
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*Steven R. Brody Vice President and Director of Lincoln Investment Management, Inc.; Vice
President of The Lincoln National Life Insurance Company
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*David A. Berry 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.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*Janet C. Chrzan Vice President/Treasurer of Lincoln Investment Management, Inc., Lincoln
National Corporation, LNC Equity Sales Corporation; Treasurer of Lincoln
National Investments, Inc.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*David C. Fischer Vice President of Lincoln Investment Management, Inc.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Mark S. Forman Vice President of Lincoln Investment Management, Inc.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*Robert C. Franzino Vice President/Portfolio Manager of Lincoln Investment Management, Inc.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*Luc N. Girard Vice President and Actuary of Lincoln Investment Management, Inc.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*Walter M. Korinke Vice President of Lincoln Investment Management, Inc.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
*James M. Keefer Vice President and General Counsel and Director of Lincoln Investment
Management, Inc.
- ----------------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
** Business address is 1300 S. Clinton Street, Fort Wayne, IN 46802.
*** Business address is 1818 Market Street, Philadelphia, PA 19103.

Item 27. Principal Underwriters.

(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Investments family.

(b) Information with respect to each director, officer or partner of
principal underwriter:

- -----------------------------------------------------------------------------------------------------------------------------------

Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
- -----------------------------------------------------------------------------------------------------------------------------------

Delaware Investment Advisers Limited Partner None
- -----------------------------------------------------------------------------------------------------------------------------------

Delaware Capital Management, Inc. Limited Partner None
- -----------------------------------------------------------------------------------------------------------------------------------

Bruce D. Barton President and Chief Executive Officer None
- -----------------------------------------------------------------------------------------------------------------------------------

David K. Downes Executive Vice President/Chief Operating President and Chief Executive
Officer/Chief Financial Officer Officer/Chief Financial Officer/Chief
Operating Officer and Trustee
- -----------------------------------------------------------------------------------------------------------------------------------

Richard J. Flannery Executive Vice President/General Counsel Executive Vice President/General Counsel
- -----------------------------------------------------------------------------------------------------------------------------------

Diane M. Anderson Senior Vice President/Retirement None
Operations
- -----------------------------------------------------------------------------------------------------------------------------------

Michael P. Bishof Senior Vice President/Treasurer/ Senior Vice President/Treasurer
Investment Accounting
- -----------------------------------------------------------------------------------------------------------------------------------

Daniel J. Brooks III Senior Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- -----------------------------------------------------------------------------------------------------------------------------------

Joseph H. Hastings Senior Vice President/Treasurer/ Senior Vice President/Corporate
Corporate Controller Controller
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------

Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- -----------------------------------------------------------------------------------------------------------------------------------

Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/ Secretary Counsel/ Secretary
- -----------------------------------------------------------------------------------------------------------------------------------

Mac Macaulliffe Senior Vice President/Divisional Sales None
Manager
- -----------------------------------------------------------------------------------------------------------------------------------

J. Chris Meyer Senior Vice President/Director, Product None
Management
- -----------------------------------------------------------------------------------------------------------------------------------

Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- -----------------------------------------------------------------------------------------------------------------------------------

Stephen C. Nell Senior Vice President/National Retirement None
Sales
- -----------------------------------------------------------------------------------------------------------------------------------

Henry W. Orvin Senior Vice President/Eastern Divisional None
Sales Manager
- -----------------------------------------------------------------------------------------------------------------------------------

Christopher H. Price Senior Vice President/Channel Manager, None
Insurance
- -----------------------------------------------------------------------------------------------------------------------------------

Thomas E. Sawyer Senior Vice President/Director, National None
Sales
- -----------------------------------------------------------------------------------------------------------------------------------

James L. Shields Senior Vice President/Chief Information None
Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Steven Sorenson Senior Vice President/National Director,
Independent Planner Channel None
- -----------------------------------------------------------------------------------------------------------------------------------

Richard P. Allen Vice President/Wholesaler, Midwest None
- -----------------------------------------------------------------------------------------------------------------------------------

David P. Anderson, Jr. Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Jeffrey H. Arcy Vice President/Wholesaler, None
South East Region
- -----------------------------------------------------------------------------------------------------------------------------------

Patrick A. Bearss Vice President/Wholesaler - Midwest None
- -----------------------------------------------------------------------------------------------------------------------------------

Gabriella Bercze Vice President/Wholesaler, Financial None
Institutions
- -----------------------------------------------------------------------------------------------------------------------------------

Larry D. Bridwell Vice President/Financial Institutions None
Wholesaler
- -----------------------------------------------------------------------------------------------------------------------------------

Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- -----------------------------------------------------------------------------------------------------------------------------------

Terrance L. Bussard Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Daniel H. Carlson Vice President/Marketing Services None
- -----------------------------------------------------------------------------------------------------------------------------------

Larry Carr Vice President/Variable Annuity Sales None
Manager
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- -----------------------------------------------------------------------------------------------------------------------------------

Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
William S. Carroll Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Matthew Coldren Vice President/National Accounts None
- -----------------------------------------------------------------------------------------------------------------------------------

Patrick A Connelly Vice President/Registered Investment None
Adviser Sales
- -----------------------------------------------------------------------------------------------------------------------------------

Jessie V. Emery Vice President/Marketing Communications None
- -----------------------------------------------------------------------------------------------------------------------------------

Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- -----------------------------------------------------------------------------------------------------------------------------------

Edward A. Foley Vice President/Marketing Communications None
- -----------------------------------------------------------------------------------------------------------------------------------

Susan T. Friestedt Vice President/Retirement Services None
- -----------------------------------------------------------------------------------------------------------------------------------

Darryl S. Grayson Vice President/Director, Internal Sales None
- -----------------------------------------------------------------------------------------------------------------------------------

Rhonda J. Guido Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Ronald A. Haimowitz Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Edward J. Hecker Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

John R. Herron Vice President/Variable Annuity Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Steven N. Horton Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Dinah J. Huntoon Vice President/Product Manager, Equities None
- -----------------------------------------------------------------------------------------------------------------------------------

Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic Planning
- -----------------------------------------------------------------------------------------------------------------------------------

Christopher L. Johnston Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Michael J. Jordan Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Carolyn Kelly Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Richard M. Koerner Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Ellen M. Krott Vice President/Marketing None
- -----------------------------------------------------------------------------------------------------------------------------------

John LeBoeuf Vice President/Independent Planner and None
Insurance Sales-East
- -----------------------------------------------------------------------------------------------------------------------------------

SooHee Lee Vice President/Fixed Income & None
International Product Management
- -----------------------------------------------------------------------------------------------------------------------------------

Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- -----------------------------------------------------------------------------------------------------------------------------------

John R. Logan Vice President/Wholesaler, Financial None
Institutions
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------

Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- -----------------------------------------------------------------------------------------------------------------------------------

Theodore T. Malone Vice President/ Independent Planner and None
Insurance Sales Wholesaler
- -----------------------------------------------------------------------------------------------------------------------------------

Debbie Marler Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Raymond G. McCarthy Vice President/National Accounts,
Independent Planner & Insurance Channel None
- -----------------------------------------------------------------------------------------------------------------------------------

Joanne C. McCranie Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Gregory J. McMillan Vice President/National Accounts None
- -----------------------------------------------------------------------------------------------------------------------------------

Nathan W. Medin Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Scott L. Metzger Vice President/Business Development None
- -----------------------------------------------------------------------------------------------------------------------------------

Jamie L. Meyer Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Christopher W. Moore Vice President/Variable Annuity Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Andrew F. Morris Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Patrick L. Murphy Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Scott E. Naughton Vice President/Independent Planner & None
Insurance Wholesaler
- -----------------------------------------------------------------------------------------------------------------------------------

Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- -----------------------------------------------------------------------------------------------------------------------------------

Julie A. Nye Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Daniel J. O'Brien Vice President/Insurance Products None
- -----------------------------------------------------------------------------------------------------------------------------------

David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- -----------------------------------------------------------------------------------------------------------------------------------

Joseph T. Owczarek Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Otis S. Page Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Eric Preus Vice President/Wrap Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Philip G. Rickards Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Laura E. Roman Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Robert A. Rosso Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------

Terri Lynn Sabby Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Richard Salus Vice President/Assistant Controller None
- -----------------------------------------------------------------------------------------------------------------------------------

Linda D. Shulz Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Gordon E. Searles Vice President/Client Services None
- -----------------------------------------------------------------------------------------------------------------------------------

Catherine A. Seklecki Vice President/Retirement Sales None
- -----------------------------------------------------------------------------------------------------------------------------------

John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- -----------------------------------------------------------------------------------------------------------------------------------

Edward B. Sheridan Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Kimberly Spangler Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Robert E. Stansbury Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Stephanie R. Szabo Vice President/Retirement Marketing None
- -----------------------------------------------------------------------------------------------------------------------------------

Michael T. Taggart Vice President/Facilities and None
Administration Services
- -----------------------------------------------------------------------------------------------------------------------------------

Julia R. Vander Els Vice President/Retirement Plan None
Communications
- -----------------------------------------------------------------------------------------------------------------------------------

Wayne W. Wagner Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

John A. Wells Vice President/Marketing Technology None
- -----------------------------------------------------------------------------------------------------------------------------------

Courtney S. West Vice President/Institutional Sales None
- -----------------------------------------------------------------------------------------------------------------------------------

Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- -----------------------------------------------------------------------------------------------------------------------------------

Scott Whitehouse Vice President/Wholesaler None
- -----------------------------------------------------------------------------------------------------------------------------------

Wesley Williams Vice President/Wholesaler
- -----------------------------------------------------------------------------------------------------------------------------------

Theodore V. Wood Vice President/Technical Systems Officer None
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>

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. None.

<PAGE>

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia, Commonwealth of Pennsylvania on this
24th day of April 2000.

DELAWARE GROUP PREMIUM FUND

By /s/David K. Downes
------------------
David K. Downes
President and Chief Executive Officer

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/David K. Downes President/Chief Executive Officer/Chief Financial April 24, 2000
- --------------------------------- Officer (Principal Executive Officer, Principal
David K. Downes Financial Officer and Principal Accounting
Officer) and Trustee

/s/Wayne A. Stork * Trustee April 24, 2000
- ---------------------------------
Wayne A. Stork

/s/Walter P. Babich * Trustee April 24, 2000
- ---------------------------------
Walter P. Babich

/s/John H. Durham * Trustee April 24, 2000
- ---------------------------------
John H. Durham

/s/Anthony D. Knerr * Trustee April 24, 2000
- ---------------------------------
Anthony D. Knerr

/s/Ann R. Leven * Trustee April 24, 2000
- ---------------------------------
Ann R. Leven

/s/ Thomas F. Madison * Trustee April 24, 2000
- ---------------------------------
Thomas F. Madison

/s/Charles E. Peck * Trustee April 24, 2000
- ---------------------------------
Charles E. Peck

/s/Jan L. Yeomans * Trustee April 24, 2000
- ---------------------------------
Jan L. Yeomans

* By /s/David K. Downes
-------------------
David K. Downes
as Attorney-in-Fact
for each of the persons indicated
</TABLE>

<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Exhibits

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Exhibit
- ----------- -------

EX-99.I Consent of Auditors

EX-99.P Code of Ethics

<PAGE>

Exhibit 99.I

Consent of Ernst & Young LLP, Independent Auditors

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 31 to the Registration Statement (Form N-1A) (No.
33-14363) of Delaware Group Premium Fund of our reports dated February 4, 2000,
included in the 1999 Annual Reports to shareholders.

Philadelphia, Pennsylvania
April 25, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Aggressive Growth Series

We have audited the accompanying statement of net assets of Aggressive Growth
Series (the "Series") as of December 31, 1999, and the related statement of
operations, statement of changes in net assets and financial highlights for the
period May 3, 1999 (commencement of operations) through December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Aggressive Growth Series at December 31, 1999, and the results of its
operations, the changes in its net assets and its financial highlights for the
period May 3, 1999 (commencement of operations) through December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Capital Reserves Series

We have audited the accompanying statement of net assets of Capital Reserves
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Reserves Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Cash Reserve Series

We have audited the accompanying statement of net assets of Cash Reserve Series
(the "Series") as of December 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Cash
Reserve Series at December 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Convertible Securities Series

We have audited the accompanying statement of net assets of Convertible
Securities Series (the "Series") as of December 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the two years in the period then ended and for the period
May 1, 1997 (commencement of operations) through December 31, 1997. These
financial statements and financial highlights are the responsibility of the
Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Convertible Securities Series at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the two years in the period then ended and for the period May 1, 1997
(commencement of operations) through December 31, 1997, in conformity with
accounting principles generally accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Delaware Balanced Series

We have audited the accompanying statement of net assets of Delaware Balanced
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Balanced Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - DelCap Series

We have audited the accompanying statement of net assets of DelCap Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of DelCap
Series at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Delchester Series

We have audited the accompanying statement of net assets of Delchester Series
(the "Series") as of December 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delchester Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Devon Series

We have audited the accompanying statement of net assets of Devon Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the two
years in the period then ended and for the period May 1, 1997 (commencement of
operations) through December 31, 1997. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Devon
Series at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the two years in the period
then ended and for the period May 1, 1997 (commencement of operations) through
December 31, 1997, in conformity with accounting principles generally accepted
in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Emerging Markets Series

We have audited the accompanying statement of net assets and statement of assets
and liabilities of Emerging Markets Series (the "Series") as of December 31,
1999, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the two years in the period then
ended and for the period May 1, 1997 (commencement of operations) through
December 31, 1997. These financial statements and financial highlights are the
responsibility of the Series' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Emerging Markets Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and its financial highlights for each of the two years in
the period then ended and for the period May 1, 1997 (commencement of
operations) through December 31, 1997, in conformity with accounting principles
generally accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Global Bond Series

We have audited the accompanying statement of net assets of Global Bond Series
(the "Series") as of December 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
three years in the period then ended and for the period May 2, 1996
(commencement of operations) through December 31, 1996. These financial
statements and financial highlights are the responsibility of the Series'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Global
Bond Series at December 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the three years in
the period then ended and for the period May 2, 1996 (commencement of
operations) through December 31, 1996, in conformity with accounting principles
generally accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Growth and Income Series

We have audited the accompanying statement of net assets of Growth and Income
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Growth
and Income Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - International Equity Series

We have audited the accompanying statement of net assets of International Equity
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
International Equity Series at December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and its financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - REIT Series

We have audited the accompanying statement of net assets of REIT Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, and the statement of changes in net assets and financial
highlights for the year then ended and for the period May 4, 1998 (commencement
of operations) through December 31, 1998. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of REIT
Series at December 31, 1999, the results of its operations for the year then
ended, and the changes in its net assets and its financial highlights for the
year then ended and for the period May 4, 1998 (commencement of operations)
through December 31, 1998, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Small Cap Value Series

We have audited the accompanying statement of net assets of Small Cap Value
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Series' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Small
Cap Value Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Social Awareness Series

We have audited the accompanying statement of net assets of Social Awareness
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the two years in the period then ended and for the period May 1, 1997
(commencement of operations) through December 31, 1997. These financial
statements and financial highlights are the responsibility of the Series'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Social
Awareness Series at December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the two years in the
period then ended and for the period May 1, 1997 (commencement of operations)
through December 31, 1997, in conformity with accounting principles generally
accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund - Strategic Income Series

We have audited the accompanying statement of net assets of Strategic Income
Series (the "Series") as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the two years in the period then ended and for the period May 1, 1997
(commencement of operations) through December 31, 1997. These financial
statements and financial highlights are the responsibility of the Series'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Strategic Income Series at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the two years in
the period then ended and for the period May 1, 1997 (commencement of
operations) through December 31, 1997, in conformity with accounting principles
generally accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium Fund. - Trend Series

We have audited the accompanying statement of net assets of Trend Series (the
"Series") as of December 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Series' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Trend
Series at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Report of Independent Auditors

To the Shareholders and Board of Trustees
Delaware Group Premium F - U.S. Growth Series

We have audited the accompanying statement of net assets of U.S. Growth Series
(the "Series") as of December 31, 1999, and the related statement of operations,
statement of changes in net assets and financial highlights for the period
November 15, 1999 (commencement of operations) through December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of U.S.
Growth Series at December 31, 1999, and the results of its operations, the
changes in its net assets and its financial highlights for the period November
15, 1999 (commencement of operations) through December 31, 1999, in conformity
with accounting principles generally accepted in the United States.

Philadelphia, Pennsylvania
February 4, 2000

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

<PAGE>

Exhibit 99.P

CODE OF ETHICS

DELAWARE INVESTMENTS FAMILY OF FUNDS

CREDO
It is the duty of all Fund employees, officers and directors to conduct
themselves with integrity, and at all times to place the interests of the
shareholders first. In the interest of this credo all personal securities
transactions will be conducted consistent with the Code of Ethics and in such a
manner as to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility. The fundamental standard
of this Code is that personnel should not take any inappropriate advantage of
their positions.

The Securities and Exchange Commission has adopted Rule 17j-1 under the
Investment Company Act of 1940. This Rule makes it unlawful for certain persons,
including any employee, officer or director of the Fund, in connection with the
purchase or sale by such person of a security held or to be acquired1 by the
Fund:

(1) To employ any device, scheme or artifice to defraud the Fund;

(2) To make to the Fund any untrue statement of a material fact or omit
to state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances in which they are made, not misleading;

(3) To engage in any act, practice or course of business that operates
or would operate as a fraud or deceit upon the Fund; or

(4) To engage in any manipulative practice with respect to the Fund.

- -------------------
(1) A security is deemed to be "held or to be acquired" if within the
most recent fifteen days it (i) is or has been held by the Fund or (ii) is being
or has been considered by the Fund or its investment adviser for purchase by the
Fund.

<PAGE>

The Rule also requires that the Fund and Delaware Management Business Trust
shall adopt a written code of ethics containing provisions reasonably necessary
to prevent persons from engaging in acts in violation of the above standard and
shall use reasonable diligence and institute procedures reasonably necessary to
prevent violations of the Code.

This Code of Ethics is being adopted by the Delaware Investments Family of Funds
(collectively "Delaware") in compliance with the requirement of Rule 17j-1 and
to effect its purposes, the purposes of the Credo set forth above, and the
recommendations of the Investment Company Institute's Advisory Group on Personal
Investing.

DEFINITIONS

"Affiliated person" means any employee of the Funds or any subsidiary of
Delaware Management Holdings, Inc. and any other person so designated by the
Compliance Department

"Access person" means any director, officer, general partner or advisory person
of the Fund and shall include all Interested Directors, Portfolio Managers,
other Investment Personnel and all Advisory Persons.

"Advisory person" means (i) any employee, officer or interested director of
Delaware, who in connection with his/her regular functions or duties, normally
makes, participates in, or obtains current information regarding the purchase or
sale of a security by the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales and (ii) any natural
person in a control relationship to any such company who regularly obtains
current information concerning recommendations made with regard to the purchase
or sale of a security by the Fund.

"Investment personnel" means portfolio managers, securities analysts and
traders, and those personnel who provide information and advice to a portfolio
manager or who help execute the portfolio manager's decisions.

A security is being "considered for purchase or sale" or is "being purchased or
sold" when a recommendation to purchase or sell the security has been made and

<PAGE>

communicated to the Order Room and with respect to the person making the
recommendation, when such person seriously considers making or when such person
knows or should know that another Advisory Person is seriously considering such
a recommendation.

"Beneficial ownership" shall be as defined in Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder. Generally
speaking, a person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in a security, is a "beneficial owner" of the
security. For instance:

- A person is normally regarded as the beneficial owner of securities
held by members of his or her immediate family sharing the same
household; and
- Ownership of derivative securities such as options, warrants or
convertible securities which confer the right to acquire the underlying
security at a fixed price constitutes beneficial ownership of the
underlying security itself.

"Control" shall mean investment discretion in whole or in part of an account
regardless of beneficial ownership, such as an account for which a person has
power of attorney or authority to effect transactions.

"Security" shall have the meaning as set forth in Section 2(a)(36) of the
Investment Company Act of 1940, except that it shall not include securities
issued or guaranteed by the government of the United States or by any of its
federal agencies, bankers' acceptances, bank certificates of deposit, commercial
paper, unit investment trusts and shares of open-end registered investment
companies.

The purchase, sale or exercise of a derivative security shall constitute the
purchase or sale of the underlying security. However, the purchase or sale of
the debt instrument of an issuer which does not give the holder the right to
purchase the issuer's stock at a fixed price, does not constitute a purchase or
sale of the issuer's stock.

<PAGE>

PROHIBITED ACTIVITIES

AFFILIATED PERSONS, ACCESS PERSONS, INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS

The following restrictions apply to all Portfolio Managers, Investment
Personnel, Access Persons and Affiliated Persons. Access Persons include
Interested Directors of the Fund.

(a) No Affiliated or Access Person shall engage in any act, practice or course
of conduct, which would violate the provisions of Rule 17j-1 set forth above.

(b) No Affiliated or Access Person shall purchase or sell, directly or
indirectly, any security which to his/her knowledge is being actively considered
for purchase or sale by Delaware; except that this prohibition shall not apply
to:

(A) purchases or sales that are nonvolitional on the part of either the
Person or the Fund;

(B) purchases which are part of an automatic dividend reinvestment plan;

(C) purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired;

(D) other purchases and sales specifically approved by the President or
Chief Executive Officer, with the advice of the General Counsel and/or the
Compliance Officer, and deemed appropriate because of unusual or
unforeseen circumstances. A list of securities excepted will be maintained
by the Compliance Department.

(c) No Affiliated or Access Person may execute a buy or sell order for an
account in which he or she has beneficial ownership or control until the third
trading day following the execution of a Delaware buy or sell order in that same
security.

<PAGE>

purchases) or loss avoided (in the event of sales), whether realized or
unrealized, in the period from the date of the personal transaction to the end
of the proscribed trading period. Payment of the amount forfeited shall be made
by check or in cash to a charity of the person's choice and a copy of the check
or receipt must be forwarded to the Compliance Department.

(e) Each Affiliated or Access Person's personal transactions must be precleared
by using the Personal Transaction Preclearance Form. The form must be submitted
prior to entering any orders for personal transactions. Preclearance is only
valid for the day the form is submitted. If the order is not executed the same
day, the preclearance form must be resubmitted. Regardless of preclearance, all
transactions remain subject to the provisions of (d) above.

INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS

The following additional restrictions apply to all Investment Personnel and
Portfolio Managers.

(a) All Investment Personnel are prohibited from purchasing any initial public
offering.

(b) All Investment Personnel are prohibited from purchasing any private
placement without express PRIOR written consent by the Compliance Department.
All private placement holdings are subject to disclosure to the Compliance
Department. Any Investment Person that holds a private placement must receive
permission from the Compliance or Legal Departments prior to any participation
by such person in Delaware's consideration of an investment in the same issuer.

(c) Short term trading resulting in a profit is prohibited. All opening
positions must be held for a period of 60 days, in the aggregate, before they
can be closed at a profit. Any short term trading profits are subject to the
disgorgement procedures outlined above and at the maximum level of profit
obtained. The closing of positions at a loss is not prohibited.

(d) All Investment Personnel are prohibited from receiving anything of more than
a de minimis value from any person or entity that does business with or on
behalf of any fund or client. Things of value may include, but not be limited
to, travel expenses, special deals or incentives.

<PAGE>

(e) All Investment Personnel require PRIOR written approval from the Legal or
Compliance Department before they may serve on the board of directors of any
public company.

PORTFOLIO MANAGERS

The following additional restrictions apply to Portfolio Managers.

(a) No Portfolio Manager may execute a buy or sell order for an account for
which he/she has beneficial ownership within seven calendar days before or after
an investment company or separate account that he/she manages trades in that
security.

(b) Despite any fault or impropriety, any Portfolio Manager who executes a
personal transaction within seven calendar days before or after an investment
company or separate account that he/she manages trades in that security, shall
forfeit any profits made (in the event of purchases) or loss avoided (in the
event of sales), whether realized or unrealized, in the period from the date of
the personal transaction to the end of the prescribed trading period. Payment of
the amount forfeited shall be made by check or in cash to a charity of the
person's choice and a copy of the check or receipt must be forwarded to the
Compliance Department.

REQUIRED REPORTS

AFFILIATED PERSONS, ACCESS PERSONS, INVESTMENT PERSONNEL, PORTFOLIO MANAGERS
AND DISINTERESTED DIRECTORS

The following reports are required to be made by all Affiliated Persons, Access
Persons, Investment Personnel and Portfolio Managers. Access Persons, Investment
Personnel and Portfolio Managers are Affiliated Persons by definition.

(a) All Affiliated Persons must disclose brokerage relationships at employment
and at the time of opening any new account.

(b) All Affiliated Persons will direct their brokers to supply to the Compliance
Department, on a timely basis, duplicate copies of all confirmations and
statements for all securities accounts. (In the U.K., all contract notes and
periodic statements)

<PAGE>

acquires any direct or indirect beneficial ownership. Each Director who is not
an interested person shall submit the quarterly reports only for transactions
where at the time of the transaction the director knew, or in the ordinary
course of fulfilling his official duties as a director should have known, that
during the fifteen day period immediately preceding the date of the transaction
by the director, such security was purchased or sold by the Fund or was being
considered for purchase or sale by the Fund.

Every report will contain the following information:

(i) the date of the transaction, the name and the number of shares and the
principal amount of each security involved;

(ii) the nature of the transaction (i.e., purchase, sale or any other type
of acquisition or disposition);

(iii) the price at which the transaction was effected;

(iv) the name of the broker, dealer or bank effecting the transaction.

(d) If any security involved in a personal transaction is purchased or sold by a
Fund within fifteen days of the personal transaction, the Compliance Department
will request and the Affiliated Person will provide additional information
relating to the circumstances surrounding the personal transaction.

(e) All Affiliated Persons will certify annually that they have read and
complied with this Code of Ethics and all disclosure and reporting requirements
contained therein.

<PAGE>

INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS

In addition to the above reporting requirements, all Investment Personnel, which
includes Portfolio Managers by definition, must disclose all personal securities
holdings on commencement of employment and thereafter on an annual basis.

ADMINISTRATIVE PROCEDURES

(a) The Legal Department of Delaware will identify all Affiliated Persons,
Access Persons, Investment Personnel and Portfolio Managers.

(b) The Legal Department shall promptly report to the President or Chief
Executive Officer of Delaware Management Business Trust any apparent violations
of the prohibitions or reporting requirements contained in this Code of Ethics.
Such Chief Executive Officer or President, or both in conjunction, will review
the reports made and determine whether or not the Code of Ethics has been
violated and shall determine what sanctions, if any, should be imposed. At the
next regular meeting the Board of Directors or a Committee of Directors created
by the Board for that purpose will review a description of any Code violation
and significant actions taken in response and consider whether the appropriate
sanctions were imposed.

When the Legal Department finds that a transaction otherwise reportable above
could not reasonably be found to have resulted in a fraud, deceit or
manipulative practice in violation of Rule 17j-1(a), it may, in its discretion,
lodge a written memorandum of such finding in lieu of reporting the transaction.

(c) All purchases and sales specifically approved by the President or Chief
Executive Officer of Delaware Management Business Trust in accordance with
Section (b)D of Prohibited Activities, as described herein, shall be reported to
the Board at its next regular meeting.

<PAGE>

Delaware Investments
Code Of Ethics
- --------------------------------------------------------------------------------

Graphic Omitted: [People writing with pens]

<PAGE>

CODE OF ETHICS
--------------

DELAWARE MANAGEMENT BUSINESS TRUST

DELAWARE DISTRIBUTORS, L.P.

DELAWARE SERVICE COMPANY, INC.

DELAWARE MANAGEMENT TRUST COMPANY

DELAWARE INTERNATIONAL ADVISERS LTD.

DELAWARE CAPITAL MANAGEMENT, INC.

RETIREMENT FINANCIAL SERVICES, INC.

CREDO

It is the duty of all employees, officers and directors to conduct themselves
with integrity, and at all times to place the interests of the shareholders
first. In the interest of this credo all personal securities transactions will
be conducted consistent with the Code of Ethics and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an individual's
position of trust and responsibility. The fundamental standard of this Code is
that personnel should not take any inappropriate advantage of their positions.

(1) To employ any device, scheme or artifice to defraud the Fund;

(2) To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances in which they are made, not misleading;

(3) To engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Fund; or

(4) To engage in any manipulative practice with respect to the Fund.

The Rule also requires that the Fund and Delaware Management Business Trust
shall adopt a written code of ethics containing provisions reasonably necessary
to prevent persons from engaging in acts in violation of the above standard and
shall use reasonable diligence and institution procedures reasonably necessary
to prevent violations of the Code.

This Code of Ethics is being adopted by Delaware Management Business Trust
("DMBT") Delaware Management Business Trust ("DMST"), Delaware Distributors,
L.P., Delaware Service Company, Inc., Delaware management Trust Company,
Delaware International Advisers Ltd. ("International") and Delaware Capital
Management, Inc. ("DCM"), Retirement Financial Services, Inc. ("RFS"),
(collectively "Delaware") in compliance with the

- ------------------
(1) A security is deemed to be "held or to be acquired" if within the most
recent fifteen days it (i) is or had been held by the Fund or (ii) is being
or had been considered by the Fund or its investment adviser for purchase
by the Fund.

<PAGE>

requirement of Rule 17j-1 and to effect its purposes, the purposes of the Credo
set forth above, and the recommendations of the Investment Company Institute's
Advisory Group on Personal Investing.

DEFINITIONS

"Affiliated Person" means any employee of the Funds or any subsidiary of
Delaware Management Holdings, Inc. and any other person so designated by the
Compliance Department.

"Access person" means any director, officer, general partner or advisory person
of the Fund and shall include all Interested Directors, Portfolio Mangers, other
Investment Personnel and all Advisory Persons.

"Advisory person" mean (i) any employee, officer or interested director of
Delaware, who in connection with his/her regular functions or duties, normally
makes, participates in, or obtains current information regarding the purchase or
sale of a security by the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales and (ii) any natural
person in a control relationship to any such company who regularly obtains
current information concerning recommendations made with regard to the purchase
or sale of a security by the Fund.

A security is being "considered for purchase or sale" or is "being purchased or
sold" when a recommendation to purchase or sell the security has been made and
communicated to the Order Room and with respect to the person making the
recommendation, when such person seriously considers making or when such person
knows or should know that another Advisory Person is seriously considering such
a recommendation.

"Beneficial ownership" shall be as defined in Section 16 or the Securities
Exchange Act of 1934 and the rules and regulations thereunder. Generally
speaking, a person who, directly or indirectly, through any contract,
arrangement understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in a security, is a "beneficial owner" of the
security. For instance:

- A person is normally regarded as the beneficial owner of
securities held by members of his or her immediate family sharing
the same household; and
- Ownership of derivative securities such as options, warrants or
convertible securities which confer the right to acquire the
underlying security at a fixed price constitutes beneficial
ownership of the underlying security itself.

"Control" shall mean investment discretion in whole or in part of an account
regardless of beneficial ownership. Such as an account for which a person has
power of attorney or authority to effect transactions.

"Security" shall have the meaning as set forth in Section 2(a)(36) of the
Investment Company Act of 1940, except that it shall not include securities
issued or guaranteed by the government of the United States or by any of it's
federal agencies, bankers' acceptances, bank certificates of deposit, commercial
paper and shares of open-end registered investment companies.

<PAGE>

PROHIBITED ACTIVITIES

AFFILIATED PERSONS, ACCESS PERSONS, INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS
The following restrictions apply to all Portfolio Managers, Investment
Personnel, Access Persons and Affiliated Persons. Access Persons include
Interested Directors of the Funds.

(a) No Affiliated or Access Person shall engage in any act, practice or course
of conduct, which would violate the provision of Rule 17j-1 set forth
above.

(b) No Affiliated or Access Person shall purchase or sell, directly or
indirectly, any security which to his/her knowledge is being actively
considered for purchase or sale by Delaware; except that this prohibition
shall not apply to:

(A) purchases or sales that are nonvolitional on the part of either the
Person or the Fund;

(B) purchases which are part of an automatic dividend reinvestment plan;

(C) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extend
such rights were acquired from such issuer, and sales or such rights
so acquired;

(D) other purchases and sales specifically approved by the President or
Chief Executive Officer, with the advice of the General Counsel and
the Compliance officer and deemed appropriate because of unusual or
unforeseen circumstances. A list of securities excepted will be
maintained by the Compliance Department.

(c) No Affiliated or Access Person may execute a buy or sell order for an
account in which he or she has beneficial ownership or control until the
third trading day following the execution of a Delaware buy or sell order
in that same security.

(d) Despite any fault or impropriety, any Affiliated or Access Person who
executes a buy or sell for an account in which he/she has beneficial
ownership or control either (i) before the third trading day following the
execution of a Delaware order in the same security, or (ii) when there are
pending orders for a Delaware transaction as reflected on the Trader Order
Scan, shall forfeit any profits made (in the event of purchases) or loss
avoided (in the event of sales), whether realized or unrealized, in the
period from the date of the personal transaction to the end of the
proscribed trading period. Payment of the amount forfeited shall be made by
check or in cash to a charity of the person's choice and a copy of the
check or receipt must be forwarded to the Compliance Department.

(e) Each Affiliated or Access Person's personal transactions must be precleared
by using the Personal Transaction Preclearance Form. The form must be
submitted prior to entering any orders for personal transactions.
Preclearance is only valid for the day the form is submitted. If the order
is not executed the same day, the preclearance form must be resubmitted.
Regardless of preclearance, all transactions remain subject to the
provisions of (d) above.

INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS

The following additional restrictions apply to all Investment Personnel and
Portfolio Managers.

(a) All Investment Personnel are prohibited from purchasing any initial public
offering.

(b) All Investment Personnel are prohibited from purchasing any private
placement without express PRIOR written consent by the Compliance
Department. All private placement holdings are subject to disclosure to the
Compliance Department. Any Investment Person that holds a private placement
must receive permission from the Compliance or Legal Departments prior to
any participation by such person in Delaware's consideration of an
investment in the same issuer.
<PAGE>

(c) Short term trading resulting in a profit is prohibited. All opening
positions must be held for a period of 60 days, in the aggregate, before
they can be closed at a profit. Any short term trading profits are subject
to the disgorgement procedures outlined above and at the maximum level of
profit obtained. The closing of positions at a loss is not prohibited.

(d) All Investment Personnel are prohibited from receiving anything of more
than ade minimis value from any person or entity that does business with or
on behalf of any fund or client. Things of value may include, but not be
limited to, travel expenses, special deals or incentives.

(e) All Investment Personnel require PRIOR written approval from the Legal or
Compliance Department before they may serve on the board of directors of
any public company.

PORTFOLIO MANAGERS

The following additional restrictions apply to Portfolio Managers

(a) No Portfolio Manager may execute a buy or sell order for an account for
which he/she has beneficial ownership within seven calendar days before or
after an investment company or separate account that he/she manages trades
in that security.

(b) Despite any fault or impropriety, any Portfolio Manager who executes a
personal transaction within seven calendar days before or after an
investment company or separate account that he/she manages trades in that
security, shall forfeit any profits made (in the event or purchases) or
loss avoided (in the event of sales), whether realized or unrealized, in
the period from the date of the personal transaction to the end of the
prescribed trading period. Payment of the amount forfeited shall be made by
check or in cash to a charity of the person's choice and a copy of the
check or receipt must be forwarded to the Compliance Department.

<PAGE>

REQUIRED REPORTS

AFFILIATED PERSONS, ACCESS PERSONS, INVESTMENT PERSONNEL,
PORTFOLIO MANAGERS AND DISINTERESTED DIRECTORS

(a) All Affiliated Persons must disclose brokerage relationships at employment
and at the time of opening any new account.

(b) All Affiliated Persons will direct their brokers to supply to the
Compliance Department, on a timely basis, duplicate copies of all
confirmation and statements for all securities accounts. (In the U.K., all
contract notes and periodic statements)

(c) Each quarter, no later than the tenth day after the end of the calendar
quarter, each Affiliated Person will submit to the Compliance Department a
personal transaction summary showing all transactions in securities in
accounts which such person has or acquires any direct or indirect
beneficial ownership. Each Director who is not an interested person shall
submit the quarterly reports only for transactions where at the time of the
transaction the director knew, or in the ordinary course of fulfilling his
official duties as a director should have known, that during the fifteen
day period immediately preceding the date of the transaction by the
director, such security was purchased or sold by the Fund or was being
considered for purchase or sale by the Fund.

Every report will contain the following information:

(i) the date of the transaction, the name and the number of shares and
the principal amount of each security involved;

(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);

(iii) the price at which the transaction was effected;

(iv) the name of the broker, dealer or bank effecting the transaction.

(d) If any security involved in a personal transaction is purchased or sold by
a Fund within fifteen days of the personal transaction, the Compliance
Department will request and the Affiliated person will provide additional
information relating to the circumstances surrounding the personal
transaction.

(e) All Affiliated Persons will certify annually that they have read and
complied with this Code of Ethics and all disclosure and reporting
requirements contained therein.

<PAGE>

INVESTMENT PERSONNEL AND PROTFOLIO MANAGERS

ADMINISTRATIVE PROCEDURES

(a) The Legal Department of Delaware will identify all Affiliated Persons,
Access Persons, Investment Personnel and Portfolio Managers.

When the Legal Department finds that a transaction otherwise reportable above
could not reasonably be found to have resulted in a fraud, deceit or
manipulative practice in violation of Rule 17j-1(a), it may, in it's discretion,
lodge a written memorandum of such finding in lieu of reporting the transaction.

<PAGE>

Code of Ethics
for
Lincoln Investment Management, Inc.

- --------------------------------------------------------------------------------

I. Introduction

It is the duty of all employees to conduct themselves with integrity,
in accordance with the Code of Ethics, and at all times to place the
interests of the shareholders and clients first. In the interest of
this credo, all personal securities transactions will be conducted
consistent with the Code of Ethics and in such a manner as to avoid any
actual or potential conflict of interest or any abuse of an
individual(1) position of trust and responsibility. The fundamental
standard of this Code is that personnel should not take any
inappropriate advantage of their positions.

The Securities and Exchange Commission (SEC) has adopted Rule 17j-1
under the Investment Company Act of 1940. This Rule makes it unlawful for
certain persons, including any investment adviser or principal underwriter to a
registered investment company, in connection with the purchase or sale by such
persons of a security held or to be acquired1 by a registered investment
company:

- to employ any device, scheme or artifice to defraud;

- to make any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements made, in light of the circumstances in which they
are made, not misleading;

- to engage in any act, practice or course of business that
operates or would operate as a fraud or deceit; or

- to engage in any manipulative practice.

- ---------------------
(1) A security is deemed to be held or to be acquired if within the most recent
fifteen days it (i) is or has been held by the registered investment
company or (ii) is being or has been considered by the registered
investment company or its investment adviser for purchase by the registered
investment company.

Page 1

<PAGE>

The Rule also requires that every registered investment company and each
investment adviser or principal underwriter for such investment company shall
adopt a written code of ethics containing provisions reasonably necessary to
prevent persons from engaging in acts in violation of the above standard and
shall use reasonable diligence and institute procedures reasonably necessary to
prevent violations of the code.

Accordingly, the Board of Directors of Lincoln Investment Management,
Inc. (ALIM) has adopted the following Code of Ethics to be effective
for its directors, officers, and, where applicable, employees on and
after March 1, 1998, thereby replacing all previous Codes of Ethics.
This Code of Ethics does not replace, but is intended to supplement,
the Policy Statement on Conflicts of Interest adopted by the Board of
Directors of Lincoln National Corporation (ALNC).

II. Definitions

A. Access Person of a Fund or Adviser includes each of its
directors, officers, Investment Personnel and Advisory Persons.

B. Adviser means Lincoln Investment Management, Inc.

C. Advisory Person of a Fund or Adviser means (i) any employee
(including employees of companies in a control relationship with a
Fund or Adviser) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security, or whose
functions relate to the making of any recommendations with respect
to such purchases and sales; and (ii) any natural person in a
control relationship with a Fund or Adviser who obtains
information concerning recommendations with regard to the purchase
or sale of a security.

For purposes of this definition, "Advisory Person when used with
reference to Lincoln Investment Management, Inc. shall be deemed
to include employees of the Treasurers Department and Law Division
of Lincoln National Corporation who otherwise satisfy this
definition.

D. Beneficial ownership means, among other things, the powers to (i)
vote or control the voting of securities; (ii) transfer securities
or control their transfer; (iii) receive income from securities or
control the disposition of the income; or (iv) receive or control
the disposition of the proceeds through a liquidation.

Generally speaking, a person who, directly or indirectly, through
any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary interest
in a security, is a a beneficial owner of the security.

Page 2

<PAGE>

For example, an Access Person will generally be considered the
beneficial owner of securities held in the name of a spouse, minor
children, or a person not in the immediate family if the person is
a relative sharing the same home or if, by reason of a contract,
understanding, relationship, agreement, or other arrangement, the
Access Person obtains benefits substantially equivalent to
ownership.

E. Compliance Committee of LIM consists of Tom McMeekin, President;
David A. Berry, Senior Vice President; Steven R. Brody, Vice
President; David Patch, Vice President; J. Michael Keefer, Vice
President and General Counsel of LIM; and Gina Rohrbacher,
Compliance Officer.

The Compliance Committee, with advice from the Law Division, will
identify all Access Persons, Advisory Persons and Investment
Personnel.

F. Control means investment discretion in whole or in part of an
account regardless of beneficial ownership to include any
controlling influence over the management or policies of an
account and/or investment company, unless the power is solely the
result of an official position with the company.

G. Considered for purchase or sale or "Being purchased or sold occurs
when (i) a recommendation to purchase or sell a security has been
made and communicated, or (ii) with respect to the person making a
recommendation, the person first seriously considers making such a
recommendation.

H. Fund and Funds means the following entities listed on Exhibit A,
and any other registered investment companies as to which LIM is
the adviser or sub-adviser from time to time.

I. Investment Personnel means portfolio managers, securities analysts
and traders, and those personnel who provide information and
advice to a portfolio manager or who help execute the portfolio
manager's decisions. All Investment Personnel are also considered
Advisory Persons for purposes of this Code of Ethics.

J. Personal Securities Transaction Report is the SEC required
quarterly report listing all personal securities transactions
subject to the Code in which the Access Person or member(s) of his
or her immediate family has, or by reason of such transaction
acquires, any direct or indirect beneficial interest.

K. Security means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, a certificate of interest or
participation in any profit-sharing agreement, collateral trust
certificate, preorganization certificate or subscription,
transferable share, an investment contract, voting-trust
certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas or other mineral rights, any put,
call, straddle, option, or privilege on any security (including a
certificate of deposit) or on any group or index of securities

Page 3

<PAGE>

(including any interest therein or based on the value thereof), or
any put, call, straddle, option, or privilege entered into on a
national securities exchange relation to foreign currency, or, in
general, any interest or participation in, temporary or interim
certificate for, receipt for, guarantees of, or warrant or right
to subscribe to or purchase, any of the foregoing.

For purposes of the Code of Ethics, the following shall not be
considered a Security:

1. U.S. Government Securities
2. Bank Certificate of Deposits
3. Bankers Acceptances
4. Commercial Paper
5. Mutual Funds (shares of open-end registered investment
companies)
6. Securities issued or guaranteed by a U.S. Governmental Agency
7. Stock index options and futures contract
8. Nonfinancial Commodities
9. Foreign Currencies
10. Unit Investment Trusts
11. Variable Annuities
12. Receipt of securities as a gift or inheritance. Future
transactions would be subject to the Code of Ethics.
13. IRAs through open-end registered investment companies

L. Window Period means a 30-day period commencing on the third
trading day after the release of LNCs: (i) annual financial
results; (ii) Annual Report to shareholders; and (iii) quarterly
earnings reports.

III. Prohibited Transactions

A. The following restrictions apply to all Access Persons. Any
violation of any of these restrictions can be expected to result
in serious sanctions, up to and including dismissal of the person
or persons involved.

1. No Access Person of a Fund or Adviser shall engage in any
act, practice or course of conduct which would violate the
provisions of Rule 17j-1.

2. No Access Person of a Fund or Adviser shall purchase or sell,
directly or indirectly, any security in which he or she has,
or by reason of the transaction acquires, any direct or
indirect beneficial ownership and which to his or her actual
knowledge at the time of the purchase or sale (a) is being
considered for purchase or sale by a Fund or any other client
of an Adviser; or (b) is being purchased or sold by a Fund or
any other client of an Adviser, whether pursuant to a program
of trading or otherwise.

Page 4

<PAGE>

3. No Access Person of a Fund or Adviser shall recommend any
security transaction without first having disclosed his or
her interest, if any, in the transaction or the issuer of the
security, including without limitation:

(a) his or her direct or indirect beneficial ownership of
any securities of the issuer;

(b) any contemplated transaction by the Access Person in
such securities;

(d) any present or proposed business relationship between
the issuer or its affiliates and the Access Person or
any party in which the Access Person has a significant
interest.

4. No Access Person making any such recommendation may purchase
or sell the security which is the subject of the
recommendation until after he or she has been informed that
the Funds and any other clients of the Adviser considering
the recommendation have deferred or rejected the
recommendation. If the recommendation is approved for a Fund
or other clients of the Adviser, the Access Person must
adhere to all trading restrictions outlined in the Code of
Ethics.

5. No Access Person of a Fund or Adviser may reveal to any other
person (except in normal course of his or her duties on
behalf of a Fund or Adviser) any information regarding
securities transactions by a Fund or any other clients of the
Adviser or the consideration of any such securities
transactions.

6. No Access Person shall use actual knowledge of a Fund or
other clients' transactions to profit by the market effect of
such transaction. Any pattern of transactions involving
parallel transactions (client buy/Access Person buys or both
selling the same security) or involving opposite transactions
(buy/sell or sell/buy) will be analyzed to determine if there
are grounds to believe that the Code of Ethics has been
violated.

7. Each Access Persons personal transactions must be pre-cleared
by using LIMs Trading Compliance System prior to entering any
orders for personal transactions with a registered
broker/dealer. Pre-clearance is only valid on the day the
security is cleared. If the order is not executed the day it
is pre-cleared, the security must be pre-cleared again the
following day prior to placing a personal transaction.

Page 5

<PAGE>

8. No Access Person may execute a buy or sell order for a
personal account in which he or she has beneficial ownership
or control until the next trading day following the execution
of a Fund/client trade in that same security.

9. All Access Persons are prohibited from receiving anything of
more than a de minimis value (not to exceed $100) from any
person or entity that does business with or on behalf of any
Fund or client. Things of value may include, but not be
limited to, travel expenses, special deals or incentives.

10. All Access Persons require PRIOR written approval from the
President of LIM, with advice from the Law Division, before
they may serve on the board of directors of any company in
which a Fund or other client of the Adviser has an
investment.

B. The following additional restrictions apply to all Investment
Personnel. Any violations of any of these requirements can be
expected to result in serious sanctions, up to and including
dismissal of the person or persons involved.

1. All Investment Personnel are prohibited from purchasing any
initial public offering for their personal account.

2. All Investment Personnel are prohibited from purchasing any
private placement without express PRIOR written consent by
the Compliance Committee. All private placement holdings are
subject to disclosure to the Compliance Officer. Investment
Personnel who are the beneficial owners of a private
placement must receive permission from the Compliance
Committee prior to any participation by any such person in
the consideration of an investment in the same issuer.

3. No Investment Personnel may execute a buy or sell order for a
personal account for which he or she has beneficial ownership
within seven calendar days before or after a Fund or other
client he or she manages trades in that security.

IV. Exempt Transactions

The following transactions are exempt from the prohibitions of
Section III.

A. Securities transactions in which the Access Person has no direct
or indirect influence or control or over which the Access Person
has granted full discretion to another;

B. Securities transactions which are not eligible for participation
in by the Funds or any other clients of the Adviser;

Page 6

<PAGE>

C. Securities transactions which are non-volitional on the part of
the Access Person, the Funds, or any other clients of the Adviser;

D. Securities transactions in the form of stock dividends, dividend
reinvestment, stock splits, mergers, consolidation or other
similar corporate reorganizations or distributions generally
applicable to all holders of the same class of securities;

E. Any acquisition of securities through the exercise of rights
issued by an issuer pro rata to all holders of a class of its
securities (to the extent such rights were acquired from the
issuer), and sales of the rights so acquired;

F. Securities transactions through systematic investment and
qualified retirement plans (e.g., 401(k)).

G. Securities transactions specifically approved by the Compliance
Committee, with advice from the Law Division and the Compliance
Officer, and deemed appropriate because of unusual or unforeseen
circumstances.

V. Transactions in LNC Stock

Transactions in LNC stock are governed by the restrictions on insider
trading adopted from time to time by Lincoln National Corporation. The
following is a summary of the restrictions on trading in LNC stock:

A. LNC Stock and Stock Options

1. Transaction does not need to be pre-cleared.
2. Report all transactions on quarterly Personal Securities
Transaction Report.
3. Transaction must be during the Window Period for officers.
4. Transaction is subject to insider trading restrictions.

B. Employee Stock Purchase Plan through Smith Barney

1. Transaction does not need to be pre-cleared.
2. Transaction does not need to be reported on quarterly Personal
Securities Transaction Report.
3. Changes to payroll deduction must be within Window Period for
officers.
4. Transaction is subject to insider trading restrictions.

Page 7

<PAGE>

C. Dividend Reinvestment and Cash Investment Plan through LNC

1. Transaction does not need to be pre-cleared.
2. Report transaction on the quarterly Personal Securities
Transactions Report.
3. Additional purchases made through the cash investment portion
of the Plan must be made during the Window Period for
officers.
4. Transactions subject to insider trading restrictions.

D. LNC 401(k) Plan

1. Transaction does not need to be pre-cleared.
2. Transaction does not need to be reported on the quarterly
Personal Securities Transaction Report.
3. Transaction must be during the Window Period for officers.
4. Transactions are subject to insider trading restrictions.

VI. Required Disclosures and Reports

The following disclosures and reports are required to be made by all
Access Persons.

A. All Access Persons must disclose brokerage relationships at the
time of their employment and at the time of opening any new
account.

B. All Access Persons must direct their brokers to supply to the
Compliance Officer, on a timely basis, duplicate copies of all
confirmations for all securities accounts.

C. The Personal Securities Transaction Report of all transactions
subject to this Code must be filed with the Compliance Officer no
later than ten (10) days after the end of each calendar quarter.
The Report must include all securities transactions which each
Access Person has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership.

The Report must be dated, signed and contain the following
information:

1. the date of the transaction
2. the name of the security and its cusip number
3. the number of shares or the principal amount of each security
involved
4. the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition)
5. the price at which the transaction was effected
6. the name of the broker, dealer or bank effecting the
transaction.

The Personal Securities Transaction Report is required even if the
Access Person has no personal securities transactions during the quarter.

Page 8

<PAGE>

The manager and department head of an Access Person will be
notified if such persons quarterly Personal Securities Transaction
Report is late. If the Personal Securities Transaction Report is
late for any following quarters, the Access Person and his/her
manager will receive a notice stating that the Access Person is in
violation of the Code of Ethics and this violation should be
considered unsatisfactory performance during the next performance
review. Violation of the Code of Ethics can result in serious
sanctions by LIM, including possible termination of employment.

An outside director of a Fund is required to file such reports
only if the director, at the time of the transactions, knew or, in
the ordinary course of fulfilling his or her official duties as
director, should have known that during the 15-day period
immediately preceding or after the date of the transaction the
same security was purchased or sold by the Fund or was being
considered for purchase or sale by the Fund or its Adviser.
(However, no director shall be presumed to know of such matters
solely by reason of being a director or serving on a committee of
the Board).

D. If any security involved in a personal transaction is purchased or
sold by a Fund or other client within fifteen days of the personal
transaction, the Compliance Officer will request and the Access
Person must provide additional information relating to the
circumstances surrounding the personal transaction.

E. All Access Persons must certify annually that they have read and
complied with this Code of Ethics and all disclosure and reporting
requirements contained herein.

VII. Supervisory

A. Any question as to whether an employee is an Access Person or
Investment Personnel, or other questions concerning the Code of
Ethics or transactions in personal accounts, should be directed to
the Compliance Officer.

B. The Compliance Officer shall promptly report to the President of
LIM and the Compliance Committee any apparent violations of the
requirements contained in this Code of Ethics. The reports will be
reviewed and a determination will be made whether or not the Code
of Ethics has been violated and what sanctions, if any, should be
imposed.

VIII. Confidentiality

All information and reports from any Access Person shall be kept in
strict confidence, subject only to disclosure as required by law or to
the Compliance Committee as deemed necessary for compliance purposes.

Page 9
Dated: July, 1998

<PAGE>

EXHIBIT A
- --------------------------------------------------------------------------------

Lincoln National Convertible Securities Fund, Inc.

Lincoln National Income Fund, Inc.

Variable Annuity Fund A

Multi-Fund Variable Annuity

- Lincoln National Social Awareness Fund, Inc.
- Lincoln National Money Market Fund, Inc.
- Lincoln National Managed Fund, Inc.
- Lincoln National Growth Income Fund, Inc.
- Lincoln National Bond Fund, Inc.
- Lincoln National Special Opportunity Fund, Inc.
- Lincoln National Capital Appreciation Fund, Inc.
- Lincoln National Aggressive Growth Fund, Inc.
- Lincoln National International Fund, Inc.
- Lincoln National Global Asset Allocation Fund, Inc.
- Lincoln National Equity Income Fund, Inc.
- Any funds which may be added to the Lincoln family of funds

Page 10

<PAGE>

CODE OF ETHICS FOR
LINCOLN NATIONAL INVESTMENT COMPANIES
EXECUTIVE SUMMARY

- -----------------------------------------------------------------

PERSONNEL SUBJECT
ACTIVITY TO RESTRICTIONS

- -----------------------------------------------------------------

Restrictions on Personal INVESTMENT ACCESS
Investing Activity as presented PERSONNEL PERSON
in the Code of Ethics
- -----------------------------------------------------------------

A. Blackout Periods

Access Person
1. Trading prohibited until
the next trading day
following the execution
of a company trade in the
same security. Yes

Investment Personnel
2. Trading prohibited for
seven calendar days before
or after a company trade. Yes
- -----------------------------------------------------------------

B. Preclearance

1. All transactions must be
precleared. Yes Yes
- -----------------------------------------------------------------

C. Initial Public Offering

1. Prohibits purchasing any
initial public offering. Yes No
- -----------------------------------------------------------------

<PAGE>

- -----------------------------------------------------------------

PERSONNEL SUBJECT
ACTIVITY TO RESTRICTIONS

- -----------------------------------------------------------------

Restrictions on Personal INVESTMENT ACCESS
Investing Activity as presented PERSONNEL PERSON
in the Code of Ethics
- -----------------------------------------------------------------

D. Private Placements

1. Prohibits purchasing
any private placements
without PRIOR written
consent Yes

2. Anyone who at any
time holds a private
placement must receive
permission prior to their
participation in the
company's consideration
of any investment in the
same issuer. Yes
- -----------------------------------------------------------------

E. Ban on Short-Term Trading Profits

1. All opening positions must
be held a period of 60 days,
in aggregate, before they can
be closed at a profit. Any
short term trading profits
are subject to disgorgement
procedures. No No
- -----------------------------------------------------------------

<PAGE>
- -----------------------------------------------------------------

PERSONNEL SUBJECT
ACTIVITY TO RESTRICTIONS

- -----------------------------------------------------------------

Restrictions on Personal INVESTMENT ACCESS
Investing Activity as presented PERSONNEL PERSON
in the Code of Ethics
- -----------------------------------------------------------------

F. Gifts

1. Prohibits receiving anything
of more than a de minimis
value from any person or
entity that does business
with or on behalf of any
fund or client. Things
of value may include, but
are limited to, cash, travel
expenses, special deals or
incentives. Yes Yes
- -----------------------------------------------------------------

G. Services as a Director

1. Must receive PRIOR written
approval from the Legal or
Compliance Department before
they may serve on the board
of directors or any public
company. Yes Yes
- -----------------------------------------------------------------

<PAGE>

- ---------------------------------------------------------------------------

PERSONNEL SUBJECT
REPORTING REQUIREMENTS TO RESTRICTIONS

- ---------------------------------------------------------------------------

Additional compliance INVESTMENT ACCESS
requirements as presented PERSONNEL PERSON
in the Code of Ethics
- ---------------------------------------------------------------------------

A. Disclosure of all Personal
Holdings Yes Yes

1. All personal holdings must Disclose holdings without
be disclosed upon employment listing number of shares.
and annually thereafter.
- ---------------------------------------------------------------------------

B. Records of Securities
Transactions

1. Employees must direct Yes Yes
their broker(s) to Confirmations Confirmations
forward confirmations only only
of personal transactions Not Account Not Account
and monthly account statements statements
statements directly
to the Compliance
Department.

2. Employees are required Yes Yes
to fill out a Personal Current Current
Securities Transaction Procedure Procedure
Report at the end of Required by Required by
each quarter and return SEC SEC
the report to the
Compliance Department
within 10 days of the
end of the quarter.
- ---------------------------------------------------------------------------

<PAGE>

- ---------------------------------------------------------------------------

PERSONNEL SUBJECT
REPORTING REQUIREMENTS TO RESTRICTIONS

- ---------------------------------------------------------------------------

Additional compliance INVESTMENT ACCESS
requirements as presented PERSONNEL PERSON
in the Code of Ethics
- ---------------------------------------------------------------------------

C. Certification of Compliance
With Code of Ethics

1. Employees must sign a
certification annually
that they have read and
understand the Code of
Ethics and have complied
with all requirements
of the Code. Yes Yes
- ---------------------------------------------------------------------------

<PAGE>

CODE OF ETHICS

Lincoln National Investment Companies
- --------------------------------------------------------------------------------
Introduction It is the duty of all employees to conduct themselves with
integrity, in accordance with the Code of Ethics, and at all
times to place the interests of the shareholders and clients
first. In the interest of this credo, all personal securities
transactions will be conducted consistent with the Code of
Ethics and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's
position of trust and responsibility. The fundamental standard
of this Code is that personnel should not take any
inappropriate advantage of their positions.

The Securities and Exchange Commission (SEC) has adopted Rule
17j-1 under the Investment Company Act of 1940. This Rule
makes it unlawful for certain persons, including any
investment adviser or principal underwriter to a registered
investment company ("Fund"), in connection with the purchase
or sale by such person of a security held or to be acquired*
by the Fund:

(a) to employ any device, scheme or artifice to defraud the
Fund;

(b) to make to the Fund any untrue statement of a material
fact or omit to state to the Fund a material fact
necessary in order to make the statements made, in light
of the circumstances in which they are made, not
misleading;

(c) to engage in any act, practice or course of business that
operates or would operate as a fraud or deceit upon the
Fund; or

(d) to engage in any manipulative practice with respect to the
Fund.

- --------------------
* A security is deemed to be "held or to be acquired" if within the most recent
fifteen days it (i) is or has been held by the Fund or (ii) is being or has
been considered by the Fund or its investment adviser for purchase by the
Fund.

<PAGE>

The Rule also requires that every registered investment
company and each investment adviser or principal underwriter
for such investment company shall adopt a written code of
ethics containing provisions reasonably necessary to prevent
persons from engaging in acts in violation of the above
standard and shall use reasonable diligence and institute
procedures reasonably necessary to prevent violations of the
Code.

Accordingly, the boards of directors or managers, as
appropriate, of Lincoln Investment Management, Inc. ("LIM"),
Delaware Companies ("Delaware"), Lynch & Mayer, Inc. ("L&M"),
Vantage Global Advisors, Inc. ("VGA"), and each of the
entities listed on Exhibit A have adopted the following Code
of Ethics to be effective for their directors, officers, and,
where applicable, employees on and after January 1, 1996,
thereby replacing all previous Code of Ethics adopted by those
companies. This Code of Ethics does not replace, but is
intended to supplement, the Policy Statement on Conflicts of
Interest adopted by the board of directors of LIM, Delaware,
L&M and VGA.

Definitions (1) "Fund" and "Funds" means the entities listed on Exhibit A,
as amended from time to time.

(2) "Adviser" and "Advisers" means LIM, Delaware, L&M and VGA.

(3) "Access Person" of a Fund or Adviser includes each of its
directors, officers, investment personnel and advisory
persons.

(4) "Advisory Person" of a Fund or Adviser means (i) any
employee (including employees of companies in a control
relationship with a Fund or Adviser) who, in connection
with his or her regular functions or duties, makes,
participates in, or obtains information regarding the
purchase or sale of a security, or whose functions relate
to the making of any recommendations with respect to such
purchases and sales; and (ii) any natural person in a
control relationship with a Fund or Adviser who obtains
information concerning recommendations with regard to the
purchase or sale of a security.

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For purposes of this definition, "Advisory Person" when
used with reference to Lincoln Investment Management, Inc.
shall be deemed to include employees of the Treasurer's
Department and Law Division of Lincoln National
Corporation who otherwise satisfy this definition. At
Lincoln Investments, Advisory and Access Persons are the
same.

(5) "Investment Personnel" means portfolio managers,
securities analyst and traders, and those personnel who
provide information and advice to a portfolio manager or
who help execute the portfolio manager's decisions.

The Compliance Committee, with advice of the Law Division,
will identify all Access Persons, Advisory Persons and
Investment Personnel. The current members of the
Compliance Committee are listed in Exhibit B.

(6) "Control" shall mean investment discretion in whole or in
part of an account regardless of beneficial ownership to
include any controlling influence over the management or
policies of an account and/or investment company, unless
the power is solely the result of an official position
with the company.

(7) "Security" means any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement,
collateral trust certificate, preorganization certificate
or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas or
other mineral rights, any put, call, straddle, option or
privilege on any security (including a certificate of
deposit) or on any group or index of securities (including
any interest therein or based on the value thereof), or
any put, call, straddle, option, or privilege entered into
on a national securities exchange relation to foreign
currency, or, in general, any interest or participation

<PAGE>

in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or
purchase, any of the foregoing.

However, "security" does not mean U.S. Government
securities, bankers acceptances, bank certificates of
deposits, commercial paper, and shares of registered
open-end registered investment companies.

A security is being "considered for purchase or sale" or
is "being purchased or sold" when a recommendation to
purchase or sell the security has been made and
communicated and, with respect to the person making the
recommendation, when such person seriously considers
making such a recommendation.

(8) "Beneficial ownership" means, among other things, the
power to (a) vote or control the voting of securities; (b)
transfer securities or control their transfer; (c) receive
income from securities or control the disposition of the
income; or (d) receive or control the disposition of the
proceeds in a liquidation.

Generally speaking, a person who, directly or indirectly,
through any contract, arrangement, understanding,
relationship or otherwise, has or shares a direct or
indirect pecuniary interest in a security, is a
"beneficial owner" of the security.

For example, an Access Person will generally be considered
the beneficial owner of securities held in the name of a
spouse, minor children, or a person not in the immediate
family if the person is a relative sharing the same home
or if, by reason of a contract, understanding,
relationship, agreement, or other arrangement, the Access
Person obtains benefits substantially equivalent to
ownership.

<PAGE>

Personal The following restrictions apply to all Access Persons.
Transactions
in Securities
(1) No Access Person of a Fund or Adviser shall engage in any
act, practice or course of conduct which would violate the
provisions of Rule 17j-1.

(2) No Access Persons of a Fund or Adviser shall purchase or
sell, directly or indirectly, any security in which he or
she has, or by reason of the transactions acquires, any
direct or indirect beneficial ownership and which to his
or her actual knowledge at the time of the purchase or
sale (a) is being considered for purchase or sale by a
Fund or any other client of an Adviser; or (b) is being
purchased or sold by a Fund or any other client of an
Adviser, whether pursuant to a program of trading or
otherwise.

(3) No Access Person of a Fund or Adviser shall recommend any
security transaction without first having disclosed his or
her interest, if any, in the transaction or the issuer of
the security, including without limitation:

(a) his or her direct or indirect beneficial ownership of
any securities of the issuer;

(b) any contemplated transaction by the Access Person in
such securities;

(d) any present or proposed business relationship between
the issuer of its affiliates and the Access Person or
any party in which the Access Person has a significant
interest.

(4) No Access Person making any such recommendation may
purchase or sell the security which is the subject of the
recommendation until after he or she has been informed
that the Funds and any other clients of the Advisers
considering the recommendation have deferred or rejected
the recommendation. If the recommendation is approved for

<PAGE>

a Fund or other client of the Advisers, the Access Person
must adhere to all trading restrictions outlined in the
Code of Ethics.

(5) No Access Person of a Fund or Adviser shall reveal to any
other person (except in normal course of his or her duties
on behalf of a Fund or Adviser) any information regarding
securities transactions by a Fund or any other clients of
the Advisers or the consideration of any such securities
transactions.

(6) The prohibitions of (2) and (3) above shall not apply to:

(a) purchases or sales effected in any account over which
the Access Person has no direct or indirect influence
or control;

(b) purchases or sales of securities which are not
eligible for purchase or sale by the Funds or any
other clients of the Advisers;

(c) transactions in securities which are non-volitional on
the part of the Access Person, the Funds, or any other
clients of the Advisers;

(d) purchases which are part of an automatic dividend
reinvestment plan;

(e) purchases effected upon the exercise of rights issued
by an issuer pro rata to all holders of a class of its
securities (to the extent such rights were acquired
from the issuer), and sales of the rights so acquired;

(f) purchases and sales specifically approved by the
Compliance Committee, with the advice of the Law
Division and the Committee Officer, and deemed
appropriate because of unusual or unforeseen
circumstances.

(g) purchases and sales of Lincoln National Corporation
securities [see (h) below].

<PAGE>

(h) In the event an Access Person of a Fund or Adviser has
a question or concern about the applicability of this
Code of Ethics to a personal securities transaction,
the concern should be discussed with the Compliance
Officer. Transactions in Lincoln National Corporation
securities shall continue to be subject to insider
trading restrictions published from time to time to
time by Lincoln National Corporation to its insiders
and by the federal securities laws.

(7) Each Access Person's personal transactions must be
precleared by the Compliance Officer using the Personal
Transaction Preclearance Form. The form must be submitted
to the Compliance Officer prior to entering any orders for
personal transactions. Preclearance is only valid for one
day. If the order is not executed the same day, the
preclearance form must be resubmitted. Regardless of
preclearance, all transactions remain subject to the
provisions of (6) above.

(8) No Access Person may execute a buy or sell order for an
account in which he or she has beneficial ownership or
control until the next trading day following the execution
of a Fund/client trade in that same security.

Violation of this requirement can be expected to result in
serious sanctions, up to and including dismissal of the
person or persons involved.

(9) All Access Persons are prohibited from receiving anything
of more than a de minimis value from any person or entity
that does business with or on behalf of any Fund or
client. Things of value may include, but not be limited
to, travel expenses, special deals or incentives.

(10) All Access Persons require PRIOR written approval from
the President of LIM, with advice of the Law Division,
before they may serve on the board of directors of any
company in which we have an investment.

<PAGE>

Investment The following additional restrictions apply to all Investment
Personnel Personnel.

(1) All Investment Personnel are prohibited from purchasing
any initial public offering for their personal account.

(2) All Investment Personnel are prohibited from purchasing
any private placement without express PRIOR written
consent by the Compliance Committee. All private placement
holdings are subject to disclosure to the Compliance
Committee. Any Investment Person who is the beneficial
owner of a private placement must receive permission from
the Compliance Committee prior to any participation by
such person in the company's considerations of an
investment in the same issuer.

(3) No Investment Personnel may execute a buy or sell order
for an account for which he/she has beneficial ownership
within seven calendar days before or after an investment
company or separate account that he/she manages trades in
that security.

Violations of this requirement can be expected to result
in serious sanctions, up to and including dismissal of the
person or persons involved.

Required The following reports are required to be made by all Access
Reports Persons.

(1) All Access Persons must disclose brokerage relationships
at employment and at the time of opening any new account.

(2) All Access Persons will direct their brokers to supply to
the Compliance Officer, on a timely basis, duplicate
copies of all confirmations for all securities accounts.

(3) Each quarter, no later than the tenth day after the end of
the calendar quarter, each Access Person will submit to
the Compliance Officer a personal transaction summary
showing all transactions in securities which such person
has or acquires any direct or indirect beneficial
ownership. The Compliance Officer shall review all
reports. Every report will contain the following
information:
<PAGE>

(a) the date of the transaction, the name and the number
of shares and the principal amount of each security
involved;

(b) the nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);

(d) the name of the broker, dealer or bank effecting the
transaction.

An outside director of a Fund is required to file such
reports only if the director, at the time of the
transactions, knew or, in the ordinary course of
fulfilling his or her official duties as director, should
have known that during the 15-day period immediately
preceding or after the date of the transaction the same
security was purchase or sold by the Fund or was being
considered for purchase or sale by the Fund or its
Adviser. (However, no director shall be presumed to know
of such matters solely by reason of being a director or
serving on a committee of the board).

(4) All Access Persons must disclose all personal securities
holdings on commencement of employment and annually
thereafter.

(5) If any security involved in a personal transaction is
purchased or sold by an investment company or client
within fifteen days of the personal transaction, the
Compliance Officer will request and the Access Person will
provide additional information relating to the
circumstances surrounding the personal transaction.

(6) All Access Persons will certify annually that they have
read and complied with this Code of Ethics and all
disclosure and reporting requirements contained therein.

<PAGE>

Supervisory The Compliance Officer shall promptly report to the President,
Procedures Lincoln Investments and the Compliance Committee any apparent
violations of the prohibitions or reporting requirements
contained in this Code of Ethics. The reports will be reviewed
and a determination will be made whether or not the Code of
Ethics has been violated and shall determine what sanctions,
if any, should be imposed.

Confidentiality All reports will be kept confidential, subject only to
disclosure as required by law and to officers of the Funds or
Advisers or their respective counsel as deemed necessary for
compliance purposes and in order to administer this Code of
Ethics.

Dated: May 1, 1996

<PAGE>

EXHIBIT A

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Lincoln National Convertible Securities Fund, Inc.

Lincoln National Income Fund, Inc.

Variable Annuity Fund A

Multi-Fund Variable Annuity
- Lincoln National Social Awareness Fund, Inc.
- Lincoln National Money Market Fund, Inc.
- Lincoln National Managed Fund, Inc.
- Lincoln National Growth Income Fund, Inc.
- Lincoln National Bond Fund, Inc.
- Lincoln National Special Opportunity Fund, Inc.
- Lincoln National Capital Appreciation Fund, Inc.
- Lincoln National Aggressive Growth Fund, Inc.
- Lincoln National International Fund, Inc.
- Lincoln National Global Assets Allocation Fund, Inc.
- Lincoln National Equity Income Fund, Inc.

Lincoln Advisor Funds
- Lincoln Growth and Income Portfolio
- Lincoln Enterprise Portfolio
- Lincoln U.S. Growth Portfolio
- Lincoln World Growth Portfolio
- Lincoln New Pacific Portfolio
- Lincoln Government Income Portfolio
- Lincoln Corporate Income Portfolio
- Lincoln Tax-Free Income Portfolio
- Lincoln Cashfund Portfolio

<PAGE>

EXHIBIT B

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Compliance Committee

- H. Thomas McMeekin, President

- Dennis Blume, Senior Vice President

- Steven R. Brody, Senior Vice President

- Ann Warner, Senior Vice President

- Harold McElraft, Vice President

- J. Michael Keefer, Vice President &
Associate General Counsel

- Gina Rohrbacher, Compliance Officer