<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-40991
File No. 811-6322
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No._______
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Post-Effective Amendment No. 17 X
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AND
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 17
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DELAWARE POOLED TRUST, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- -------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: October 17, 1997
----------------
It is proposed that this filing will become effective:
______ immediately upon filing pursuant to paragraph (b)
______ on (date) pursuant to paragraph (b)
______ 60 days after filing pursuant to paragraph (a)(1)
______ on (date) pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
- ------
______ on (date) pursuant to paragraph (a)(2) of Rule 485
Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. The Rule 24f-2 Notice for
Registrant's most recent fiscal year was filed on December 27, 1996.
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 17 to Registration File No. 33-40991 includes
the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectus
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET
PART A
Item No. Description Location in Prospectus*
- -------- ----------- -----------------------
1 Cover Page...............................Cover
2 Fund Expenses............................Fund Expenses
3 Condensed Financial Information..........Financial Highlights
4 General Description of Registrant .......Investment Objectives,
Policies and Risk
Considerations
5 Management of the Fund ..................Management of the Fund
6 Capital Stock and Other Securities ......Dividends and Capital Gains
Distributions; Taxes
7 Purchase of Securities Being Offered.....Cover; Purchase of Shares;
Management of the Fund
8 Redemption or Repurchase.................Purchase of Shares;
Redemption of Shares
9 Legal Proceedings........................None
* All Portfolios, except information about REIT Fund A Class, REIT Fund B Class,
REIT Fund C Class and REIT Fund Institutional Class of The Real Estate
Investment Trust Portfolio appear in separate prospectuses and are covered by a
separate cross-reference sheet, which appears next in this filing.
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE SHEET
PART A
Location in
Item No. Description Prospectuses
- ------- ----------- -------------
<S> <C> <C>
The Real Estate Investment
Trust Portfolio
REIT Fund A Class/ REIT Fund
REIT Fund B Class/ Institutional
REIT Fund C Class/ Class
1 Cover Page...................................................... Cover Page Cover Page
2 Synopsis........................................................ Fund Expenses Fund Expenses
3 Condensed Financial Information................................. Financial Financial
Highlights Highlights
4 General Description of Registrant .............................. Investment Investment
Objective, Policies Objective,
and Risk Policies and
Considerations Risk
Considerations
5 Management of the Fund ......................................... Management Management
of the Fund of the Fund
6 Capital Stock and Other Securities ............................. Dividends and Capital Dividends and
Gains Distributions; Capital Gains
Taxes Distributions;
Taxes
7 Purchase of Securities Being Offered............................ Cover; Purchase of Cover;
Shares; Management Purchase of
of the Fund Shares;
Management of
the Fund
8 Redemption or Repurchase........................................ Purchase of Shares; Purchase of
Redemption of Shares Shares;
Redemption of
Shares
9 Legal Proceedings............................................... None None
</TABLE>
<PAGE>
PART B
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
All Portfolios
10 Cover Page..............................Cover
11 Table of Contents.......................Table of Contents
12 General Information and History.........General Information
13 Investment Objectives and Policies......Investment Policies,
Portfolio Techniques and Risk
Considerations
14 Management of the Registrant............Officers and Directors
15 Control Persons and Principal Holders
of Securities...........................Officers and Directors
16 Investment Advisory and Other Services..Investment Management
Agreements; Officers and
Directors; General
Information; Financial
Statements
17 Brokerage Allocation....................Trading Practices and
Brokerage
18 Capital Stock and Other Securities......Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of
Securities Being Offered................Purchasing Shares;
Determining Net Asset
Value; Redemption and
Repurchase
20 Tax Status..............................Accounting and Tax Issues;
Taxes
21 Underwriters ...........................Purchasing Shares
22 Calculation of Performance Data.........Performance Information
23 Financial Statements....................Financial Statements
<PAGE>
PART C
Item No. Description Location in Part C
- -------- ----------- ------------------
All Portfolios
24 Financial Statements and Exhibits..............Item 24
25 Persons Controlled by or under Common
Control with Registrant........................Item 25
26 Number of Holders of Securities................Item 26
27 Indemnification................................Item 27
28 Business and Other Connections of
Investment Adviser.............................Item 28
29 Principal Underwriters.........................Item 29
30 Location of Accounts and Records...............Item 30
31 Management Services............................Item 31
32 Undertakings...................................Item 32
<PAGE>
(DPT-I)
DELAWARE POOLED TRUST
Delaware Pooled Trust, Inc. ("Fund") is an, open-end management investment
company. The Fund consists of 14 portfolios (collectively, the "Portfolios," or,
individually, a "Portfolio") offering no-load investment alternatives for
institutional clients and high net-worth individuals. Investors may make
investments in only one or in more than one of the following Portfolios:
<TABLE>
<CAPTION>
EQUITY ORIENTED FIXED-INCOME ORIENTED
<S> <C>
The Defensive Equity Portfolio The Fixed Income Portfolio
The Aggressive Growth Portfolio The Limited-Term Maturity Portfolio
The International Equity Portfolio The Global Fixed Income Portfolio
The Defensive Equity Small/Mid-Cap Portfolio The International Fixed Income Portfolio
The Labor Select International Equity Portfolio The High-Yield Bond Portfolio
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II
The Global Equity Portfolio
The Emerging Markets Portfolio
</TABLE>
The Fund is designed to meet the investment needs of discerning institutional
investors and high net-worth individuals who desire experienced investment
management and place a premium on personal service.
The High-Yield Bond Portfolio of the Fund invests up to 100% of its assets in
lower rated fixed-income securities, commonly known as "junk bonds," which
involve greater risks, including default risks, than higher rated fixed-income
securities. Purchasers should carefully assess these risks before investing in
The High-Yield Bond Portfolio. See "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" and "ADDITIONAL INVESTMENT INFORMATION - HIGH-YIELD, HIGH RISK
SECURITIES."
This Prospectus is designed to set forth concisely the information about the
Fund that a prospective client should know before investing and it should be
retained for future reference. Additional information about the Fund is
contained in a Statement of Additional Information dated _______ __, 1997, as it
may be amended from time to time. That information is incorporated herein by
reference and is available without charge upon request from the Fund:
Delaware Pooled Trust, Inc.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
1-800-231-8002
The Real Estate Investment Trust Portfolio offers five classes of shares. This
Prospectus relates only to The Real Estate Investment Trust Portfolio class,
which is being offered for sale to investors beginning October , 1997. The other
classes are subject to sales charges and/or other expenses, which may affect
<PAGE>
(DPT-I)
their performance. A prospectus for any of these classes can be obtained by
calling or writing to the Fund at the address or telephone number set forth
above. References to The Real Estate Investment Trust Portfolio in this
Prospectus shall mean The Real Estate Investment Trust Portfolio class, unless
otherwise noted.
-2-
<PAGE>
(DPT-I)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
<S> <C>
Fund Expenses Additional Investment Information
Financial Highlights Investment Limitations
Delaware Pooled Trust Summary Management of the Fund
Fund Officers and Portfolio Managers Shareholder Services
Risk Factors Dividends and Capital Gains
Investment Objectives, Policies Distributions
and Risk Considerations Taxes
Purchase of Shares Valuation of Shares
Redemption of Shares Portfolio Transactions
Performance Information
General Information
Appendix A--Ratings
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is:
______ __, 1997
-3-
<PAGE>
(DPT-I)
FUND EXPENSES
The following tables illustrate all expenses and fees that a shareholder of the
Fund can expect to incur. The purpose of the tables is to assist the investor in
understanding the various expenses that an investor in the Fund will bear
directly or indirectly. With respect to The Fixed Income Portfolio, The
Limited-Term Maturity Portfolio, The International Fixed Income Portfolio, The
Defensive Equity Small/Mid-Cap Portfolio, The High-Yield Bond Portfolio, The
Global Equity Portfolio, The Emerging Markets Portfolio, The Real Estate
Investment Trust Portfolio, and The Real Estate Investment Trust Portfolio II,
the amounts set forth below corresponding to the caption "Other Expenses" are
based on estimates for the initial fiscal year in which they conduct operations.
With respect to The Defensive Equity Portfolio, The Aggressive Growth Portfolio,
The International Equity Portfolio, The Global Fixed Income Portfolio and The
Labor Select International Equity Portfolio, the amounts set forth below
corresponding to the caption "Other Expenses" are based on actual results for
the Portfolios' most recently completed fiscal year.
<TABLE>
<CAPTION>
====================================================================================================================================
The The Inter-
The The The Inter- The Limited- The Global national
Shareholder Defensive Aggressive national Fixed Term Fixed Fixed
Transaction Equity Growth Equity Income Maturity Income Income
Expenses Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Charge None None None None None None None
Imposed on
Purchases
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Charge
Imposed on None None None None None None None
Reinvested
Dividends
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption Fees None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange Fees None None None None None None None
====================================================================================================================================
</TABLE>
-4-
<PAGE>
(DPT-I)
<TABLE>
<CAPTION>
========================================================================================================================
Annual Fund
Operating The
Expenses (as The The The The The Limited- The Global International
a percentage Defensive Aggressive International Fixed Term Fixed Fixed
of average Equity Growth Equity Income Maturity Income Income
net assets) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees After Voluntary 0.52%* 0.69%* 0.75%* 0.00%* 0.22%* 0.43%* 0.02%*
Waiver and Payment
- ------------------------------------------------------------------------------------------------------------------------
12b-1 Fees None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.15% 0.21% 0.14% 0.53% 0.21% 0.17% 0.58%
- ------------------------------------------------------------------------------------------------------------------------
Total Operating
Expenses After
Voluntary Waiver
and Payment 0.67%* 0.90%* 0.89%* 0.53%* 0.43%* 0.60%* 0.60%*
========================================================================================================================
</TABLE>
* Since The International Fixed Income Portfolio did not sell shares until April
11, 1997, "Other Expenses" for this Portfolio are based on estimated amounts
derived from The Global Fixed Income Portfolio and assume the voluntary waiver
of fees will be in effect. The above information for The Defensive Equity
Portfolio, The Aggressive Growth Portfolio, The International Equity Portfolio,
The Fixed Income Portfolio, The Limited-Term Maturity Portfolio and The Global
Fixed Income Portfolio reflects the expenses these Portfolios incurred for the
Fund's fiscal year ended October 31, 1996. With respect to The Defensive Equity
Portfolio, The Aggressive Growth Portfolio, The Fixed Income Portfolio and The
Limited-Term Maturity Portfolio, Delaware Investment Advisers has elected
voluntarily to waive that portion, if any, of the annual Investment Advisory
Fees payable by a Portfolio and to pay a Portfolio's expenses to the extent
necessary to ensure that "Total Operating Expenses" of that Portfolio (exclusive
of taxes, interest, brokerage commissions and extraordinary expenses) do not
exceed, as a percentage of average net assets, on an annualized basis, 0.68%,
0.93%, 0.53% and 0.43%, respectively, during the period from November 1, 1996
through October 31, 1997. Similarly, Delaware International Advisers Ltd.
("Delaware International"), the investment adviser to The International Equity
Portfolio, The Global Fixed Income Portfolio and The International Fixed Income
Portfolio, has elected voluntarily to waive that portion, if any, of its annual
Investment Advisory Fees and to pay the Portfolio's expenses to the extent
necessary to ensure that the expenses of that Portfolio (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses) do not exceed, as a
percentage of average net assets, on an annualized basis, 0.96%, 0.60% and
0.60%, respectively, during the period from November 1, 1996 through October 31,
1997. In the absence of such voluntary waivers and payments, "Investment
Advisory Fees" (as a percentage of net assets) would be 0.55%, 0.80_%, 0.40%,
0.30%, 0.50% and 0.50%, respectively, and "Total Fund Operating Expenses" (as a
percentage of average net assets) would be 0.70%, 1.01%, 1.20%, 0.51%, 0.66%,
and 1.08%, respectively, for The Defensive Equity, The Aggressive Growth, The
Fixed Income, The Limited-Term Maturity, The Global Fixed Income and The
International Fixed Income Portfolios. The actual "Total Operating Expenses" of
The International Equity Portfolio were 0.89% for the fiscal year ended October
31, 1996 and therefore the voluntary waiver and payment noted above was not
triggered. See "MANAGEMENT OF THE FUND" for a recital of the Investment Advisory
Fees to which each adviser is entitled under its Investment Management
Agreement.
-5-
<PAGE>
(DPT-I)
<TABLE>
<CAPTION>
=============================================================================================
The
Defensive The Labor The Real
Equity Select Estate
Shareholder Small/ International Investment
Transaction Mid-Cap Equity Trust
Expenses Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales Charge
Imposed on None None None
Purchases
- ---------------------------------------------------------------------------------------------
Sales Charge
Imposed on None None None
Reinvested
Dividends
- ---------------------------------------------------------------------------------------------
Purchase
Reimbursement None None None
Fees*
- ---------------------------------------------------------------------------------------------
Redemption
Reimbursement None None None
Fees*
- ---------------------------------------------------------------------------------------------
Exchange Fees None None None
=============================================================================================
</TABLE>
[RESTUBBED FROM TABLE ABOVE]
<TABLE>
<CAPTION>
=============================================================================================================
The Real The
Estate High- The The
Shareholder Investment Yield Global Emerging
Transaction Trust Bond Equity Markets
Expenses Portfolio II Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales Charge
Imposed on None None None None
Purchases
- -------------------------------------------------------------------------------------------------------------
Sales Charge
Imposed on None None None None
Reinvested
Dividends
- -------------------------------------------------------------------------------------------------------------
Purchase
Reimbursement None None None 0.75%
Fees*
- -------------------------------------------------------------------------------------------------------------
Redemption
Reimbursement None None None 0.75%
Fees*
- -------------------------------------------------------------------------------------------------------------
Exchange Fees None None None None
=============================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================
Annual Fund The
Operating Defensive The Labor The Real
Expenses (as a Equity Select Estate
percentage Small/ International Investment
of average Mid-Cap Equity Trust
net assets) Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment
Advisory Fees 0.65%** 0.32%** 0.56%**
After Voluntary
Waiver and
Payment
- ----------------------------------------------------------------------------------------------
12b-1 Fees None None None
- ----------------------------------------------------------------------------------------------
Other Expenses 0.14% 0.60% 0.33%
- ----------------------------------------------------------------------------------------------
Total Operating
Expenses
After Voluntary 0.79%** 0.92%** 0.89%**
Waiver
and Payment
==============================================================================================
</TABLE>
[RESTUBBED FROM TABLE ABOVE]
<TABLE>
<CAPTION>
=============================================================================================================
Annual Fund
Operating The Real
Expenses (as a Estate The The The
percentage Investment High-Yield Global Emerging
of average Trust Bond Equity Markets
net assets) Portfolio II Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment
Advisory Fees 0.56%** 0.45%** 0.75%** 1.20%**
After Voluntary
Waiver and
Payment
- -------------------------------------------------------------------------------------------------------------
12b-1 Fees None None None None
- -------------------------------------------------------------------------------------------------------------
Other Expenses 0.33% 0.14% ____% 0.35%
- -------------------------------------------------------------------------------------------------------------
Total Operating
Expenses
After Voluntary 0.89%** 0.59%** %** 1.55%**
Waiver
and Payment
=============================================================================================================
</TABLE>
* A purchase reimbursement fee and a redemption reimbursement fee each
equal to 0.75% (as a percentage of the dollar amount purchased or
redeemed, as the case may be) are assessed against investors in shares
of The Emerging Markets Portfolio and paid to the Portfolio. The
purpose of these fees is to allocate transaction costs associated with
investments and redemptions to the investors making those transactions,
thus insulating other shareholders from those costs. See "HOW TO
INVEST," "PURCHASE OF SHARES," "HOW TO REDEEM," "REDEMPTION OF SHARES"
and "PURPOSE OF REIMBURSEMENT FEES -- THE EMERGING MARKETS PORTFOLIO."
** The above information for The Labor Select International Equity
Portfolio reflects the expenses the Portfolio incurred for the Fund's
fiscal year ended October 31, 1996. Since The Defensive Equity
Small/Mid-Cap Portfolio, The Global Equity Portfolio and The Real
Estate Investment Trust Portfolio II have not commenced operations; the
Fund has not commenced selling shares of the Real Estate Investment
Trust Portfolio as of the date of this Prospectus; and The High-Yield
Bond Portfolio and The Emerging Markets Portfolio did not sell shares
-6-
<PAGE>
(DPT-I)
until, respectively, December 12, 1996 and April 14, 1997, "Other
Expenses" is based on estimated amounts each Portfolio expects to pay
during the current fiscal year. For The Real Estate Investment Trust
Portfolio and The Real Estate Investment Trust Portfolio II, "Other
Expenses" are estimates based on the expenses incurred by the original
(and then only) class of shares of The Real Estate Investment Trust
Portfolio for the Fund's fiscal year ended October 31, 1996. Such
original class of shares, like The Real Estate Investment Trust
Portfolio class being offered in this Prospectus, carried no front-end
sales charge and was not subject to Rule 12b-1 expenses. Effective ,
1997, that original class has been redesignated The REIT Fund A Class,
which is offered by a separate prospectus.
With respect to The Defensive Equity Small/Mid-Cap Portfolio, The Real
Estate Investment Trust Portfolio, The Real Estate Investment Trust
Portfolio II and The High-Yield Bond Portfolio, Delaware Investment
Advisers has elected voluntarily to waive that portion, if any, of the
annual Investment Advisory Fee payable by each such Portfolio or class
and to pay such Portfolio's or class' expenses to the extent necessary
to ensure that "Total Operating Expenses" of that Portfolio or class
(exclusive of taxes, interest, brokerage commissions and extraordinary
expenses) do not exceed, as a percentage of average net assets, on an
annualized basis, 0.79%, 0.89%, 0.89% and 0.59%, respectively, during
the period from the commencement of the public offering of such
Portfolio or class through October 31, 1997. Similarly, Delaware
International, the investment adviser to The Labor Select International
Equity Portfolio, The Global Equity Portfolio and The Emerging Markets
Portfolio, has elected voluntarily to waive that portion, if any, of
the annual Investment Advisory Fee payable by each such Portfolio and
to pay such Portfolio's expenses to the extent necessary to ensure that
"Total Operating Expenses" of that Portfolio (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses) do not
exceed, as a percentage of average net assets, on an annualized basis,
0.92%, ___% and 1.55%, respectively, during the period from the
commencement of the public offering of the Portfolio through October
31, 1997. In the absence of such voluntary waivers and payments,
"Investment Advisory Fees" (as a percentage of average net assets)
would be 0.75%, 0.75%, 0.75%, and 0.75% and "Total Fund Operating
Expenses" (as a percentage of average net assets) would be 1.35%,
1.08%, 1.08% and ___%, respectively, for The Labor Select International
Equity Portfolio, The Real Estate Investment Trust Portfolio, The Real
Estate Investment Trust Portfolio II and The Global Equity Portfolio.
See "MANAGEMENT OF THE FUND" for a recital of the Investment Advisory
Fees to which each adviser is entitled under its Investment Management
Agreement.
The following example illustrates the expenses that you would incur on a $1,000
investment, assuming (1) a 5% annual rate of return, and (2) redemption at the
end of each time period. The following examples also assume the voluntary waiver
of the management fee and/or other payments of expenses by the investment
adviser as discussed in this Prospectus. For The Emerging Markets Portfolio, the
expenses include the purchase reimbursement and redemption reimbursement fees
payable to the Portfolio. No other Portfolio charges these fees.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
The Defensive Equity Portfolio $7 $21 $37 $ 83
The Aggressive Growth Portfolio 9 29 50 111
The International Equity Portfolio 9 28 49 110
The Labor Select International Equity Portfolio 9 29 51 113
The Fixed Income Portfolio 5 17 30 66
The Limited-Term Maturity Portfolio 4 14 24 54
The Global Fixed Income Portfolio 6 19 33 75
The International Fixed Income Portfolio 6 19 33 75
</TABLE>
-7-
<PAGE>
(DPT-I)
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
The Defensive Equity Small/Mid-Cap Portfolio* $ 8 $25
The High-Yield Bond Portfolio* 6 19
The Global Equity Portfolio*
The Real Estate Investment Trust Portfolio** 9 28
The Real Estate Investment Trust Portfolio II** 9 28
The Emerging Markets Portfolio* 36 68
</TABLE>
For The Emerging Markets Portfolio, the only Portfolio subject to a redemption
reimbursement fee, you would pay the following expenses on the same investment,
assuming no redemption:
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
The Emerging Markets Portfolio $26 $58
</TABLE>
* Assumes net assets of each Portfolio equal to $75 million.
** Based upon the expenses incurred by the original (and then only) class of
shares offered by The Real Estate Investment Trust Portfolio for the Fund's
fiscal year ended October 31, 1996. That original class, which has been
redesignated The REIT Fund A Class and is offered by a separate prospectus,
carried no front-end sales charge or Rule 12b-1 distribution fees through ,
1997.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-8-
<PAGE>
(DPT-I)
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
The Defensive Equity Portfolio, The Aggressive Growth Portfolio, The
International Equity Portfolio, The Global Fixed Income Portfolio, The Labor
Select International Equity Portfolio, The Real Estate Investment Trust
Portfolio and The Fixed Income Portfolio of Delaware Pooled Trust, Inc. included
in, or incorporated by reference into the Statement of Additional Information
and, for periods ending on or before October 31, 1996 have been audited by Ernst
& Young LLP, independent auditors. The data should be read in conjunction with
the financial statements.
Further information about the performance of these Portfolios of Delaware Pooled
Trust, Inc. is contained in their Annual Report. Both the Annual Report (which
includes related notes and the report of Ernst & Young LLP) and the Statement of
Additional Information may be obtained from the Fund upon request at no charge.
As of the date of this Prospectus, The Defensive Equity Small/Mid-Cap Portfolio,
The Limited-Term Maturity Portfolio, The Real Estate Investment Trust Portfolio
II and The Global Equity Portfolio have sold no shares to public investors and,
thus, have not commenced operations. The High-Yield Bond Portfolio, The
International Fixed Income Portfolio and The Emerging Markets Portfolio
commenced operations on December 2, 1996, April 11, 1997 and April 14, 1997,
respectively.
-9-
<PAGE>
DPT-I-CHT
<TABLE>
<CAPTION>
The Defensive
Equity Portfolio
-------------------------------------------------------------------------
Period 2/3/92(1)
Year Ended through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/92
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $14.6600 $13.0800 $12.7300 $10.6600 $10.0000
Income From Investment Operations
Net Investment Income ................................... 0.4404 0.4303 0.3203 0.2841 0.2291
Net Gains (Losses) on Securities
(both realized and unrealized) ........................ 2.9596 1.9797 0.6527 2.3159 0.5109
-------- -------- -------- -------- --------
Total from Investment Operations................ 3.4000 2.4100 0.9730 2.6000 0.7400
-------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment income) .................. (0.4400) (0.3400) (0.2800) (0.3200) (0.0800)
Distributions (from capital gains) ...................... (1.1600) (0.4900) (0.3430) (0.2100) none
Returns of Capital ...................................... none none none none none
-------- -------- -------- -------- --------
Total Distributions ............................ (1.6000) (0.8300) (0.8300) (0.5300) (0.0800)
-------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $16.4600 $14.6660 $13.0800 $12.7300 $10.6600
======== ======== ======== ======== ========
Total Return ............................................ 24.87%(2) 19.77%(2) 7.96%(2) 25.17%(2) 10.13%(2)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) ................ $ 67,179 $ 51,947 $ 37,323 $ 13,418 $ 4,473
Ratio of Expenses to Average Daily Net Assets ............ 0.67% 0.68% 0.68% 0.68% 0.68%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations ........................... 0.70% 0.71% 0.82% 1.38% 2.38%
Ratio of Net Investment Income to Average Daily Net Assets 2.85% 3.33% 3.26% 2.90% 3.65%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations ........................... 2.83% 3.30% 3.12% 2.20% 1.95%
Portfolio Turnover Rate .................................. 74% 88% 73% 37% 28%
Average Commission Rate Paid ............................. $ 0.06 N/A N/A N/A N/A
</TABLE>
- ----------
(1) Date of initial sale; ratios and total return have been annualized.
(2) Total return reflects the expense limitations referenced in Fund
Expenses.
-10-
<PAGE>
DPT-I-CHT
<TABLE>
<CAPTION>
The Aggressive
Growth Portfolio
---------------------------------------------------------------------
Period 2/27/92(1)
Year Ended through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/92
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $12.8600 $11.0100 $11.2000 $ 9.0400 $10.0000
Income From Investment Operations
Net Investment Income .................................... (0.0188) 0.0428 0.0075 0.0181 0.0167
Net Gains (Losses) on Securities
(both realized and unrealized) ......................... 2.3913 2.0552 0.0325 2.1589 (0.9767)
-------- -------- -------- -------- --------
Total from Investment Operations ................ 2.3725 2.0980 0.0400 2.1770 (0.9600)
-------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment income) ................... (0.0425) (0.0120) (0.0200) (0.0170) none
Distributions (from capital gains) ....................... (0.6200) (0.2360) (0.2100) none none
Returns of Capital ....................................... none none none none none
-------- -------- -------- -------- --------
Total Distributions ............................. (0.6625) (0.2480) (0.2300) (0.0170) none
-------- -------- -------- -------- --------
Net Asset Value, End of Period ........................... $14.5700 $12.8600 $11.0100 $11.2000 $ 9.0400
======== ======== ======== ======== ========
Total Return ............................................. 19.19%(2) 19.61%(2) 0.34%(2) 24.10%(2) (13.89%)(2)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) ................ $ 28,526 $ 29,092 $ 22,640 $ 20,478 $ 4,538
Ratio of Expenses to Average Daily Net Assets ............ 0.90% 0.93% 0.93% 0.93% 0.93%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations ........................... 1.01% 1.08% 1.17% 1.40% 2.56%
Ratio of Net Investment Income to Average Daily Net Assets (0.18%) 0.37% 0.07% 0.23% 0.28%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations ........................... (0.29%) 0.22% (0.17%) (0.24%) (1.35%)
Portfolio Turnover Rate .................................. 95% 64% 43% 81% 34%
Average Commission Rate Paid ............................. $ 0.06 N/A N/A N/A N/A
</TABLE>
(1) Date of initial sale; ratios and total return have been annualized.
(2) Total return reflects the expense limitations referenced in Fund
Expenses.
-11-
<PAGE>
DPT-I-CHT
<TABLE>
<CAPTION>
The International
Equity Portfolio
---------------------------------------------------------------
Period 2/4/92(1)
Year Ended through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/92
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............................. $13.1200 $13.1100 $11.9900 $9.5000 $10.0000
Income From Investment Operations
Net Investment Income............................................ 0.5063 0.4749 0.1440 0.2414 0.2282
Net Gains (Losses) on Securities
(both realized and unrealized)................................. 1.7937 0.0011 1.2360 2.5686 (0.6282)
-------- -------- -------- -------- -------
Total from Investment Operations........................ 2.3000 0.4760 1.3800 2.8100 (0.4000)
-------- -------- -------- -------- -------
Less Distributions
Dividends (from net investment income)........................... (0.4900) (0.1700) (0.1600) (0.3200) (0.1000)
Distributions (from capital gains)............................... (0.1500) (0.2960) (0.1000) none none
Returns of Capital............................................... none none none none none
-------- -------- -------- -------- -------
Total Distributions..................................... (0.6400) (0.4660) (0.2600) (0.3200) (0.1000)
-------- -------- -------- -------- -------
Net Asset Value, End of Period................................... $14.7800 $13.1200 $13.1100 $11.9900 $9.5000
======== ======== ======== ======== =======
Total Return..................................................... 18.12% 3.91% 11.66%(2) 30.28%(2) (5.44%)(2)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted)........................ $299,950 $156,467 $70,820 $24,288 $5,966
Ratio of Expenses to Average Daily Net Assets.................... 0.89% 0.90% 0.94% 0.96% 0.96%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations................................... -- -- 0.97% 1.38% 2.94%
Ratio of Net Investment Income to Average Daily Net Assets....... 4.36% 4.81% 1.36% 2.98% 4.67%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations................................... -- -- 1.33% 2.56% 2.69%
Portfolio Turnover Rate.......................................... 8% 20% 22% 28% 2%
Average Commission Rate Paid..................................... $0.02 N/A N/A N/A N/A
</TABLE>
(1) Date of initial sale; ratios and total return have been annualized.
(2) Total return reflects the expense limitations referenced in Fund
Expenses.
-12-
<PAGE>
DPT-I-CHT
<TABLE>
<CAPTION>
The Global
Fixed Income Portfolio
-----------------------------------------------------------
Period 11/30/92(1)
Year Ended through
10/31/96 10/31/95 10/31/94 10/31/93
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $11.0400 $ 9.7900 $11.0900 $10.0000
Income From Investment Operations
Net Investment Income .................................... 0.7774 0.7357 0.4189 0.9547
Net Gains (Losses) on Securities
(both realized and unrealized) ......................... 0.7246 0.9243 (0.1929) 0.7433
-------- -------- -------- --------
Total from Investment Operations ................ 1.5020 1.6600 0.2260 1.6980
-------- -------- -------- --------
Less Distributions
Dividends (from net investment income) ................... (0.7200) (0.4100) (0.9490) (0.6080)
Distributions (from capital gains) ....................... (0.2020) none (0.5770) none
Returns of Capital ....................................... none none none none
-------- -------- -------- --------
Total Distributions ............................. (0.9220) (0.4100) (1.5260) (0.6080)
-------- -------- -------- --------
Net Asset Value, End of Period ........................... $11.6200 $11.0400 $ 9.7900 $11.0900
======== ======== ======== ========
Total Return ............................................. 16.40%(2) 17.38%(2) 2.07%(2) 18.96%(2)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) ................ $252,068 $99,161 $42,266 $29,313
Ratio of Expenses to Average Daily Net Assets ............ 0.60% 0.60% 0.62% 0.62%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations ........................... 0.66% 0.68% 0.76% 0.88%
Ratio of Net Investment Income to Average Daily Net Assets 8.52% 6.73% 3.62% 10.68%
Ratio of Net Investment Income to Average Daily Net Asset
Prior to Expense Limitations ........................... 8.46% 6.65% 3.48% 10.42%
Portfolio Turnover Rate .................................. 63% 77% 205% 198%
</TABLE>
(1) Date of initial sale; ratios and total return have been annualized.
(2) Total return reflects the expense limitations referenced in Fund
Expenses.
-13-
<PAGE>
DPT-I-CHT
<TABLE>
<CAPTION>
The Labor Select The Real Estate
International Investment The Fixed
Equity Portfolio Trust Portfolio(1) Income Portfolio
Period 12/19/95(2) Period 12/6/95(2) Period 3/12/96(2)
through through through
10/31/96 10/31/96 10/31/96
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $10.0000 $10.0000 $10.0000
Income From Investment Operations
Net Investment Income........................................ 0.4785 0.6515 0.3856
Net Gains (Losses) on Securities
(both realized and unrealized)............................. 1.3115 1.9385 0.0100
-------- -------- --------
Total from Investment Operations.................... 1.7900 2.5900 0.3956
-------- -------- --------
Less Distributions
Dividends (from net investment income)....................... (0.1000) (0.1000) (0.3856)
Distributions (from capital gains)........................... none none none
Returns of Capital........................................... none none none
-------- -------- --------
Total Distributions................................. (0.1000) (0.4100) (0.3856)
-------- -------- --------
Net Asset Value, End of Period............................... $11.6900 $12.4900 $10.0100
======== ======== ========
Total Return................................................. 17.97%(3) 26.12%(3) 4.08%(3)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted).................... $23,154 $26,468 $10,518
Ratio of Expenses to Average Daily Net Assets................ 0.92% 0.89% 0.53%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations............................... 1.30% 1.02% 1.20%
Ratio of Net Investment Income to Average Daily Net Assets... 6.64% 6.70% 6.14%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations............................... 6.26% 6.57% 5.47%
Portfolio Turnover Rate...................................... 7% 109% 232%
Average Commission Rate Paid................................. $0.03 $0.06 N/A
</TABLE>
(1) Shares of The Real Estate Investment Trust Portfolio class of The Real
Estate Investment Trust Portfolio being offered in this Prospectus were
made available for sale beginning October , 1997. The financial
highlights appearing above are derived from data concerning the
original (and then only) class of shares offered by The Real Estate
Investment Trust Portfolio. That original class has been redesignated
The REIT Fund A Class and is offered in a separate prospectus. Like The
Real Estate Investment Trust Portfolio class, the original class, prior
to its redesignation, did not carry a front-end sales charge and was
not subject to Rule 12b-1 distribution expenses.
(2) Date of initial sale; ratios and total return have been annualized.
(3) Total return reflects the expense limitations referenced in Fund
Expenses.
-14-
<PAGE>
DPT-I-CHT
<TABLE>
<CAPTION>
The High-Yield
Bond Portfolio
Unaudited
12/2/96(1)
through
4/30/97
<S> <C>
Net Asset Value, Beginning of Period................................. $10.0000
Income From Investment Operations
Net Investment Income................................................ 0.3300
Net Gains (Losses) on Securities
(both realized and unrealized)..................................... 0.1950
-------
Total from Investment Operations............................ 0.5250
-------
Less Distributions
Dividends (from net investment income)............................... 0.2650)
Distributions (from capital gains)................................... none
Returns of Capital................................................... none
-------
Total Distributions......................................... 0.2650)
-------
Net Asset Value, End of Period....................................... 11.2600
=======
Total Return......................................................... 5.29%(2)(3)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted)............................ $8,604
Ratio of Expenses to Average Daily Net Assets........................ 0.59%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations....................................... 0.91%
Ratio of Net Investment Income to Average Daily Net Assets........... 8.86%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations....................................... 8.54%
Portfolio Turnover Rate.............................................. 125%
Average Commission Rate Paid......................................... N/A
</TABLE>
(1) Date of initial sale; ratios and total return have been annualized.
(2) Total return reflects the expense limitations referenced in Fund
Expenses.
(3) Total return for this short period of time may not be representative of
longer term results.
-15-
<PAGE>
(DPT-I)
DELAWARE POOLED TRUST SUMMARY
THE FUND
The Fund consists of 14 Portfolios offering eligible investors a broad range of
investment choices coupled with the advantage of a no-load mutual fund with the
service companies of The Delaware Group providing customized services as
investment adviser, administrator and distributor. Each Portfolio, other than
The Real Estate Investment Trust Portfolio, The Real Estate Investment Trust
Portfolio II, The Global Fixed Income Portfolio, The International Fixed Income
Portfolio and The Emerging Markets Portfolio, is a diversified fund as defined
by the Investment Company Act of 1940 ("1940 Act"). The Real Estate Investment
Trust Portfolio, The Real Estate Investment Trust Portfolio II, The Global Fixed
Income Portfolio, The International Fixed Income Portfolio and The Emerging
Markets Portfolio are nondiversified funds as defined by the 1940 Act. The
investment objectives and principal policies of each of the 14 Portfolios are as
follows:
The Defensive Equity Portfolio--seeks to realize maximum long-term total return,
consistent with reasonable risk, through investments in equity securities of
companies which, at the time of purchase, have dividend yields above the current
yield of the Standard & Poor's 500 Stock Index and which, in the opinion of
Delaware Investment Advisers, offer capital gains potential as well.
The Aggressive Growth Portfolio--seeks to realize maximum long-term capital
growth by investing in equity securities of smaller and medium-sized companies
that, in the opinion of Delaware Investment Advisers, offer, at the time of
purchase, superior long-term growth potential.
The International Equity Portfolio--seeks to achieve maximum long-term total
return by investing primarily in equity securities of issuers organized or
having a majority of their assets in or deriving a majority of their operating
income outside of the United States which, in the opinion of Delaware
International, are undervalued, at the time of purchase, based on rigorous
fundamental analysis conducted by the investment adviser.
The Defensive Equity Small/Mid-Cap Portfolio--seeks to realize maximum long-term
total return. The Portfolio seeks to achieve this objective by investing in
equity securities of companies which, at the time of purchase, have dividend
yields above the current yield of the Standard & Poor's 500 Stock Index, have a
market capitalization below that of the third decile of companies registered on
the New York Stock Exchange, and which, in Delaware Investment Advisers'
opinion, offer capital gains potential.
The Labor Select International Equity Portfolio--seeks to achieve maximum
long-term total return. The Portfolio seeks to achieve this objective by
investing primarily in equity securities of issuers organized or having a
majority of their assets in or deriving a majority of their operating income
outside of the United States which, in the opinion of Delaware International,
are undervalued, at the time of purchase, based on rigorous fundamental analysis
conducted by the investment adviser, and furthermore, present certain
characteristics that are compatible or operate in accordance with certain
investment policies or restrictions followed by organized labor.
The Real Estate Investment Trust Portfolio and The Real Estate Investment Trust
Portfolio II--seek to achieve maximum long-term total return. Capital
appreciation is a secondary objective. Each Portfolio seeks to achieve its
objectives by investing at least 65% of its total assets in equity securities of
real estate investment trusts. The Real Estate Investment Trust Portfolio and
-16-
<PAGE>
(DPT-I)
The Real Estate Investment Trust Portfolio II are sometimes referred to
collectively as "The Real Estate Investment Trust Portfolios" in this
Prospectus.
The Global Equity Portfolio-- seeks to achieve long-term growth without undue
risk to principal. The Portfolio seeks to achieve this objective by investing in
global securities that provide the potential for capital appreciation and
income.
The Emerging Markets Portfolio--seeks to achieve long-term capital appreciation.
The Portfolio seeks to achieve its objective by investing primarily in equity
securities of issuers located or operating in emerging countries.
The Fixed Income Portfolio--seeks to realize maximum long-term total return,
consistent with reasonable risk, by investing in a diversified portfolio of
investment grade fixed-income obligations. The Portfolio will include U.S.
government securities, mortgage-backed securities, corporate bonds and other
fixed-income securities.
The Limited-Term Maturity Portfolio--seeks to provide a high level of current
income, consistent with the preservation of principal and reasonable risk. The
Portfolio will include U.S. government securities, mortgage-backed securities,
corporate bonds and other fixed-income securities. At no time will the average
maturity of the Portfolio exceed five years.
The Global Fixed Income Portfolio--seeks to achieve current income consistent
with the preservation of investors' principal. The Portfolio seeks to achieve
this objective by investing primarily 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 and that may also provide the potential for capital
appreciation.
The International Fixed Income Portfolio--seeks to achieve current income
consistent with the preservation of investors' principal. The Portfolio seeks to
achieve this objective by investing primarily 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 outside of the
United States and that may also provide the potential for capital appreciation.
Under normal circumstances, the Portfolio intends to invest in securities that
are denominated in foreign currencies.
The High-Yield Bond Portfolio--seeks high total return. The Portfolio seeks to
achieve its objective by investing primarily in bonds rated B- or higher by
Standard & Poor's Ratings Group, Division of McGraw Hill ("S&P") or B3 or higher
by Moody's Investors Service, Inc. ("Moody's").
For further information, see "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" and "ADDITIONAL INVESTMENT INFORMATION."
INVESTMENT MANAGEMENT
-17-
<PAGE>
(DPT-I)
Delaware Investment Advisers, a division of Delaware Management Company, Inc.
("Delaware"), acts as investment adviser to The Defensive Equity, The Aggressive
Growth, The Fixed Income, The Limited-Term Maturity, The Defensive Equity
Small/Mid-Cap, The Real Estate Investment Trust and The High-Yield Bond
Portfolios. The investment management fees payable to Delaware Investment
Advisers by these Portfolios are, respectively, 0.55%, 0.80%, 0.40%, 0.30%,
0.65%, 0.75% (for each of The Real Estate Investment Trust Portfolios) and 0.45%
of the respective Portfolio's average net assets. Lincoln Investment Management,
Inc., acts as sub-adviser to Delaware with respect to The Real Estate Investment
Trust Portfolios and receives 30% of the management fees paid to Delaware.
Delaware International, an affiliate of Delaware, is the investment adviser to
The International Equity, The Global Fixed Income, The International Fixed
Income, The Labor Select International Equity, The Global Equity and The
Emerging Markets Portfolios. The investment management fees payable to Delaware
International by The International Equity, The Global Fixed Income, The
International Fixed Income, The Labor Select International Equity, The Global
Equity and The Emerging Markets Portfolios are, respectively, 0.75%, 0.50%,
0.50%, 0.75%, 0.75% and 1.20% of the respective Portfolio's average net assets.
Delaware acts as sub-adviser to Delaware International with respect to The
Global Equity Portfolio managing the U.S. securities portion of the Portfolio
and receives 0.50% of the management fee paid to Delaware International. In
addition, out of the investment advisory fees to which they are otherwise
entitled, Delaware and Delaware International pay their proportionate share of
the fees paid to unaffiliated directors by the Fund, except that Delaware will
make no such payments out of the fees it receives for managing The Defensive
Equity Small/Mid-Cap, The Real Estate Investment Trust and The High-Yield Bond
Portfolios and Delaware International will make no such payments out of the fees
it receives for managing The International Fixed Income, The Labor Select
International Equity and The Emerging Markets Portfolios. See "MANAGEMENT OF THE
FUND."
FUND OFFICERS AND PORTFOLIO MANAGERS
Wayne A. Stork
Chairman
A graduate of Brown University, Mr. Stork also attended the NYU Graduate School
of Business Administration while a senior transportation analyst at the Irving
Trust Company. He joined Delaware in 1962 as a security analyst covering a wide
range of industry groups. In 1975, he became Chief Investment Officer of
Delaware Investment Advisers, President in 1984, and in 1990 was named Chairman.
Mr. Stork is a Director of Delaware Management Company, Inc. and its affiliates,
and is Chairman of the Delaware Group of funds. He is a member of the Institute
of Chartered Financial Analysts and the Financial Analysts Federation.
David G. Tilles
Managing Director and Chief Investment Officer - Delaware International
Advisers Ltd.
Mr. Tilles was educated at the Sorbonne, Warwick University and Heidelberg
University. Prior to joining Delaware in 1990 as Managing Principal and Chief
Investment Officer of Delaware International Advisers Ltd., 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 was
Chief Investment Officer of Hill Samuel Investment Advisers Ltd.
George E. Deming
Vice President/Senior Portfolio Manager - The Defensive Equity Portfolio
-18-
<PAGE>
(DPT-I)
Mr. Deming received his BA in Economics and Political Science from the
University of Vermont and an MA in International Affairs from the University of
Pennsylvania. Prior to joining Delaware in 1978, he was responsible for
portfolio management and institutional sales at White, Weld & Co., Inc. He is a
member of the Financial Analysts of Philadelphia. Mr. Deming has managed The
Defensive Equity Portfolio since its inception.
Gerald S. Frey
Vice President/Senior Portfolio Manager - The Aggressive Growth Portfolio
Mr. Frey holds a BA in Economics from Bloomsburg University and attended Wilkes
College and New York University. He has approximately 20 years' experience in
the money management business. Prior to joining the Delaware Group in 1996, he
was a Senior Director with Morgan Grenfell Capital Management in New York. Mr.
Frey has managed The Aggressive Growth Portfolio since June 1996.
Timothy W. Sanderson
Director/Senior Portfolio Manager - Delaware International Advisers Ltd. (The
International Equity Portfolio)
A graduate of University College, Oxford, Mr. Sanderson began his investment
career in 1979 with Hill Samuel Investment Management Group. Prior to joining
Delaware International Advisers Ltd. in 1990 as Senior Portfolio Manager and
Director, he was an analyst and senior portfolio manager for Hill Samuel where,
since 1987, he had responsibility for Pacific Basin research and the management
of international institutional portfolios. Mr. Sanderson has managed The
International Equity Portfolio since its inception.
Clive A. Gillmore
Director/Senior Portfolio Manager - Delaware International Advisers Ltd. (The
Labor Select International Equity Portfolio and The Emerging Markets Portfolio)
A graduate of the Warwick University, England, and the London Business School
Investment Program, Mr. Gillmore joined Delaware in 1990 after eight years of
investment experience. His most recent position prior to joining Delaware was as
a Pacific Basin equity analyst and senior portfolio manager for Hill Samuel
Investment Advisers Ltd. Prior to that, Mr. Gillmore was an analyst and
portfolio manager for Legal and General Investment in the United Kingdom. Mr.
Gillmore has managed of The Labor Select International Equity Portfolio and The
Emerging Markets Portfolio since their respective dates of inception.
Robert Akester
Senior Portfolio Manager - Delaware International Advisers Ltd. (The Emerging
Markets Portfolio)
Prior to joining Delaware in 1996, Mr. Akester, who began his investment career
in 1969, was most recently a Director of Hill Samuel Investment Advisers Ltd.,
which he joined in 1985. His prior experience included working as a Senior
Analyst and head of the South-East Asian Research team at James Capel, and as a
Fund Manager at Prudential Assurance Co., Ltd. Mr. Akester holds a BS in
Statistics and Economics from University College, London and is an associate of
the Institute of Actuaries, with a certificate in Finance and Investment. Mr.
Akester has managed The Emerging Markets Portfolio since its inception.
-19-
<PAGE>
(DPT-I)
Babak Zenouzi
Vice President/Portfolio Manager - The Real Estate Investment Trust Portfolios
Mr. Zenouzi holds a BS in Finance and Economics from Babson College in
Wellesley, Massachusetts, and an MS in Finance from Boston College. Prior to
joining Delaware in 1992, he was with The Boston Company where he held the
positions of assistant vice president, senior financial analyst, financial
analyst and portfolio accountant. Mr. Zenouzi has served as a portfolio manager
of The Real Estate Investment Trust Portfolio since its inception and will serve
as portfolio manager of The Real Estate Investment Trust Portfolio II when it
commences operations.
Steven R. Brody
Senior Vice President/Director of Real Estate Operations - Lincoln Investment
Management, Inc. Sub-adviser to The Real Estate Investment Trust Portfolios
Mr. Brody, a graduate of Miami (Ohio) University, joined Lincoln following 15
years in the commercial mortgage and real estate industry with another insurance
company, a commercial bank and a mortgage banking firm. He is responsible for
Lincoln's mortgage, real estate equity, private placement and mezzanine finance
activities, and the day-to-day operations of Lincoln Investment Management. Mr.
Brody has been active in the Mortgage Bankers Association of America and the
Urban Land Institute and is a Fellow of the Life Office Management Association.
He serves on the boards of Lincoln Investment Management, Indiana Institute of
Technology, and The Malpas Trust. Mr. Brody has served as a sub-adviser for The
Real Estate Investment Trust Portfolio since its inception and will serve as a
sub-adviser for The Real Estate Investment Trust Portfolio II when it commences
operations.
John F. Robertson
Assistant Vice President/Real Estate Investments - Lincoln Investment
Management, Inc. Sub-adviser to The Real Estate Investment Trust Portfolios
Mr. Robertson holds a BA from Wabash College where he was graduated magna cum
laude and awarded membership into Phi Beta Kappa, and an MBA with emphasis in
finance and real estate from Indiana University. Prior to joining Lincoln
Investment Management, Inc.'s Real Estate Debt Group in 1993, he was a
consultant with Ernst & Young's Special Services Group where he specialized in
the valuation of all types of commercial real estate. Mr. Robertson is a CFA
charterholder and has completed numerous courses toward the MAI designation. Mr.
Robertson has served as a sub-adviser for The Real Estate Investment Trust
Portfolio since its inception and will serve as a sub-adviser for The Real
Estate Investment Trust Portfolio II when it commences operations.
Lawrence T. Kissko
Vice President/Real Estate Equity - Lincoln Investment Management, Inc.
Sub-adviser to The Real Estate Investment Trust Portfolios
Mr. Kissko holds a BS degree in Management Science from Rensselaer Polytechnic
Institute and an MBA in Finance from State University of New York at Albany. He
is responsible for real estate asset management as well as the real estate
equity production effort of Lincoln Investment Management, Inc. Mr. Kissko
joined Lincoln in 1983, following a five-year association with Union Mutual Life
Insurance Company of Portland, Maine. Prior to that, he was associated with
Massachusetts Mutual Life Insurance Company. He is a CFA charterholder. Mr.
Kissko has served as a sub-adviser for The Real Estate Investment Trust
Portfolio since its inception and will serve as a sub-adviser for The Real
Estate Investment Trust Portfolio II when it commences operations.
-20-
<PAGE>
(DPT-I)
Gary A. Reed
Vice President/Senior Portfolio Manager - The Fixed Income Portfolio
Mr. Reed holds an AB in Economics from the University of Chicago and an MA in
Economics from Columbia University. He began his investment career in 1978 with
The Equitable Life Assurance Society, specializing in credit analysis. Prior to
joining Delaware Investment Advisers in 1989, Mr. Reed served as Vice President
and Manager of the Fixed Income Department at Irving Trust Company. Mr. Reed has
managed both discretionary and structured fixed-income portfolios and is
experienced with a broad range of high-grade fixed-income securities.
Additionally, he has developed investment programs for Decommissioning Trust
Funds and supervised their management. Mr. Reed has managed The Fixed Income
Portfolio since its inception.
Elizabeth Desmond
Senior Portfolio Manager - Delaware International Advisors Ltd. (The Global
Equity Portfolio)
Ms. Desmond is a graduate of Wellesley College and the masters program in East
Asian studies at Stanford University. After working for the Japanese government
for two years, she began her investment career as a Pacific Basin investment
manager with Shearson Lehman Global Asset Management. Prior to joining Delaware
International in the Spring of 1991, she was a Pacific Basin equity analyst and
senior portfolio manager at Hill Samuel Investment Advisers Ltd. Ms. Desmond is
a CFA charterholder. Ms. Desmond will manage The Global Equity Portfolio when it
commences operations.
Robert L. Arnold
Vice President/Portfolio Manager - The Global Equity Portfolio
Mr. Arnold holds a BS from Carnegie Mellon University and earned an MBA from the
University of Chicago. Before acting as a portfolio manager at Delaware, he was
a financial analyst focusing on the financial services industry, including
banks, thrifts, insurance companies and consumer finance companies. Prior to
joining Delaware in March 1992, he was a planning analyst with Chemical Bank in
New York. He began his investment career as a management consultant with Arthur
Young in Philadelphia. When The Global Equity Portfolio commences operations,
Delaware will act as sub-adviser, managing the U.S. Securities portion of the
Portfolio. In that capacity, Mr. Arnold will furnish investment recommendations,
asset allocation advice, research and other services with respect to U.S.
securities.
Ian G. Sims
Director/Senior Portfolio Manager - Delaware International Advisers Ltd. (The
Global Fixed Income Portfolio and The International Fixed Income Portfolio
Mr. Sims is a graduate of the University of Leicester and holds a postgraduate
degree in statistics from the University of Newcastle-Upon-Tyne. He joined
Delaware International Advisers Ltd. in 1990 as a senior international
fixed-income and currency manager. Mr. Sims began his investment career with the
Standard Life Assurance Co., and subsequently moved to the Royal Bank of Canada
Investment Management International Company, where he was an international
fixed-income manager. Prior to joining Delaware, he was a senior fixed-income
and currency portfolio manager with Hill Samuel Investment Advisers Ltd. Mr.
Sims has managed The Global Fixed Income Portfolio since its inception and will
manage The International Fixed Income Portfolio when it commences operations.
Paul A. Matlack
Vice President/Senior Portfolio Manager - The High-Yield Bond Portfolio
Mr. Matlack is a graduate of the University of Pennsylvania and received his MBA
in Finance from George Washington University. He began his career with Mellon
Bank as a credit specialist analyzing leveraged transactions in the chemical and
pharmaceutical industries. He subsequently served as a loan officer in Mellon's
Corporate Lending Division and in the Special Industries Group at Provident
National Bank, before joining Delaware in 1989. He is a CFA charterholder. Mr.
Matlack has served as a portfolio manager of The High-Yield Bond Portfolio since
its inception.
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Gerald T. Nichols
Vice President/Senior Portfolio Manager - The High-Yield Bond Portfolio
Mr. Nichols is a graduate of the University of Kansas, where he received an MS
in Finance and a BS in Business Administration. Prior to joining Delaware in
1989, he was the investment officer for a merchant banking firm with interests
in the insurance and thrift industries. Mr. Nichols began his career in the
high-yield bond market with Waddell and Reed, Inc. in 1983 where, as a
high-yield credit analyst, he followed a variety of industries. He is a CFA
charterholder. Mr. Nichols has served as a portfolio manager of The High-Yield
Bond Portfolio since its inception.
ADMINISTRATIVE SERVICES
Delaware Service Company, Inc., an affiliate of Delaware Management Company,
Inc. and Delaware International Advisers Ltd., provides the Fund with
administrative, dividend disbursing, accounting and transfer agency services.
See "MANAGEMENT OF THE FUND."
SPECIAL REPORTS AND OTHER SERVICES
The Fund provides client shareholders with annual audited financial reports and
unaudited semi-annual financial reports. In addition, the investment advisers'
dedicated service staff may also provide client shareholders detailed monthly
appraisals of the status of their account and complete reviews of portfolio
assets, performance results and other pertinent data. Finally, the investment
advisers' service staff expects to conduct personal reviews no less than
annually with each shareholder, with interim telephone updates and other
communications, as appropriate. The Fund's dedicated telephone number
(1-800-231-8002) is available for shareholder inquiries during normal business
hours. The net asset values for the Portfolios are also available by using the
above "800" telephone number.
Written correspondence should be addressed to:
Delaware Pooled Trust, Inc.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
Attn: Client Services
From time to time, certain institutional separate accounts advised by Delaware
Investment Advisers or Delaware International may invest in the Fund's
Portfolios. The Portfolios may experience relatively large investments or
redemptions as a result of the institutional separate accounts either purchasing
or redeeming the Portfolios' shares. These transactions will affect the
Portfolios, since Portfolios that experience redemptions may be required to sell
portfolio securities, and Portfolios that receive additional cash will need to
invest it. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management
to the extent the Portfolios may be required to sell securities or invest cash
at times when they would not otherwise do so. Delaware Investment Advisers and
Delaware International, representing the interests of the Portfolios, is
committed to minimizing the impact of such transactions on the Portfolios. In
addition, Delaware Investment Advisers and Delaware International, as adviser to
the institutional separate accounts, is also committed to minimizing the impact
on the Portfolios to the extent it is consistent with pursuing the investment
objectives of the institutional separate accounts.
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If permitted under applicable law, in cases where a shareholder of any of the
Portfolios has an investment counseling relationship with Delaware Investment
Advisers or Delaware International, Delaware Investment Advisers or Delaware
International may, at its discretion, reduce the shareholder's investment
counseling fees by an amount equal to the pro-rata advisory fees paid by the
respective Portfolio. This procedure would be utilized with clients having
contractual relationships based on total assets managed by Delaware Investment
Advisers or Delaware International to avoid situations where excess advisory
fees might be paid to Delaware Investment Advisers or Delaware International. In
no event will a client pay higher total advisory fees as a result of the
client's investment in a Portfolio.
See "SHAREHOLDER SERVICES."
CUSTODIAL SERVICES
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245 serves as
custodian for The Global Fixed Income, The International Equity, The Labor
Select International Equity, The Real Estate Investment Trust, The High-Yield
Bond, The International Fixed Income, The Global Equity and The Emerging Markets
Portfolios. Bankers Trust Company, One Bankers Trust Plaza, New York, NY 10006
serves as custodian for The Defensive Equity, The Aggressive Growth, The Fixed
Income, The Limited-Term Maturity and The Defensive Equity Small/Mid-Cap
Portfolios.
HOW TO INVEST
Shares of each Portfolio are offered directly to institutions and high net-worth
individual investors at net asset value with no sales commissions or 12b-1
charges. In the case of The Emerging Markets Portfolio, there is a purchase
reimbursement fee that applies to all purchases, whether pursuant to the
exchange privilege or otherwise. That fee which is paid by investors to the
Portfolio equals 0.75% of the dollar amount invested. This purchase
reimbursement fee is deducted automatically from the amount invested; it cannot
be paid separately. This purchase reimbursement fee does not apply to
investments in the Portfolio that are made by securities in-kind or
reinvestments of dividends or other distributions. See "PURPOSE OF REIMBURSEMENT
FEES --THE EMERGING MARKETS PORTFOLIO" and "EXCHANGE PRIVILEGE" under
"SHAREHOLDER SERVICES." The minimum initial investment for a Portfolio of the
Fund is $1,000,000. There is no minimum for subsequent investments in a
Portfolio where the minimum initial investment has been satisfied. In addition,
eligible investors in The International Equity Portfolio may, under certain
circumstances, be required to make their investments in the Portfolio pursuant
to instructions of the Fund, by a contribution of securities in-kind to the
Portfolio or by following another procedure that will have the same economic
effect as an in-kind purchase; in either case, such investors will be required
to pay the brokerage or other transaction costs arising in connection with
acquiring the subject securities. At such time as the Fund receives appropriate
regulatory approvals to do so in the future, under certain circumstances, the
Fund may, at its sole discretion, allow eligible investors who have an existing
investment counseling relationship with Delaware Investment Advisers or Delaware
International to make investments in any of the Fund's Portfolios by a
contribution of securities in-kind to such Portfolios. See "PURCHASE OF SHARES."
HOW TO REDEEM
Shares of each Portfolio, except The Emerging Markets Portfolio, may be redeemed
at any time, without cost, at the net asset value per share of the Portfolio
next determined after receipt of the redemption request. For The Emerging
Markets Portfolio, shares may be redeemed at any time at the net asset value per
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share of the Portfolio next determined after receipt of the redemption request,
less a redemption reimbursement fee equal to 0.75% of such value. The fee is
deducted automatically from the redemption proceeds. The fee also applies in the
case of an exchange of shares of The Emerging Markets Portfolio for shares of
another Portfolio. See "EXCHANGE PRIVILEGE" under "SHAREHOLDER SERVICES" and
"PURPOSE OF REIMBURSEMENT FEES -- THE EMERGING MARKETS PORTFOLIO." The
redemption price may be more or less than the purchase price and the redemption
may be in cash or, under certain circumstances, in-kind. If a shareholder
reduces their investment in a Portfolio below $500,000, their investment in that
Portfolio may be subject to redemption. In addition, investors in The
International Equity, The Labor Select International Equity, The Global Fixed
Income, The International Fixed Income, The Global Equity and The Emerging
Markets Portfolios may, under certain circumstances, be required to accept their
redemption, pursuant to instructions from the Fund, in-kind in portfolio
securities or, at the election of the investor, by following another procedure
that will have the same economic effect as an in-kind redemption; in either
case, such investors will be required to pay the brokerage or other transaction
costs arising in connection with the sale of the subject securities. If a
redemption of shares of The Emerging Markets Portfolio is made in-kind, the
redemption reimbursement fee that is otherwise applicable will not be assessed.
See "REDEMPTION OF SHARES."
RISK FACTORS
An investment in the Fund entails certain risks and considerations about which
an investor should be aware.
Because both The Aggressive Growth Portfolio (which seeks long-term capital
growth) and The Defensive Equity Small/Mid-Cap Portfolio (which seeks to
maximize long-term total return) invest primarily in small- to medium-sized
companies, the Portfolios' investments are likely to involve a higher degree of
liquidity risk and price volatility than if investments were made in larger
capitalization securities.
The International Equity, The Labor Select International Equity, The Global
Fixed Income, The International Fixed Income, The Global Equity and The Emerging
Markets Portfolios will invest in securities of foreign issuers which normally
are denominated in foreign currencies and may hold foreign currency directly; in
addition, The Real Estate Investment Trust and The High-Yield Bond Portfolios
may invest up to 10% of their total assets in foreign securities. Investments in
securities of non-United States issuers which are generally denominated in
foreign currencies involve certain risk and opportunity considerations not
typically associated with investing in United States companies. Consequently,
these Portfolios may be affected by changes in currency rates and exchange
control regulations and may incur costs in connection with conversions between
currencies. To hedge this currency risk associated with investments in non-U.S.
dollar denominated securities, a Portfolio may invest in forward foreign
currency contracts. Those activities pose special risks which do not typically
arise in connection with investments in U.S. securities. In addition, The Real
Estate Investment Trust, The International Fixed Income, The Global Equity and
The Emerging Markets Portfolios may engage in foreign currency options and
futures transactions. For a discussion of the risks associated with foreign
securities see "FOREIGN INVESTMENT INFORMATION" and for those concerning these
hedging instruments see "RISKS OF TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD
CONTRACTS," both of which references appear under the heading "ADDITIONAL
INVESTMENT INFORMATION."
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The International Equity, The Labor Select International Equity, The Global
Equity, The Global Fixed Income, The International Fixed Income, The Real Estate
Investment Trust and The High-Yield Bond Portfolios may commit their assets
eligible for foreign investment to securities of issuers located in emerging
markets. The Emerging Markets Portfolio will invest its assets primarily in
securities of companies that are located or operated in emerging markets.
Investments in securities of companies in emerging markets present a greater
degree of risk than tends to be the case for foreign investments in Western
Europe and other developed markets. Among other things, there is a greater
possibility of expropriation, nationalization, confiscatory taxation, income
earned or other special taxes, foreign exchange restrictions, limitations on the
repatriation of income and capital from investments, defaults in foreign
government debt, and economic, political or social instability. In addition, in
many emerging markets, there is substantially less publicly available
information about issuers and the information that is available tends to be of a
lesser quality. Economic markets and structures tend to be less mature and
diverse and the securities markets which are subject to less government
regulation or supervision may also be smaller, less liquid and subject to
greater price volatility. See "ADDITIONAL INVESTMENT INFORMATION--FOREIGN
INVESTMENT INFORMATION" for a more extensive discussion of these and other
factors.
The foreign securities in which The International Equity, The Labor Select
International Equity, The Global Fixed Income, The International Fixed Income,
The Global Equity and The Emerging Markets Portfolios (and The Real Estate
Investment Trust and The High-Yield Bond Portfolios, up to 10% of their total
assets) may invest from time to time may be listed primarily on foreign
exchanges which trade on days when the New York Stock Exchange is closed (such
as Saturday). As a result, the net asset value of the Portfolios may be
significantly affected by such trading on days when shareholders will have no
access to the Portfolios. See "VALUATION OF SHARES."
The Aggressive Growth, The Real Estate Investment Trust, The Global Equity and
The Emerging Markets Portfolios also may, under certain circumstances, use
certain futures contracts and options on futures contracts, as well as options
on stock. The Portfolios will only enter into these transactions for hedging
purposes. See "FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS" and "RISKS OF
TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS," both of which
references appear under the heading "ADDITIONAL INVESTMENT INFORMATION."
The Real Estate Investment Trust Portfolios concentrate their investments in the
real estate industry. As a consequence, the net asset value of each Portfolio
can be expected to fluctuate in light of the factors affecting that industry,
and may fluctuate more widely than a portfolio that invests in a broader range
of industries. Each Portfolio may be more susceptible to any single economic,
political or regulatory occurrence affecting the real estate industry.
The High-Yield Bond Portfolio invests in lower rated fixed-income securities,
which, while generally having higher yields, are subject to factors, such as
reduced creditworthiness of issuers, increased risks of default and a more
limited and less liquid secondary market than higher rated securities. These
securities are subject to greater volatility and risk of loss of income and
principal than are higher rated securities. See "INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS" and "ADDITIONAL INVESTMENT INFORMATION--HIGH-YIELD,
HIGH RISK SECURITIES."
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The Emerging Markets Portfolio may invest up to 35% of its assets in high-yield,
high risk fixed-income securities, including Brady Bonds. Consequently, greater
investment risks may be involved with an investment in this Portfolio. See
"ADDITIONAL INVESTMENT INFORMATION--HIGH-YIELD, HIGH RISK SECURITIES."
The Fixed Income, The Limited-Term Maturity, The Global Fixed Income and The
International Fixed Income Portfolios will normally experience annual portfolio
turnover rates exceeding 100%, but those rates are not expected to exceed 250%
with respect to The Fixed Income Portfolio and 200% with respect to The
Limited-Term Maturity, The Global Fixed Income and The International Fixed
Income Portfolios. Such relatively high portfolio turnover rates involve
correspondingly higher brokerage commissions, for equity transactions, and other
transaction costs and may affect the taxes payable by the Portfolios'
shareholders that are subject to federal income tax. See "INVESTMENT OBJECTIVES,
POLICIES AND RISK CONSIDERATIONS," "PORTFOLIO TRANSACTIONS" and "TAXES."
The Fixed Income, The Limited-Term Maturity and The Global Fixed Income
Portfolios may invest in collateralized mortgage obligations and those
Portfolios, as well as The Real Estate Investment Trust Portfolios, may invest
in mortgage-backed securities. See "ADDITIONAL INVESTMENT
INFORMATION--MORTGAGE-BACKED SECURITIES."
The Real Estate Investment Trust Portfolios, by investing primarily in
securities of real estate investment trusts, are subject to interest rate risk,
in that as interest rates decline, the value of each Portfolio's investments in
real estate investment trusts can be expected to rise. Conversely, when interest
rates rise, the value of each Portfolio's investments in real estate investment
trusts holding fixed rate obligations can be expected to decline. See
"ADDITIONAL INVESTMENT INFORMATION--REITS."
Each of the 14 Portfolios may lend its portfolio securities, may invest in
repurchase agreements and may purchase securities on a when-issued basis.
While The Real Estate Investment Trust Portfolios, The Global Fixed Income
Portfolio, The International Fixed Income Portfolio and The Emerging Markets
Portfolio intend to seek to qualify as "diversified" investment companies under
provisions of Subchapter M of the Internal Revenue Code, they will not be
diversified under the 1940 Act. Thus, while at least 50% of each Portfolio's
total assets will be represented by cash, cash items, certain qualifying
securities and other securities limited in respect of any one issuer to an
amount not greater than 5% of the Portfolio's total assets, it will not satisfy
the 1940 Act requirement in this respect, which applies that test to 75% of the
Portfolio's assets. A nondiversified portfolio is believed to be subject to
greater risk because adverse effects on the portfolio's security holdings may
affect a larger portion of the overall assets.
Each of the investment strategies identified above involves special risks which
are described under "INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS"
and "ADDITIONAL INVESTMENT INFORMATION" in this Prospectus and "INVESTMENT
POLICIES, PORTFOLIO TECHNIQUES AND RISK CONSIDERATIONS" in the Statement of
Additional Information.
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INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS
The investment objective of each Portfolio of the Fund is described below,
together with the policies each Portfolio employs in its efforts to achieve its
objective. There is no assurance that a Portfolio will attain its objective. The
investment objective of each Portfolio is fundamental and may only be changed by
a majority approval of that Portfolio's shareholders. Unless otherwise noted,
the investment policies described below are not fundamental policies and may be
changed without shareholder approval.
THE DEFENSIVE EQUITY PORTFOLIO
The Defensive Equity Portfolio's investment objective is to realize maximum
long-term total return, consistent with reasonable risk. The Portfolio seeks to
achieve this objective by investing in equity securities of companies which, at
the time of purchase, have dividend yields above the current yield of the
Standard & Poor's 500 Stock Index ("S&P 500 Index") and which, in the investment
adviser's opinion, offer capital gains potential as well.
In selecting Portfolio securities, the investment adviser places an emphasis on
strong relative performance in falling markets. The Portfolio invests primarily
in equity securities of U.S. companies, although from time to time the Portfolio
will include sponsored or unsponsored American Depositary Receipts actively
traded in the United States. See "ADDITIONAL INVESTMENT INFORMATION --
DEPOSITARY RECEIPTS" for a further description of American Depositary Receipts.
Under normal market conditions, at least 65% of the Portfolio's total assets
will be invested in equity securities. Equity securities for this purpose
include, but are not limited to, common stocks, securities convertible into
common stocks and securities having common stock characteristics, such as rights
and warrants to purchase common stocks. The Portfolio also may purchase
preferred stock. The Portfolio may hold cash or invest in short-term debt
securities and other money market instruments when, in the investment adviser's
opinion, such holdings are prudent given then prevailing market conditions.
Except when the investment adviser believes a temporary defensive approach is
appropriate, the Portfolio, normally, will not hold more than 5% of its total
assets in cash or such short-term investments. All these short-term investments
will be of the highest quality as determined by a nationally-recognized
statistical rating organization (e.g., AAA by S&P or Aaa by Moody's) or be of
comparable quality as determined by the investment adviser. "APPENDIX
A--RATINGS" to this Prospectus describes the ratings of S&P and Moody's. See
"ADDITIONAL INVESTMENT INFORMATION" for further details concerning these and
other investment policies.
The investment adviser seeks to invest in high-yielding equity securities and
believes that, although capital gains are important, the dividend return
component will be a significant portion of the expected total return. The
investment adviser believes that a diversified portfolio of such high-yielding
stocks will outperform the market over the long-term, as well as preserve
principal in difficult market environments. Companies considered for purchase
generally will exhibit the following characteristics at the time of purchase: 1)
a dividend yield greater than the prevailing yield of the S&P 500 Index; 2) a
price-to-book ratio lower than the average large capitalization company; and 3)
a below-market price-to-earnings ratio.
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The investment adviser takes a long-term investment approach by placing a strong
emphasis on its ability to determine attractive values and, generally, does not
seek to respond to short-term changes in the market. It is anticipated that the
annual turnover rate of the Portfolio will not exceed 100% under normal
circumstances. See "PORTFOLIO TRANSACTIONS." The Portfolio will maintain
diversity among economic sectors and industries and will not invest 25% or more
of its total assets in the stocks of issuers in any one industry, nor,
ordinarily, more than 5%, at the time of purchase, of any one company.
THE AGGRESSIVE GROWTH PORTFOLIO
The Aggressive Growth Portfolio's investment goal is to realize maximum
long-term capital growth. The Portfolio seeks to attain this objective by
investing in equity securities of smaller and medium-sized companies which, in
the opinion of the investment adviser, present, at the time of purchase,
significant long-term growth potential. In pursuing this objective, current
income is expected to be incidental.
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in growth-oriented common stocks of domestic corporations. Such
companies, in the investment adviser's view, generally are those companies that
currently have total market capitalization between $100 million and $2.5 billion
at the time of purchase. The Portfolio may invest in securities issued by
companies having a capitalization outside that range when, in the investment
adviser's opinion, such a company exhibits the same characteristics and growth
potential as companies within the range. Equity securities for this purpose
include, but are not to be limited to, common stocks, securities convertible
into common stocks and securities having common stock characteristics, such as
rights and warrants to purchase common stocks. The Portfolio also may purchase
preferred stock. Although the investment adviser does not pursue a market timing
approach to investing, the Portfolio may hold cash or invest in short-term debt
securities or other money market instruments when, in the investment adviser's
opinion, such holdings are prudent given the prevailing market conditions.
Except when the investment adviser believes a temporary defensive approach is
appropriate, the Portfolio, normally, will not hold more than 10% of its total
assets in cash or such short-term investments, but, on occasion, may hold as
much as 30% of its total assets in cash or such short-term investments. All such
holdings will be of the highest quality as determined by a nationally-recognized
statistical rating organization (e.g., AAA by S&P or Aaa by Moody's) or be of
comparable quality as determined by the investment adviser. See "ADDITIONAL
INVESTMENT INFORMATION" for further details concerning these and other
investment policies.
The Portfolio may also, to a limited extent, enter into futures contracts on
stocks, purchase or sell options on such futures, engage in certain options
transactions on stocks and enter into closing transactions with respect to those
activities. However, these activities will not be entered into for speculative
purposes, but rather to facilitate the ability quickly to deploy into the stock
market the Portfolio's positions in cash, short-term debt securities and other
money market instruments, at times when the Portfolio's assets are not fully
invested in equity securities. Such positions will generally be eliminated when
it becomes possible to invest in securities that are appropriate for the
Portfolio. See "ADDITIONAL INVESTMENT INFORMATION--FUTURES CONTRACTS AND OPTIONS
ON FUTURES CONTRACTS" and "OPTIONS" for a further discussion of these investment
policies.
The Portfolio will not invest 25% or more of its total assets in securities of
companies which conduct their principal business activities in specific
industries. The Portfolio expects to invest in small- to
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medium-sized companies that have been in existence for at least three years
(including the operation of any predecessor company) but which have the
potential, in the investment adviser's judgment, for significant long-term
capital growth. The investment adviser assesses economic, industry, market and
company developments to select investments in promising emerging growth
companies that are expected to benefit from new technology, new products or
services, research discoveries, rejuvenated management and the like. However,
the Portfolio may invest in any equity security which, in the investment
adviser's judgment, provides the potential for significant capital appreciation.
The investment adviser believes that consistent earnings per share growth is
just as important as high absolute growth. Because the Portfolio seeks long-term
capital growth by investing primarily in small- to medium-sized companies, its
investments are likely to involve a higher degree of liquidity risk and price
volatility than larger capitalization securities.
The investment adviser does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the investment adviser may take advantage of short-term opportunities
that are consistent with its investment objective. It is anticipated that the
annual turnover rate of the Portfolio, under normal circumstances, will not
exceed 100%. See "PORTFOLIO TRANSACTIONS."
THE INTERNATIONAL EQUITY PORTFOLIO
The investment objective of The International Equity Portfolio is to achieve
maximum long-term total return. The Portfolio seeks to achieve its objective by
investing, under normal market conditions, at least 65% of its total assets in
equity securities of issuers organized or having a majority of their assets or
deriving a majority of their operating income outside the United States, and
which, in the investment adviser's opinion, are undervalued at the time of
purchase based on fundamental analysis employed by the investment adviser.
In selecting portfolio securities the investment adviser emphasizes strong
performance in falling markets relative to other mutual funds focusing on
international equity investments. Equity securities in which the Portfolio may
invest include, but are not limited to, common stocks and securities convertible
into common stock and securities having common stock characteristics, such as
rights and warrants to purchase common stocks. Additionally, the Portfolio may
from time to time, hold its assets in cash (which may be U.S. dollars or foreign
currency, including European Currency Units ("ECU")) or may invest in short-term
debt securities or other money market instruments. Except when the investment
adviser believes a temporary defensive approach is appropriate, the Portfolio
generally will not hold more than 5% of its assets in cash or such short-term
instruments. All such holdings will be of the highest quality as determined by a
nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or of comparable quality as determined by the Portfolio's investment
adviser. See "ADDITIONAL INFORMATION" for further details concerning these and
other investment policies.
The Portfolio may hold up to 15% of its assets in foreign fixed-income
securities when, in the investment adviser's opinion, equity securities are
overvalued and such fixed-income securities present an opportunity for returns,
over an 18-month period, greater than those available through investments in
equity securities or the short-term investments described above. The foreign
fixed-income securities in which the Portfolio may invest may be U.S. dollar or
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foreign currency denominated, including ECU, and must have a government or
government agency backed credit status which would include, but not be limited
to, supranational entities. A supranational entity is an entity established or
financially supported by the national governments of one or more countries to
promote development or reconstruction. They include: The World Bank, European
Investment Bank, Asian Development Bank, European Economic Community and the
Inter-American Development Bank. Such fixed-income securities will be, at the
time of purchase, of the highest quality (e.g., AAA by S&P or Aaa by Moody's) or
of comparable quality as determined by the Portfolio's investment adviser. The
Portfolio may also invest in sponsored and unsponsored American Depositary
Receipts, European Depositary Receipts or Global Depositary Receipts
("Depositary Receipts"). See "ADDITIONAL INVESTMENT INFORMATION--DEPOSITARY
RECEIPTS" for a further description of Depositary Receipts.
The investment adviser's approach in selecting investments for the Portfolio is
oriented to individual stock selection and is value driven. In selecting stocks
for the Portfolio, the investment adviser identifies those stocks which it
believes will provide the highest total return over a market cycle taking into
consideration the movement in the price of the individual security, and the
impact of currency adjustment on a United States domiciled, dollar-based
investor. The investment adviser conducts extensive fundamental research on a
global basis, and it is through this research effort that securities which, in
the investment adviser's opinion, have the potential for maximum long-term total
return are identified. The center of the fundamental research effort is a value
oriented dividend discount methodology toward individual securities and market
analysis which isolates value across country boundaries. This approach focuses
on future anticipated dividends and discounts the value of those dividends back
to what they would be worth if they were being paid today. Comparisons of the
values of different possible investments are then made. The investment adviser's
management approach is long-term in orientation, but it is expected that the
annual turnover rate of the Portfolio will not exceed 150% under normal
circumstances. See "PORTFOLIO TRANSACTIONS" and "TAXES."
While the Portfolio is not subject to any specific geographic diversification
requirements, it will, under normal market conditions, invest at least 65% of
its total assets 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 different countries outside the United States. Investments will be made
mainly in marketable securities of companies located in developed countries, but
the stock markets of developing countries are rapidly becoming accessible and
the Portfolio may hold securities of issuers located in any developing country
determined to be appropriate by the investment adviser. Investments in
obligations of foreign issuers involve somewhat different investment risks than
those affecting obligations of United States issuers. The risks posed by
investments in emerging or developing countries frequently are greater. See
"ADDITIONAL INVESTMENT INFORMATION--FOREIGN INVESTMENT INFORMATION."
Currency considerations carry a special risk for a portfolio of international
securities, and the investment adviser employs a purchasing power parity
approach to evaluate currency risk. In this regard, the Portfolio will actively
carry on hedging activities, and may invest in forward foreign currency exchange
contracts to hedge currency risks associated with the purchase of individual
securities denominated in a particular currency. See "ADDITIONAL INVESTMENT
INFORMATION--FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS."
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THE DEFENSIVE EQUITY SMALL/MID-CAP PORTFOLIO
The Defensive Equity Small/Mid-Cap Portfolio's investment objective is to
realize maximum long-term total return. The Portfolio seeks to achieve this
objective by investing primarily in equity securities of companies which, at the
time of purchase, have dividend yields above the current yield of the S&P 500
Index, have a market capitalization below that of the third decile of companies
registered on the New York Stock Exchange, and, in the investment adviser's
opinion, offer capital gains potential as well.
In selecting Portfolio securities, the investment adviser places an emphasis on
strong relative performance in falling markets. The Portfolio invests primarily
in equity securities of U.S. companies, although from time to time the Portfolio
will include sponsored or unsponsored American Depositary Receipts actively
traded in the United States. Under normal market conditions, at least 65% of the
value of the Portfolio's total assets will be invested in equity securities of
companies that currently have a total market capitalization of less than $3
billion. Equity securities for this purpose include common stocks, securities
convertible into common stocks and securities having common stock
characteristics, such as rights and warrants to purchase common stocks. The
Portfolio also may purchase preferred stock, and certain other non-traditional
equity securities. See "ADDITIONAL INVESTMENT INFORMATION--CONVERTIBLE, DEBT AND
NON-TRADITIONAL EQUITY SECURITIES" and "DEPOSITARY RECEIPTS" for further details
concerning these and other investment policies.
The Portfolio may hold cash or invest in short-term debt securities and other
money market instruments when, in the investment adviser's opinion, such
holdings are prudent given then prevailing market conditions. Except when the
investment adviser believes a temporary defensive approach is appropriate, the
Portfolio, normally, will not hold more than 5% of its total assets in cash or
such short-term investments. All these short-term investments will be of the
highest quality as determined by a nationally-recognized statistical rating
organization (e.g., AAA by S&P or Aaa by Moody's) or be of comparable quality as
determined by the investment adviser. See "ADDITIONAL INVESTMENT INFORMATION"
and "APPENDIX A-RATINGS" for further details concerning these and other
investment policies.
The investment adviser seeks to invest in high-yielding equity securities of
small- and mid-cap companies and believes that, although capital gains are
important, the dividend return component will be a significant portion of the
expected total return. Further, the investment adviser believes that, although
more volatile, small- and mid-cap companies will provide higher returns over the
long-term. In the investment adviser's opinion, a diversified portfolio of such
high-yielding, small- and mid-cap companies will outperform the market over the
long-term, as well as preserve principal in difficult market environments.
Companies considered for purchase generally will exhibit the following
characteristics at the time of purchase: 1) a dividend yield greater than the
prevailing yield of the S&P 500 Index; and 2) market capitalization below that
of the third decile of companies registered on the New York Stock Exchange. Such
companies, in the investment adviser's view, generally are those companies that
currently have a total market capitalization of less than $3 billion at the time
of purchase.
The Portfolio expects to invest in companies in the capitalization range
described above, and that have been in existence for at least three years
(including the operation of any predecessor company) but which have the
potential, in the investment adviser's judgment, for providing long-term total
return. Because the Portfolio seeks long-term total return by investing
primarily in small- to mid-cap
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companies, its investments are likely to involve a higher degree of liquidity
risk and price volatility than investments in larger capitalization securities.
The investment adviser takes a long-term investment approach by placing a strong
emphasis on its ability to determine attractive values and, generally, does not
seek to respond to short-term changes in the market. It is anticipated that the
annual turnover rate of the Portfolio will generally not exceed 100% under
normal circumstances. See "PORTFOLIO TRANSACTIONS." The Portfolio will maintain
diversity among economic sectors and industries and will not invest 25% or more
of its total assets in the stocks of issuers in any one industry, nor,
ordinarily, more than 5%, at the time of purchase, of any one company.
THE LABOR SELECT INTERNATIONAL EQUITY PORTFOLIO
The investment objective of The Labor Select International Equity Portfolio is
to achieve maximum long-term total return. The Portfolio seeks to achieve its
objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of issuers organized or having a majority of
their assets or deriving a majority of their operating income outside of the
United States, and which, in the investment adviser's opinion, are undervalued
at the time of purchase based on rigorous fundamental analysis employed by the
investment adviser. In addition to following these quantitative guidelines, the
Portfolio's investment adviser will select securities of issuers that present
certain characteristics that are compatible or operate in accordance with
certain investment policies or restrictions followed by organized labor.
In selecting portfolio securities, the investment adviser emphasizes strong
performance in falling markets relative to other mutual funds focusing on
international equity investments. Equity securities in which the Portfolio may
invest include common stocks and securities convertible into common stock and
securities having common stock characteristics, such as rights and warrants to
purchase common stocks. Additionally, the Portfolio may, from time to time, hold
its assets in cash (which may be U.S. dollars or foreign currency, including the
ECU) or may invest in short-term debt securities or other money market
instruments. Except when the investment adviser believes a temporary defensive
approach is appropriate, the Portfolio generally will not hold more than 5% of
its assets in cash or such short-term instruments. All such holdings will be of
the highest quality as determined by a nationally-recognized statistical rating
organization (e.g., AAA by S&P or Aaa by Moody's) or be of comparable quality as
determined by the Portfolio's investment adviser.
The Portfolio may hold up to 15% of its assets in foreign fixed-income
securities when, in the investment adviser's opinion, equity securities are
overvalued and such fixed-income securities present an opportunity for returns
greater than those available through investments in equity securities or the
short-term investments described above. The foreign fixed-income securities in
which the Portfolio may invest may be U.S. dollar or foreign currency
denominated, including the ECU, and must have a government or government agency
backed credit status which would include, but not be limited to, supranational
entities. A supranational entity is an entity established or financially
supported by the national governments of one or more countries to promote
development or reconstruction. They include: the World Bank, European Investment
Bank, Asian Development Bank, European Economic Community and the Inter-American
Development Bank. Such fixed-income securities will be, at the time of purchase,
of the highest quality (e.g., AAA by S&P or Aaa by Moody's) or be of comparable
quality as determined by the Portfolio's investment adviser. See "ADDITIONAL
INVESTMENT INFORMATION" for a further description of these and other investment
policies.
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The investment adviser's approach in selecting investments for the Portfolio is
primarily quantitatively oriented to individual stock selection and is value
driven. In selecting stocks for the Portfolio, the investment adviser identifies
those stocks which it believes will provide the highest total return over a
market cycle, taking into consideration the movement in the price of the
individual security, the impact of currency adjustment on a United States
domiciled, dollar-based investor and the investment guidelines described below.
The investment adviser conducts extensive fundamental research on a global
basis, and it is through this research effort that securities which, in the
investment adviser's opinion, have the potential for maximum long-term total
return are identified. The center of the fundamental research effort is a value
oriented dividend discount methodology toward individual securities and market
analysis which isolates value across country boundaries. This approach focuses
on future anticipated dividends and discounts the value of those dividends back
to what they would be worth if they were being paid today. Comparisons of the
values of different possible investments are then made.
Supplementing the adviser's quantitative approach to stock selection, the
investment adviser will, in managing the Portfolio, also attempt to follow
certain qualitative investment guidelines which seek to identify issuers that
present certain characteristics that are compatible or operate in accordance
with certain investment policies or restrictions followed by organized labor.
These qualitative investment guidelines include country screens, as well as
additional issuer-specific criteria. The country screens require that the
securities are of issuers domiciled in those countries that are included in the
Morgan Stanley Capital International Europe, Australia and Far East ("EAFE")
Index and Canada, as long as the country does not appear on any list of
prohibited or boycotted nations of the AFL-CIO or certain other labor
organizations. Nations that are presently in the EAFE Index include Japan, the
United Kingdom, Germany, France and The Netherlands. In addition, the Portfolio
will tend to favor investment in issuers located in those countries that the
investment adviser perceives as enjoying favorable relations with the United
States. Pursuant to the Portfolio's issuer-specific criteria, the Portfolio will
(1) invest only in companies which are publicly traded; (2) focus on companies
that show, in the investment adviser's opinion, evidence of pursuing fair labor
practices; (3) focus on companies that have not been subject to penalties or
tariffs imposed by applicable U.S. government agencies for unfair trade
practices within the previous two years; and (4) not invest in initial public
offerings. In the opinion of the Portfolio's investment adviser, evidence of
pursuing fair labor practices would include whether a company has demonstrated
patterns of non-compliance with applicable labor or health and safety laws. The
qualitative labor sensitivity factors that the Portfolio's investment adviser
will utilize in selecting securities will vary over time, and will be solely in
the adviser's discretion.
While the Portfolio is not subject to any specific geographic diversification
requirements, it will, under normal conditions, invest at least 65% of its total
assets 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
different countries outside the United States, and which comply with the
parameters described above. Investments in obligations of foreign issuers
involve somewhat different investment risks than those affecting obligations of
United States issuers. The risks posed by investments in foreign countries
frequently are greater. See "ADDITIONAL INVESTMENT INFORMATION--FOREIGN
INVESTMENT INFORMATION."
The investment adviser does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the investment adviser may take advantage of short-term opportunities
that are consistent with its investment objective. It is
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anticipated that the annual turnover rate of the Portfolio, under normal
circumstances, will generally not exceed 100%. See "PORTFOLIO TRANSACTIONS."
Currency considerations carry a special risk for a portfolio of international
securities, and the investment adviser employs a purchasing power parity
approach to evaluate currency risk. In this regard, the Portfolio may actively
carry on hedging activities, and may invest in forward foreign currency exchange
contracts to hedge currency risks associated with the purchase of individual
securities denominated in a particular currency. See"ADDITIONAL INVESTMENT
INFORMATION--FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS."
THE REAL ESTATE INVESTMENT TRUST PORTFOLIOS
The investment objective of each of The Real Estate Investment Trust Portfolios
is to achieve maximum long-term total return. Capital appreciation is a
secondary objective. Each Portfolio seeks to achieve its objectives by investing
in securities of companies principally engaged in the real estate industry.
Under normal circumstances, at least 65% of each Portfolio's total assets will
be invested in equity securities of real estate investment trusts ("REITs").
Each Portfolio will operate as a nondiversified fund as defined by the 1940 Act.
The Portfolios invest in equity securities of REITs and other real estate
industry operating companies ("REOCs"). For purposes of the Portfolios'
investments, a REOC is a company that derives at least 50% of its gross revenues
or net profits from either (1) the ownership, development, construction,
financing, management or sale of commercial, industrial or residential real
estate, or (2) products or services related to the real estate industry, such as
building supplies or mortgage servicing. The Portfolios' investments in equity
securities of REITs and REOCs may include, from time to time, sponsored or
unsponsored American Depositary Receipts actively traded in the United States.
Equity securities for this purpose include common stocks, securities convertible
into common stocks and securities having common stock characteristics, such as
rights and warrants to purchase common stocks. Each Portfolio may also purchase
preferred stock. Each Portfolio may invest up to 10% of its assets in foreign
securities, and in convertible securities. See "ADDITIONAL INVESTMENT
INFORMATION--FOREIGN INVESTMENT INFORMATION," "DEPOSITARY RECEIPTS" and
"CONVERTIBLE, DEBT AND NON-TRADITIONAL EQUITY SECURITIES" for further discussion
of these investment policies. Each Portfolio may also invest in mortgage-backed
securities. See "MORTGAGE-BACKED SECURITIES" for more detailed information about
this investment policy.
Each Portfolio may hold cash or invest in short-term debt securities and other
money market instruments when, in the investment adviser's opinion, such
holdings are prudent given then prevailing market conditions. Except when the
investment adviser believes a temporary defensive approach is appropriate, each
Portfolio will not hold more than 5% of its total assets in cash or such
short-term investments. All these short-term investments will be of the highest
quality as determined by a nationally-recognized statistical rating organization
(e.g. AAA by S&P or Aaa by Moody's) or be of comparable quality as determined by
the Portfolio's investment adviser. See "ADDITIONAL INVESTMENT INFORMATION" for
further details concerning these and other investment policies.
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Although the Portfolios do not invest directly in real estate, the Portfolios do
invest primarily in REITs, and may purchase equity securities of REOCs. Thus,
because the Portfolio concentrate their investments in the real estate industry,
an investment in either Portfolio may be subject to certain risks associated
with direct ownership of real estate and with the real estate industry in
general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition; property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties resulting from, environmental problems; casualty for condemnation
losses, uninsured damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and changes in interest rates.
The Portfolios may invest without limitation in shares of REITs. REITs are
pooled investment vehicles which invest primarily in income-producing real
estate or real estate related loans or interests. REITs are generally classified
as equity REITs, mortgage REITs or a combination of equity and mortgage REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. Like investment
companies such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements in the Internal
Revenue Code of 1986, as amended (the "Code"). REITs are subject to substantial
cash flow dependency, defaults by borrowers, self-liquidation, and the risk of
failing to qualify for tax-free pass-through of income under the Code, and/or to
maintain exemptions from the 1940 Act. By investing in REITs indirectly through
either Portfolio, a shareholder bears not only a proportionate share of the
expenses of the Portfolio, but also, indirectly, similar expenses of the REITs.
For a further discussion of the risks presented by investing in REITs, see
"ADDITIONAL INVESTMENT INFORMATION--REITS."
While the Portfolios do not intend to invest directly in real estate, either
Portfolio could, under certain circumstances, own real estate directly as a
result of a default on securities that it owns. In addition, if either Portfolio
has rental income or income from the direct disposition of real property, the
receipt of such income may adversely affect the Portfolio's ability to retain
its tax status as a regulated investment company.
Each Portfolio may also, to a limited extent, enter into futures contracts on
stocks, purchase or sell options on such futures, engage in certain options
transactions on stocks and enter into closing transactions with respect to those
activities. However, these activities will not be entered into for speculative
purposes, but rather to facilitate the ability quickly to deploy into the stock
market the Portfolio's positions in cash, short-term debt securities and other
money market instruments, at times when the Portfolio's assets are not fully
invested in equity securities. Such positions will generally be eliminated when
it becomes possible to invest in securities that are appropriate for the
Portfolio. See "ADDITIONAL INVESTMENT INFORMATION--FUTURES CONTRACTS AND OPTIONS
ON FUTURES CONTRACTS" and "OPTIONS" for a further discussion of these investment
policies.
In connection with each Portfolio's ability to invest up to 10% of its total
assets in the securities of foreign issuers, currency considerations may present
Rrisks if the Portfolio holds international securities. Currency considerations
carry a special risk for a portfolio of international securities. In this
regard, the Portfolio may actively carry on hedging activities, and may invest
in forward foreign currency exchange contracts to hedge currency risks
associated with the purchase of individual securities denominated in a
particular currency. See "ADDITIONAL INVESTMENT INFORMATION--FORWARD FOREIGN
CURRENCY EXCHANGE CONTRACTS."
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The investment adviser does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the investment adviser may take advantage of short-term opportunities
that are consistent with its investment objective. It is anticipated that the
annual turnover rate of the Portfolio, under normal circumstances, will
generally not exceed 100%. See "PORTFOLIO TRANSACTIONS."
THE GLOBAL EQUITY PORTFOLIO
The objective of The Global Equity Portfolio is to achieve long-term growth
without undue risk to principal. The Portfolio seeks to achieve this objective
by investing in global equity securities that provide the potential for capital
appreciation and income. The Portfolio is a global fund. Under normal
circumstances, at least 65% of the Portfolio's assets will be invested in equity
securities of issuers organized or having a majority of their assets in or
deriving a majority of their operating income in at least three different
countries, one of which may be the United States. The Portfolio will invest in a
broad range of equity securities including common stocks, preferred stocks,
convertible securities and warrants. The Portfolio may also invest in sponsored
or unsponsored Depositary Receipts. See "DEPOSITARY RECEIPTS" under "ADDITIONAL
INVESTMENT INFORMATION."
The Portfolio will attempt to achieve its objective by investing in securities
traded in equity markets and currencies that Delaware International and Delaware
(with respect to U.S. securities) believe offer the best relative value within
the global investment universe. A dividend discount model will be employed to
assess value across country boundaries. When using a dividend discount analysis
to value individual equity markets, Delaware International and Delaware (with
respect to U.S. securities) will look at future anticipated dividends and
discount the value of those dividends back to what they would be worth if they
were being paid today. Delaware International and Delaware (with respect to U.S.
securities) will use this technique to attempt to compare the value of different
investments.
In a global portfolio, currency return is also an integral component of an
investment's total return. Delaware International and Delaware (with respect to
U.S. securities) will use a purchasing power parity approach to access the value
of individual currencies. Purchasing power parity attempts to identify the
amounts of goods and services that a dollar will buy in the United States and
compare that to the amount of a foreign currency required to buy the same amount
of goods and services in another country. Eventually, currencies should trade at
levels that would make it possible for the dollar to buy the same amount of
goods and services overseas as in the United States. When the dollar buys less,
the foreign currency may be considered to be overvalued. When the dollar buys
more, the currency may be considered to be undervalued.
Simultaneous with identifying the most attractive equity markets and currencies,
Delaware International will attempt to purchase undervalued securities.
Individual equity securities around the world will be selected on the basis of
an analysis of the issuing company's operations, financial statements and each
company's current valuation. In the selection process, Delaware International
and Delaware (with respect to U.S. securities) will place special emphasis on
present dividend yield and expectations for dividend growth.
The Portfolio may purchase securities in any foreign country, developed and
underdeveloped, or emerging market countries. With respect to certain countries,
investments by an investment company may only be made through investments in
closed-end investment companies that in turn are authorized
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to invest in the securities of such countries. See "ADDITIONAL INVESTMENT
INFORMATION" for further details concerning these and other investment policies.
The Portfolio may also seek to achieve growth through investment of up to 35% of
its assets in income producing debt securities such as U.S. or foreign
government or corporate bonds. In addition, for temporary defensive purposes,
the Portfolio may invest all or a substantial portion of its assets in high
quality debt instruments issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the U.S. government, its agencies
or instrumentalities (and which are backed by the full faith and credit of the
U.S. government), or issued by foreign or U.S. companies and certain short-term
instruments. See "ADDITIONAL INVESTMENT INFORMATION" for further details
concerning these instruments. For example, the Portfolio may invest in U.S.
fixed-income markets when Delaware International believes that the global equity
markets are excessively volatile or overvalued so that the Fund's objective
cannot be achieved in such markets. Any corporate debt obligations will be rated
AA or better by Standard & Poor's Ratings Group ("S&P"), Aa or better by Moody's
Investors Service, Inc. ("Moody's"), or have an equivalent rating from another
nationally recognized statistical rating organization, or if unrated, will be
determined to be of comparable quality by Delaware International. The Portfolio
may also invest in the securities listed above pending investment of proceeds
from new sales of Portfolio shares and to maintain sufficient cash to meet
redemption requests.
It is anticipated that the annual portfolio turnover rate, under normal
circumstances, will not exceed 100%. See "PORTFOLIO TRANSACTIONS."
THE EMERGING MARKETS PORTFOLIO
The objective of The Emerging Markets Portfolio is to achieve long-term capital
appreciation. The Portfolio seeks to achieve this objective by investing
primarily in equity securities of issuers located or operating in emerging
countries. The Portfolio is an international fund. Under normal circumstances,
at least 65% of the Portfolio's 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 different emerging countries. The
Portfolio will attempt to achieve its objective by investing in a broad range of
equity securities, including common stocks, preferred stocks, convertible
securities and warrants issued by companies located or operating in emerging
countries.
The Portfolio considers an "emerging country" to be any country which is
generally recognized to be an emerging or developing country by the
international financial community, including the World Bank and the
International Finance Corporation, as well as countries that are classified by
the United Nations or otherwise regarded by their authorities as developing. In
addition, any country that is included in the IFC Free Index or MSCI EMF Index
will be considered to be an "emerging country." As of the date of this
Prospectus, there are more than 130 countries which, in Delaware International's
judgment, are generally considered to be emerging or developing countries by the
international financial community, approximately 40 of which currently have
stock markets. Within this group of developing or emerging countries are
included almost every nation in the world, except the United States, Canada,
Japan, Australia, New Zealand and most nations located in Western and Northern
Europe.
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Currently, investing in many emerging countries is not feasible, or may, in
Delaware International's opinion, involve unacceptable political risks. The
Portfolio will focus its investments in those emerging countries where Delaware
International considers the economies to be developing strongly and where the
markets are becoming more sophisticated. Delaware International believes that
investment opportunities may result from an evolving long-term international
trend favoring more market-oriented economies, a trend that may particularly
benefit certain countries having developing markets. This trend may be
facilitated by local or international political, economic or financial
developments that could benefit the capital markets in such countries.
In considering possible emerging countries in which the Portfolio may invest,
Delaware International will place particular emphasis on certain factors, such
as economic conditions (including growth trends, inflation rates and trade
balances), regulatory and currency controls, accounting standards and political
and social conditions. It is currently anticipated that the countries in which
the Portfolio may invest will include, but not be limited to, Argentina, Brazil,
Chile, China, Columbia, The Czech Republic, Egypt, Greece, Hong Kong, Hungary,
India, Indonesia, Israel, Jamaica, Jordan, Kenya, Korea, Malaysia, Mexico,
Nigeria, Pakistan, Peru, the Philippines, Poland, Portugal, Russia, South
Africa, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. As markets
in other emerging countries develop, Delaware International expects to expand
and further diversify the countries in which the Portfolio invests.
Although not an exclusive list of criteria to be considered by Delaware
International, an emerging country equity security is one issued by a company
that, in the opinion of Delaware International, exhibits one or more of the
following characteristics: (i) its principal securities trading market is an
emerging country, as defined above; (ii) while traded in any market, alone or on
a consolidated basis, the company derives 50% or more of its annual revenues
from either goods produced, sales made or services performed in emerging
countries; or (iii) it is organized under the laws of, and has a principal
office in, an emerging country. Determinations as to eligibility will be made by
Delaware International based on publicly available information and inquiries
made of the companies. See "ADDITIONAL INVESTMENT INFORMATION--FOREIGN
INVESTMENT INFORMATION."
The Portfolio may invest in Depositary Receipts. See "DEPOSITARY RECEIPTS" and
"INVESTMENT COMPANY SECURITIES" under "ADDITIONAL INVESTMENT
INFORMATION."
The Portfolio also may invest in convertible preferred stocks that offer
enhanced yield features, such as Preferred Equity Redemption Cumulative Stock,
and certain other non-traditional equity securities. See "ADDITIONAL INVESTMENT
INFORMATION--CONVERTIBLE, DEBT AND NON-TRADITIONAL EQUITY SECURITIES."
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Up to 35% of the Portfolio's net assets may be invested in fixed-income
securities issued by emerging country companies, and foreign governments, their
agencies, instrumentalities or political subdivisions, all of which may be
high-yield, high risk fixed-income securities rated lower than BBB by S&P and
Baa by Moody's or, if unrated, are considered by Delaware International to be of
equivalent quality and which present special investment risks. The Portfolio may
also invest in Brady Bonds and zero coupon securities. See "HIGH-YIELD, HIGH
RISK SECURITIES" and "ZERO COUPON SECURITIES" under "ADDITIONAL INVESTMENT
INFORMATION." The Portfolio may invest in securities issued in any currency and
may hold foreign currency. Securities of issuers within a given country may be
dominated in the currency of another country or in multinational currency units,
including ECU. See "ADDITIONAL INVESTMENT INFORMATION--FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS."
For temporary defensive purposes, the Portfolio may invest all or a substantial
portion of its assets in the high quality debt instruments in which The
International Equity Portfolio may invest. See "INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS--THE INTERNATIONAL EQUITY PORTFOLIO."
See "ADDITIONAL INVESTMENT INFORMATION" for a further discussion about the above
and other securities and investment practices.
It is anticipated that the annual portfolio turnover rate, under normal
circumstances, will not exceed ___%. See "PORTFOLIO TURNOVER."
THE FIXED INCOME PORTFOLIO
The Fixed Income Portfolio's investment objective is to realize maximum
long-term total return, consistent with reasonable risk. It seeks to achieve its
objective by investing in a diversified portfolio of investment grade
fixed-income obligations, including securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities ("U.S. government securities"),
mortgage-backed securities, asset-backed securities, corporate bonds and other
fixed-income securities.
It seeks maximum long-term total return by investing in debt securities having
an average effective maturity (that is, the market value weighted average time
to repayment of principal) of between one to ten years. Short- and
intermediate-term debt securities (under ten years) form the core of the
Portfolio, with long-term bonds (over ten years) purchased as well as when the
investment adviser believes they will enhance return without significantly
increasing risk. Average effective maturity may exceed the above range when the
investment adviser believes opportunities for enhanced returns exceed risk.
Typically, approximately 50% of the Portfolio's assets will be invested in U.S.
government securities, mortgage-backed securities and asset-backed securities.
All securities purchased by the Portfolio will have an investment grade rating
at the time of purchase. Investment grade fixed-income obligations will be those
rated BBB or better by S&P or Baa or better by Moody's or those deemed to be of
comparable quality by the investment adviser. Obligations rated BBB and Baa have
speculative characteristics. To the extent that the rating of a debt obligation
held by the Portfolio falls below BBB or Baa, the Portfolio, as soon as
practicable, will dispose of the security, unless such disposal would be
detrimental to the Portfolio in light of market conditions. See "ADDITIONAL
INVESTMENT INFORMATION--U.S. GOVERNMENT SECURITIES" and "MORTGAGE-BACKED
SECURITIES" for more detailed information about these and other investment
policies.
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The Portfolio will normally experience an annual portfolio turnover rate
exceeding 100%, but that rate is not expected to exceed 250%. A 100% turnover
rate would occur if all of the securities in the Portfolio were sold and
replaced within one year. The rate of portfolio turnover is not a limiting
factor when the investment adviser deems it desirable to purchase or sell
securities. High portfolio turnover (over 100%) involves correspondingly greater
brokerage commissions and other transaction costs and may affect taxes payable
by the Portfolio's shareholders that are subject to federal income taxes. The
turnover rate may also be affected by cash requirements from redemptions and
repurchases of the Portfolio's shares. The degree of Portfolio activity may
affect brokerage costs of the Portfolio and taxes payable by institutional
shareholders that are subject to federal income taxes.
See "PORTFOLIO TRANSACTIONS" and "TAXES.
THE LIMITED-TERM MATURITY PORTFOLIO
The Limited-Term Maturity Portfolio seeks to realize a high level of current
income, consistent with the preservation of principal and reasonable risk. It
seeks to achieve its objective by investing in a diversified portfolio of
investment grade fixed-income securities including: U.S. government securities,
mortgage-backed securities, asset-backed securities, corporate bonds and other
fixed-income securities. The Portfolio will not exceed an average effective
maturity (that is, the market value weighted average time to repayment of
principal) of five years and will invest at least a majority of its assets in
U.S. government securities and mortgage-backed securities. The Portfolio also
may hold up to 30% of its assets in investment grade corporate fixed-income
obligations (other than mortgage-backed securities and U.S. government
securities) and asset-backed securities, but may not invest more than 10% of its
assets in such investment grade corporate fixed-income securities rated, at the
time of purchase, Baa by Moody's or BBB by S&P or determined to be of comparable
quality by the investment adviser. To the extent that the rating of a debt
obligation held by the Portfolio falls below BBB or Baa, the Portfolio, as soon
as practicable, will dispose of the security, unless such disposal would be
detrimental to the Portfolio in light of market conditions.
The Limited-Term Maturity Portfolio will normally experience an annual portfolio
turnover rate exceeding 100%, but that rate is not expected to exceed 200%. See
"INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS--THE FIXED INCOME
PORTFOLIO" for a discussion of the implication of a portfolio turnover rate
exceeding 100%.
THE GLOBAL FIXED INCOME PORTFOLIO
The Portfolio seeks to realize current income consistent with the preservation
of investors' principal. It seeks to achieve its objective by investing
primarily in fixed-income securities that may also provide the potential for
capital appreciation The Portfolio is a global fund. As such, it may invest in
securities issued in any currency and may hold foreign currency. Under normal
circumstances, at least 65% of the Portfolio's assets will be invested in the
fixed-income securities of issuers organized or having a majority of their
assets in or deriving a majority of their operating income in at least three
different countries, one of which may be the United States. Securities of
issuers within a given country may be denominated in the currency of another
country or in multinational currency units such as the ECU. The Portfolio will
operate as a nondiversified fund as defined by the 1940 Act.
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The investment adviser's approach in selecting investments for the portfolio is
oriented to country selection and is value driven. In selecting fixed-income
instruments for the Portfolio, the investment adviser identifies those
countries' fixed-income markets which it believes will provide the United
States' domiciled investor the highest yield over a market cycle while also
offering the opportunity for capital gain and currency appreciation. The
investment adviser conducts extensive fundamental research on a global basis,
and it is through this effort that attractive fixed-income markets are selected
for investment. The core of the fundamental research effort is a value oriented
discounted income stream methodology which isolates value across country
boundaries. This approach focuses on future coupon and redemption payments and
discounts the value of those payments back to what they would be worth if they
were to be paid today. Comparisons of the values of different possible
investments are then made. The investment adviser's management approach is
long-term in orientation, and it is therefore expected that the annual turnover
of the portfolio will not exceed 200% under normal circumstances. See "PORTFOLIO
TRANSACTIONS" and "TAXES."
The Portfolio will attempt to achieve its objective by investing in a broad
range of fixed-income securities, including del obligations of foreign and U.S.
companies which are generally rated A or better by S&P or Moody's or, if
unrated, are deemed to be of comparable quality by Delaware International, as
well as foreign and U.S. government securities with the limitation noted below.
The Portfolio may invest up to 5% of its assets in fixed-income securities rated
below investment grade, including foreign government securities as discussed
below. See "ADDITIONAL INVESTMENT INFORMATION--HIGH-YIELD, HIGH RISK
SECURITIES."
The Portfolio may also invest in zero coupon bonds, and in the debt securities
of supranational entities denominated in any currency.
Zero coupon bonds are debt obligations which do not entitle the holder to any
periodic payments of interest prior to maturity or a specified date when the
securities begin paying current interest, and therefore are issued and traded at
a discount from their face amounts or par value. A supranational entity is an
entity established or financially supported by the national governments of one
or more countries to promote reconstruction or development. Examples of
supranational entities include, among others, the World Bank, the European
Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-Development Bank, the Export-Import Bank and the
Asian Development Bank. For increased safety, the Portfolio currently
anticipates that a large percentage of its assets will be invested in U.S.
government securities and foreign government securities and securities of
supranational entities. See "ADDITIONAL INVESTMENT INFORMATION" for further
details concerning these and other investment policies.
With respect to U.S. government securities, the Portfolio may invest only in
securities issued or guaranteed as to the payment of principal and interest by
the U.S. government, and those of its agencies or instrumentalities which are
backed by the full faith and credit of the United States. Direct obligations of
the U.S. government which are available for purchase by the Portfolio include
bills, notes, bonds and other debt securities issued by the U.S. Treasury. These
obligations differ mainly in interest rates, maturities and dates of issuance.
Agencies whose obligations are backed by the full faith and credit of the United
States include the Farmers Home Administration, Federal Financing Bank and
others. When the Portfolio's investment adviser believes a temporary defensive
approach is appropriate, the Portfolio may hold up to 100% of its assets in such
U.S. government securities and certain other short-term instruments. See
"ADDITIONAL INVESTMENT INFORMATION--U.S. GOVERNMENT SECURITIES" and "SHORT-TERM
INVESTMENTS."
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With respect to securities issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the Portfolio will generally invest
in such securities if they have been rated AAA or AA by S&P or Aaa or Aa by
Moody's or, if unrated, have been determined by the investment adviser to be of
comparable quality. As noted above, the Portfolio may invest up to 5% of its
assets in non-investment grade fixed-income securities. These investments may
include foreign government securities, some of which may be so-called Brady
Bonds. See "ADDITIONAL INFORMATION--HIGH-YIELD, HIGH RISK SECURITIES." The
Portfolio may also invest in sponsored or unsponsored American Depositary
Receipts or European Depositary Receipts. While the Portfolio may A securities
of issuers in any foreign country, developed or underdeveloped, it is currently
anticipated that the countries in which the Portfolio may invest will include,
but not be limited to, Canada, Germany, the United Kingdom, New Zealand, France,
The Netherlands, Belgium, Spain, Switzerland, Ireland, Denmark, Portugal, Italy,
Austria, Norway, Sweden, Finland, Luxembourg, Japan and Australia. With respect
to certain countries, investments by an investment company may only be made
through investments in closed-end investment companies that in turn are
authorized to invest in the securities of issuers in such countries. Any
investment the Portfolio may make in other investment companies is limited in
amount by the 1940 Act and would involve the indirect payment of a portion of
the expenses, including advisory fees, of such other investment companies. See
"ADDITIONAL INVESTMENT INFORMATION--FOREIGN INVESTMENT INFORMATION" and
"DEPOSITARY RECEIPTS."
Currency considerations carry a special risk for a portfolio of international
securities and the investment adviser employs a purchasing power parity approach
to evaluate currency risk. In this regard, the Portfolio will actively carry on
hedging activities, and may invest in forward foreign currency exchange
contracts to hedge currency risks associated with its portfolio of securities.
See "ADDITIONAL INVESTMENT INFORMATION-- FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS."
It is anticipated that the average weighted maturity of the Portfolio will be in
the five-to-ten year range. If, however, the investment adviser anticipates a
declining interest rate environment, the average weighted maturity may be
extended beyond ten years. Conversely, if the investment adviser anticipates a
rising rate environment, the average weighted maturity may be shortened to less
than five years. The Portfolio will not invest 25% or more of its total assets
in the securities of issuers all of which conduct their principal business
activities in the same industry.
THE INTERNATIONAL FIXED INCOME PORTFOLIO
The Portfolio seeks to realize current income consistent with the preservation
of investors' principal. It seeks to achieve its objective by investing
primarily in fixed-income securities that may also provide the potential for
capital appreciation. The Portfolio is an international fund. As such, it may
invest in securities issued in any currency and may hold foreign currency. Under
normal circumstances, at least 65% of the Portfolio's assets will be invested in
the fixed-income securities of issuers organized or having a majority of their
assets in or deriving a majority of their operating income in at least three
different countries outside of the United States. Under normal circumstances,
the Portfolio intends to invest in securities which are denominated in foreign
currencies. Securities of issuers within a given country may be denominated in
the currency of another country or in multinational currency units such as ECU.
The Portfolio will operate as a nondiversified fund as defined by the 1940 Act.
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The investment adviser's approach in selecting investments for the portfolio is
oriented to country selection and is value driven. In selecting fixed-income
instruments for the Portfolio, the investment adviser identifies those
countries' fixed-income markets which it believes will provide the United States
domiciled investor the highest yield over a market cycle while also offering the
opportunity for capital gain and currency appreciation. The investment adviser
conducts extensive fundamental research on a global basis, and it is through
this effort that attractive fixed-income markets are selected for investment.
The core of the fundamental research effort is a value oriented discounted
income stream methodology which isolates value across country boundaries. This
approach focuses on future coupon and redemption payments and discounts the
value of those payments back to what they would be worth if they were to be paid
today. Comparisons of the values of different possible investments are then
made. The investment adviser's management approach is long-term in orientation,
but, it is expected that the annual turnover of the portfolio will be
approximately 200% under normal circumstances. See "PORTFOLIO TRANSACTIONS" and
"TAXES."
The Portfolio will attempt to achieve its objective by investing in a broad
range of fixed-income securities, including debt obligations of foreign
companies which are generally rated A or better by S&P or Moody's or, if
unrated, are deemed to be of comparable quality by Delaware International, as
well as, foreign government securities with the limitation noted below. The
Portfolio may invest up to 5% of its assets in fixed-income securities rated
below investment grade, including foreign government securities as discussed
below. See "ADDITIONAL INVESTMENT INFORMATION---HIGH-YIELD, HIGH RISK
SECURITIES."
The Portfolio may also invest in zero coupon bonds, and in the debt securities
of supranational entities denominated in any currency.
Zero coupon bonds are debt obligations which do not entitle the holder to any
periodic payments of interest prior to maturity or a specified date when the
securities begin paying current interest, and therefore are issued an traded at
a discount from their face amounts or par value. A supranational entity is an
entity established or financially supported by the national governments of one
or more countries to promote reconstruction or development. Examples of
supranational entities include, among others, the World Bank, the European
Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-Development Bank, the Export-Import Bank and the
Asian Development Bank. For increased safety, the Portfolio currently
anticipates that a large percentage of its assets will be invested in foreign
government securities and securities of supranational entities. See "ADDITIONAL
INVESTMENT INFORMATION" for further details about these and other investment
policies.
With respect to U.S. government securities, the Portfolio may invest only in
securities issued or guaranteed as to the payment of principal and interest by
the U.S. government, and those of its agencies or instrumentalities which are
backed by the full faith and credit of the United States. Direct obligations of
the U.S. government which are available for purchase by the Portfolio include
bills, notes, bonds and other debt securities issued by the U.S. Treasury. These
obligations differ mainly in interest rates, maturities and dates of issuance.
Agencies whose obligations are backed by the full faith and credit of the United
States include the Farmers Home Administration, Federal Financing Bank and
others. When the Portfolio's investment adviser believes a temporary defensive
approach is appropriate, the Portfolio may hold up to 100% of its assets in such
U.S. government securities and certain other short-term instruments. See
"ADDITIONAL INVESTMENT INFORMATION--U.S. GOVERNMENT SECURITIES" and "SHORT-TERM
INVESTMENTS."
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With respect to securities issued by foreign governments, their agencies,
instrumentalities or political subdivisions, the Portfolio will generally invest
in such securities if they have been rated AAA or AA by S&P or Aaa or Aa by
Moody's or if unrated, have been determined by the investment adviser to be of
comparable quality. As noted above, the Portfolio may invest up to 5% of its
assets in non-investment grade fixed-income securities. These investments may
include foreign government securities, some of which may be so-called Brady
Bonds. See "ADDITIONAL INFORMATION---HIGH-YIELD, HIGH RISK SECURITIES." The
Portfolio may also invest in sponsored or unsponsored American Depositary
Receipts or European Depositary Receipts. While the Portfolio may purchase
securities of issuers in any foreign country, developed or underdeveloped, it is
currently anticipated that the countries in which the Portfolio may invest will
include, but not be limited to, Canada, Germany, the United Kingdom, New
Zealand, France, The Netherlands, Belgium, Spain, Switzerland, Ireland, Denmark,
Portugal, Italy, Austria, Norway, Sweden, Finland, Luxembourg, Japan and
Australia. With respect to certain countries, investments by an investment
company may only be made through investments in closed-end investment companies
that in turn are authorized to invest in the securities of issuers in such
countries. Any investment the Portfolio may make in other investment companies
is limited in amount by the 1940 Act and would involve the indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies. See "ADDITIONAL INVESTMENT INFORMATION--FOREIGN INVESTMENT
INFORMATION" and "DEPOSITARY RECEIPTS."
Currency considerations carry a special risk for a portfolio of international
securities and the investment adviser employs a purchasing power parity approach
to evaluate currency risk. In this regard, the Portfolio will actively carry on
hedging activities, and may utilize a wide range of hedging instruments,
including options, futures contracts, and related options, and forward foreign
currency exchange contracts to hedge currency risks associated with its
portfolios of securities. See "ADDITIONAL INVESTMENT INFORMATION--FORWARD
FOREIGN CURRENCY EXCHANGE CONTRACTS, FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS" and "OPTIONS."
It is anticipated that the average weighted maturity of the Portfolio will be in
the five-to-ten year range. If, however, the investment adviser anticipates a
declining interest rate environment, the average weighted maturity may be
extended beyond ten years. Conversely, if the investment adviser anticipates a
rising rate environment, the average weighted maturity may be shortened to less
than five years. The Portfolio will not invest 25% or more of its total assets
in the securities of issuers all of which conduct their principal business
activities in the same industry.
THE HIGH-YIELD BOND PORTFOLIO
The High-Yield Bond Portfolio's investment objective is to seek high total
return. The Portfolio seeks to achieve its objective by investing primarily in
bonds rated B- or higher by S&P or B3 or higher by Moody's or, if unrated,
judged to be of comparable quality by the investment adviser.
The Portfolio will invest at least 80% of its assets at the time of purchase in:
(1) corporate bonds that may be rated B- or higher by S&P or B3 or higher by
Moody's, or that may be unrated (which may be more speculative in nature than
rated bonds); (2) securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; or (3) commercial paper of companies rated A-1 or
A-2 by S&P or rated P-1 or P-2 by Moody's or, if unrated, judged to be of
comparable quality by the investment adviser. The Portfolio may also invest in
income-producing securities, including common stocks and preferred stocks, some
of which may have convertible features or attached warrants and which may be
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speculative. See "ADDITIONAL INVESTMENT INFORMATION--CONVERTIBLE, DEBT AND
NON-TRADITIONAL EQUITY SECURITIES" for a further discussion of these investment
policies. The Portfolio may invest up to 10% of its total assets in securities
of issuers domiciled in foreign countries. The Portfolio may hold cash or invest
in short-term debt securities and other money market instruments when, in the
investment adviser's opinion, such holdings are prudent given then prevailing
market conditions. Except when the investment adviser believes a temporary
defensive approach is appropriate, the Portfolio normally will not hold more
than 5% of its total assets in cash or such short-term investments. All these
short-term investments will be of the highest quality as determined by a
nationally recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if unrated, judged to be of comparable quality as determined by
the investment adviser. See "ADDITIONAL INVESTMENT INFORMATION" for further
details concerning these and other investment policies.
Although the Portfolio does not generally purchase a substantial amount of zero
coupon bonds or pay-in-kind (PIK) bonds, from time to time, the Portfolio may
acquire zero coupon bonds and, to a lesser extent, PIK bonds. Zero coupon bonds
and PIK bonds are generally considered to be more interest-sensitive than income
bearing bonds, to be more speculative than interest-bearing bonds, and to have
certain tax consequences which could, under certain circumstances, be adverse to
the Portfolio. For example, the Portfolio accrues, and is required to distribute
to shareholders income on its zero coupon bonds. However, the Portfolio may not
receive the cash associated with this income until the bonds are sold or mature.
If the Portfolio did not have sufficient cash to make the required distribution
of accrued income, the Portfolio could be required to sell other securities in
its portfolio or to borrow to generate the cash required.
With respect to U.S. government securities, the Portfolio may invest only in
securities issued or guaranteed as to the payment of principal and interest by
the U.S. government, and those of its agencies or instrumentalities which are
backed by the full faith and credit of the United States. Direct obligations of
the U.S. government which are available for purchase by the Portfolio include
bills, notes, bonds and other debt securities issued by the U.S. Treasury. These
obligations differ mainly in interest rates, maturities and dates of issuance.
Agencies whose obligations are backed by the full faith and credit of the United
States include the Farmers Home Administration, Federal Financing Bank and
others. See "ADDITIONAL INVESTMENT INFORMATION--U.S. GOVERNMENT SECURITIES."
The investment adviser does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the investment adviser may take advantage of short-term opportunities
that are consistent with its investment objective. It is anticipated that the
annual turnover rate of the Portfolio, under normal circumstances, will
generally not exceed 100%.
It is anticipated that the Portfolio's assets will be invested primarily in
unrated corporate bonds and bonds rated B- or higher by S&P or B3 or higher by
Moody's, or, if unrated, judged to be of comparable quality by the investment
adviser. The market values of fixed-income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall. Lower rated
and unrated fixed-income securities tend to reflect short-term corporate and
market developments to a greater extent than higher rated fixed-income
securities, which react primarily to fluctuations in the general level of
interest rates. These lower rated or unrated securities generally have higher
yields, but, as a result of factors such as reduced creditworthiness of issuers,
increased risks of default and a more limited and less liquid secondary market,
are subject to greater volatility and risks of loss of income and principal than
are higher rated securities. The investment adviser will attempt to reduce such
risks through portfolio diversification, credit analysis, and attention to
trends in the economy, industries and financial markets.
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Investing in these so-called "junk" or "high-yield" bonds entails certain risks,
including the risk of loss of principal, which may be greater than the risks
involved in investment grade bonds, and which should be considered by investors
contemplating an investment in the Portfolio. Such bonds are sometimes issued by
companies whose earnings at the time of issuance are less than the projected
debt service on the junk bonds. Some of the principal risks to which junk bonds
are subject are discussed below.
Although the market for high-yield bonds has been in existence for many years,
including periods of economic downturns, the high-yield market grew rapidly
during the long economic expansion which took place in the United States during
the 1980s. During the economic expansion, the use of high-yield debt securities
to fund highly leveraged corporate acquisitions and restructurings increased
dramatically. As a result, the high-yield market grew substantially during the
economic expansion. Although experts disagree on the impact recessionary periods
have had and will have on the high-yield market, some analysts believe a
protracted economic downturn would severely disrupt the market for high yield
bonds, would adversely affect the value of outstanding bonds and would adversely
affect the ability of high-yield issuers to repay principal and interest. Those
analysts cite volatility experienced in the high-yield market in the past as
evidence for their position. It is likely that protracted periods of economic
uncertainty would result in increased volatility in the market prices of
high-yield bonds, an increase in the number of high-yield bond defaults and
corresponding volatility in the Portfolio's net asset value.
In addition, if, as a result of volatility in the high-yield market or other
factors, the Portfolio experiences substantial net redemptions of the
Portfolio's shares for a sustained period of time, the Portfolio may be required
to sell securities without regard to the investment merits of the securities to
be sold. If the Portfolio sells a substantial number of securities to generate
proceeds for redemptions, the asset base of the Portfolio will decrease and the
Portfolio's expense ratios may increase.
Furthermore, the secondary market for high-yield securities is currently
dominated by institutional investors, including mutual funds and certain
financial institutions. There is generally no established retail secondary
market for high-yield securities. As a result, the secondary market for
high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions which dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse effect on the
Portfolio's ability to dispose of particular issues, when necessary, to meet the
Portfolio's liquidity needs or in response to a specific economic event, such as
the deterioration in the creditworthiness of the issuer. In addition, a less
liquid secondary market makes it more difficult for the Portfolio to obtain
precise valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role in valuing
high-yield securities than is normally the case. The secondary market for
high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. The Portfolio's privately placed
high-yield securities are particularly susceptible to the liquidity and
valuation risks outlined above.
Finally, there are a variety of legislative actions which have been taken or
which are considered from time to time by the United States Congress which could
adversely affect the market for high-yield bonds. For example, Congressional
legislation limited the deductibility of interest paid on certain high-yield
bonds used to finance corporate acquisitions. Also, Congressional legislation
has, with some exceptions, generally prohibited federally-insured savings and
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loan institutions from investing in high-yield securities. Regulatory actions
have also affected the high-yield market. For example, many insurance companies
have restricted or eliminated their purchase of high-yield bonds as a result of,
among other factors, actions taken by the National Association of Insurance
Commissioners. If similar legislative and regulatory actions are taken in the
future, they could result in further tightening of the secondary market for
high-yield issues, could reduce the number of new high-yield securities being
issued and could make it more difficult for the Portfolio to attain its
investment objective.
See "ADDITIONAL INVESTMENT INFORMATION--HIGH-YIELD, HIGH RISK SECURITIES" for
further information about high-yield securities.
It is anticipated that the annual portfolio turnover rate, under normal
circumstances, will not exceed ____%. See "PORTFOLIO TRANSACTIONS."
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PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission, at net
asset value per share next determined after (i) the Fund has been notified by
telephone of your purchase order and (ii) Federal Funds have been delivered to
the Fund's bank account maintained with The Chase Manhattan Bank or Bankers
Trust Company ("Custodian Banks"). In addition, a purchase reimbursement fee
equal to 0.75% of the dollar amount invested is charged to investors in shares
of The Emerging Markets Portfolio and paid to the Portfolio. See "HOW TO INVEST"
and "PURPOSE OF REIMBURSEMENT FEES -- THE EMERGING MARKETS PORTFOLIO.
Shares of The International Equity Portfolio may, under certain circumstances,
be required to be purchased in-kind, as noted below. At such time as the Fund
receives appropriate regulatory approvals to do so in the future, under certain
circumstances, the Fund may, at its sole discretion, allow eligible investors
who have an existing investment counseling relationship with Delaware Investment
Advisers or Delaware International to make investments in the Portfolios by a
contribution of securities in-kind to such Portfolios.
The minimum initial investment for a Portfolio is $1,000,000.
By Federal Funds Wire
Purchases of shares of a Portfolio may be made by having your bank wire Federal
Funds to CoreStates Bank, N.A. as described below. In order to ensure prompt
receipt of your Federal Funds Wire and processing of your purchase order, it is
important that the following steps be taken:
1. Telephone the Fund (Toll Free: 1-800-231-8002) and provide us with the
account name, address, telephone number, Tax Identification Number, the
Portfolio(s) selected, the amount being wired and by which bank and which
specific branch, if applicable. We will provide you with a Fund account number.
2. Instruct your bank to wire the specified amount of Federal Funds to
CoreStates Bank, N.A., Philadelphia, PA, ABA #031000011, DSC Wire Purchase Bank
Account #1412893401. The funds should be sent to the attention of Delaware
Pooled Trust, Inc. (be sure to have your bank include the name of the
Portfolio(s) selected, the account number assigned to you and your account
name). Federal Funds purchase orders will be accepted only on a day on which the
Fund, the NYSE and the Custodian Banks are open for business.
3. Complete the Account Registration Form within two days and mail it to:
Delaware Pooled Trust, Inc.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
Attn: Client Services
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By Mail
Purchases of shares of a Portfolio may also be made by mailing a check payable
to the specific Portfolio selected to the above address (be sure to complete an
Investment Application before sending your check).
Purchase Price
In order for share purchases to be priced at the end of a given business day,
the Fund must be notified by telephone and Federal Funds must be received no
later than the close of regular trading on the New York Stock Exchange ("NYSE")
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. If notice
is given or Federal Funds are delivered after that time, the purchase order will
be priced on the following business day.
In-Kind Purchases or Similar Procedures (The International Equity Portfolio)
Institutions proposing to invest an amount which at the time they telephone the
Fund (as required above), would constitute 5% or more of the assets of The
International Equity Portfolio will, under normal circumstances, be required to
make purchases by tendering securities in which the Portfolio otherwise would
invest or, by following another procedure that will have the same economic
effect as an in-kind purchase. In either case, an investor that is required to
purchase shares pursuant to those procedures will be required to pay the
brokerage or other transaction costs of acquiring the subject securities.
Prospective investors will be notified when they telephone the Fund whether
their investment must be made in-kind or by such other procedure and, if
in-kind, what securities must be tendered. The purchase price per share for such
investors shall be the net asset value next determined after, as the case may
be, (1) delivery of cash or securities to the Custodian Banks and/or (2) the
assignment to the Portfolio by a prospective purchaser on trade date of the
investor's right to delivery of securities as to which brokerage orders have
been placed (but, as to which settlement is yet to occur) and delivery of cash
in an amount necessary to pay for those securities on settlement date. The
assets provided to the Portfolio pursuant to these procedures shall be valued
consistent with the same valuation procedures used to calculate the Portfolio's
net asset value. See "VALUATION OF SHARES." Such investors should contact the
Fund at (1-800-231-8002) for further information.
ADDITIONAL INVESTMENTS
You may add to your shareholder account at any time and in any amount.
Procedures are the same as those to be followed for a new account, in as much as
it is very important to notify the Fund of your impending purchase by first
calling the Fund (1-800-231-8002). Then you must be sure that your bank follows
the same procedures as described above with respect to the wiring of Federal
Funds to CoreStates Bank, N.A. Additional investments in The International
Equity Portfolio are subject to the same procedures and requirements (including
the in-kind or similar procedures) set forth above.
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REDEMPTION OF SHARES
You may withdraw all or any portion of the amount in your account by redeeming
shares at any time by submitting a request in accordance with the instructions
provided below. The Fund will redeem shares of each Portfolio, other than The
Emerging Markets Portfolio, without cost at its net asset value next determined
after receipt of your redemption request. For redemptions of shares of The
Emerging Markets Portfolio, a redemption reimbursement fee equal to 0.75% of the
amount redeemed is deducted automatically and paid to the Portfolio. See "HOW TO
REDEEM" and "PURPOSE OF REIMBURSEMENT FEES -- THE EMERGING MARKETS PORTFOLIO."
On days that the Fund, the NYSE and the Custodian Banks are open for business,
the net asset value of the Fund's Portfolios are determined as of the close of
regular trading of the NYSE (ordinarily, 4 p.m., Eastern time). See "VALUATION
OF SHARES."
Shares of the Fund may be redeemed by mail, FAX message, or telephone. No charge
is made for redemption, except the reimbursement fee assessed to investors in
The Emerging Markets Portfolio. The proceeds of any redemption may be more or
less than the purchase price of your shares depending on the market value of the
investment securities held by the Portfolio. Shares of The International Equity
Portfolio, The Labor Select International Equity Portfolio, The Global Fixed
Income Portfolio, The International Fixed Income Portfolio, The Global Equity
Portfolio and The Emerging Markets Portfolio may, under certain circumstances,
be required to be redeemed in-kind in portfolio securities, as noted below.
By Mail or FAX Message
Each Portfolio will redeem its shares at the net asset value next determined on
the date the request is received in "good order." Your request should be
addressed to:
Delaware Pooled Trust, Inc.
Attn: Client Services
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
FAX # 215-255-8864
"Good order" for purposes of mail or FAX message redemptions means that the
request to redeem must include the following documentation:
a. A letter of instruction specifying the number of shares or dollar amount to
be redeemed signed by the appropriate corporate or organizational officer(s)
exactly as it appears on the Account Registration Form.
b. If you wish to change the name of the commercial bank or account designation
to receive the redemption proceeds as provided in the Account Registration Form,
then a separate written request must be submitted to the Fund at the above
address and copies of this request sent to both the current commercial bank and
the new designee bank. Prior to redemption, the Fund will telephonically confirm
the change with both the current and the new designee banks. Further
clarification of these procedures can be obtained by calling the Fund.
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By Telephone
If you have previously elected the Telephone Redemption Option on the Account
Registration Form, you can request a redemption of your shares by calling the
Fund and requesting the redemption proceeds be wired to the commercial bank or
account designation identified in the Account Registration Form. Shares cannot
be redeemed by telephone if stock certificates are held for those shares or, in
the case of The International Equity Portfolio, The Labor Select International
Equity Portfolio, The Global Fixed Income Portfolio, The International Fixed
Income Portfolio, The Global Equity Portfolio or The Emerging Markets Portfolio,
in instances when the special in-kind redemption procedures are triggered, as
described below. Please contact the Fund for further details. In times of
drastic market conditions, the telephone redemption option may be difficult to
implement. If you experience difficulty in making a telephone redemption, your
request may be made by mail or FAX message, pursuant to the procedures described
above. It will be priced at the net asset value next determined after it is
received. Neither the Fund, the Portfolios nor the Fund's transfer agent,
Delaware Service Company, Inc., is responsible for any losses incurred in acting
upon written or telephone instructions for redemption or exchange of Portfolio
shares which are reasonably believed to be genuine. With respect to such
telephone transactions, the Fund will ensure that reasonable procedures are used
to confirm that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not, the Fund
or Delaware Service Company, Inc. may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
To change the name of the commercial bank or account designated to receive the
redemption proceeds, a written request must be sent to the Fund at the address
above. Requests to change the bank or account designation must be signed by the
appropriate person(s) authorized to act on behalf of the shareholder.
The Fund's telephone redemption privileges and procedures may be modified or
terminated by the Fund only upon written notice to the Fund's client
shareholders.
Redemptions In-Kind or Similar Procedures (The International Equity, The Labor
Select International Equity, The Global Fixed Income, The International Fixed
Income, The Global Equity and the Emerging Markets Portfolios)
Institutions proposing to redeem an amount which, at the time they notify the
Fund of their intention to redeem (as described below), would constitute 5% or
more of the assets of The International Equity Portfolio, The Labor Select
International Equity Portfolio, The Global Fixed Income Portfolio, The
International Fixed Income Portfolio, The Global Equity Portfolio or The
Emerging Markets Portfolio will, under normal circumstances, and if applicable
law permits, be required to accept their redemption proceeds in-kind in
Portfolio securities, unless they elect another procedure which will have the
same economic effect as an in-kind redemption. In either case, an investor that
is required to redeem shares pursuant to this election will bear the brokerage
or other transaction costs of selling the Portfolio securities representing the
value of their redeemed shares. Any Portfolio securities delivered upon
redemption will be valued as described in "VALUATION OF SHARES." Investors in
these Portfolios should contact the Fund at (1-800-231-8002) for further
information.
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Eligible investors who have an existing investment counseling relationship with
Delaware Investment Advisers or Delaware International will not be subject to
the Fund's in-kind redemption requirements until such time as the Fund receives
appropriate regulatory approvals to permit such redemptions for the account of
such eligible investors.
IMPORTANT REDEMPTION INFORMATION
Because the Fund's shares are sold to institutions and high net-worth
individuals investors with a relatively high investment minimum, Fund
shareholders likely will hold a significant number of Fund shares. For this
reason, the Fund requests that shareholders proposing to make a large redemption
order give the Fund at least ten days advanced notice of any such order. This
request can easily be satisfied by calling the Fund at (1-800-231-8002), and
giving notification of your future intentions. Once a formal redemption order is
received, the Fund, in the case of redemptions to be made in cash, normally will
make payment for all shares redeemed under this procedure within three business
days of receipt of the order. In no event, however, will payment be made more
than seven days after receipt of a redemption request in good order. The Fund
may suspend the right of redemption or postpone the date at times when the NYSE
is closed, or under any emergency circumstances as determined by the Securities
and Exchange Commission ("Commission").
With respect to The International Equity, The Labor Select International Equity,
The Global Fixed Income, The International Fixed Income, The Global Equity and
the Emerging Markets Portfolios, as noted above, or if the Fund otherwise
determines that it would be detrimental to the best interests of the remaining
shareholders of a Portfolio to make payment wholly or partly in cash, the Fund
may pay the redemption proceeds in whole or in part by a distribution in-kind of
securities held by a Portfolio in lieu of cash in conformity with applicable
rules of the Commission. Investors may incur brokerage charges on the sale of
Portfolio securities so received in payment of redemptions.
Due to the relatively high cost of maintaining shareholder accounts, the Fund
reserves the right to redeem shares in a Portfolio if the value of your holdings
in that Portfolio is below $500,000. The Fund, however, will not redeem shares
based solely upon market reductions in net asset value. If the Fund intends to
take such action, a shareholder would be notified and given 90 days to make an
additional investment before the redemption is processed.
PURPOSE OF REIMBURSEMENT FEES -- THE EMERGING MARKETS PORTFOLIO
The purpose of the purchase and redemption transaction fees is to allocate
transaction costs associated with purchases and redemptions to investors making
those transactions, thus insulating existing shareholders from those transaction
costs. These costs include: (1) brokerage costs; (2) market impact costs, i.e.,
the increase in markets prices which may result when the Portfolio purchases or
sells thinly traded stocks; and (3) the effect of the "bid-asked" spread in
international markets.
The fees represent Delaware International's estimate of the brokerage and other
transaction costs incurred by the Portfolio in purchasing and selling
international stocks. Without the fee, the Portfolio would incur these costs
directly, resulting in reduced investment performance for all shareholders of
the Portfolio. With the fee, the transaction costs of purchasing and selling
international stocks are borne not by all existing shareholders, but only by
those investors making transactions. Transaction costs incurred when purchasing
or selling stocks of companies in emerging market countries are
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extremely high. There are three components of transaction costs - brokerage
fees, the difference between the bid/asked spread and market impact. Each one of
these factors is significantly more expensive in emerging market countries than
in the United States, because of less competition among brokers, lower
utilization of technology on the part of the exchanges and brokers, the lack of
derivative instruments and generally less liquid markets. Consequently,
brokerage commissions are high, bid/asked spreads are wide, and the market
impact is significant. In addition to these customary costs, most foreign
countries have exchange fees or stamp taxes.
ADDITIONAL INVESTMENT INFORMATION
U.S. GOVERNMENT SECURITIES
The U.S. government securities in which the various Portfolios may invest for
temporary purposes and otherwise (see "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS"), include a variety of securities which are issued or guaranteed
as to the payment of principal and interest by the U.S. government, and by
various agencies or instrumentalities which have been established or sponsored
by the U.S. government.
U.S. Treasury securities are backed by the "full faith and credit" of the United
States. Securities issued or guaranteed by federal agencies and U.S. government
sponsored instrumentalities may or may not be backed by the full faith and
credit of the United States. In the case of securities not backed by the full
faith and credit of the United States, investors in such securities look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are, in effect, backed
by the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the Treasury,
if needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S. Treasury
to purchase certain amounts of their securities to assist the institutions in
meeting their debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the Federal Home Loan Mortgage Corporation,
are federally chartered institutions under U.S. government supervision, but
their debt securities are backed only by the creditworthiness of those
institutions, not the U.S. government.
Some of the U.S. government agencies that issue or guarantee securities include
the Export-Import Bank of the United States, Farmers Home Administration,
Federal Housing Administration, Maritime Administration, Small Business
Administration, and the Tennessee Valley Authority.
An instrumentality of a U.S. government agency is a government agency organized
under Federal charter with government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Immediate Credit
Banks and the Federal National Mortgage Association.
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MORTGAGE-BACKED SECURITIES
The Real Estate Investment Trust, The Fixed Income, The Limited-Term Maturity
and The Global Fixed Income Portfolios may invest in mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
or by government sponsored corporations. Those securities include, but are not
limited to, GNMA certificates. Such securities differ from other fixed-income
securities in that principal is paid back by the borrower over the length of the
loan rather than returned in a lump sum at maturity. When prevailing interest
rates rise, the value of a GNMA security may decrease as do other debt
securities. When prevailing interest rates decline, however, the value of GNMA
securities may not rise on a comparable basis with other debt securities because
of the prepayment feature of GNMA securities. Additionally, if a GNMA
certificate is purchased at a premium above its principal value because its
fixed rate of interest exceeds the prevailing level of yields, the decline in
price to par may result in a loss of the premium in the event of prepayment.
Funds received from prepayments may be reinvested at the prevailing interest
rates which may be lower than the rate of interest that had previously been
earned.
The Portfolios also may invest in collateralized mortgage obligations ("CMOs")
and real estate mortgage investment conduits ("REMICs"). CMOs are debt
securities issued by U.S. government agencies or by financial institutions and
other mortgage lenders and collateralized by a pool of mortgages held under an
indenture. CMOs are issued in a number of classes or series with different
maturities. The classes or series are retired in sequence as the underlying
mortgages are repaid. REMICs, which were authorized under the Tax Reform Act of
1986, are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities. To the extent any
privately-issued CMOs or REMICs in which the Portfolios may invest are
considered by the Commission to be investment companies, the Portfolios will
limit their investments in such securities in a manner consistent with the
provisions of the 1940 Act.
The mortgages backing these securities include conventional 30-year fixed rate
mortgages, graduated payment mortgages and adjustable rate mortgages. These
mortgages may be supported by various types of insurance, may be backed by GNMA
certificates or other mortgage pass-throughs issued or guaranteed by the U.S.
government, its agencies or instrumentalities. However, the guarantees do not
extend to the mortgage-backed securities' value, which is likely to vary
inversely with fluctuations in interest rates. These certificates are in most
cases "pass-through" instruments, through which the holder receives a share of
all interest and principal payments from the mortgages underlying the
certificate. Because the prepayment characteristics of the underlying mortgages
vary, it is not possible to predict accurately the average life or realized
yield of a particular issue of pass-through certificates. During periods of
declining interest rates, prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. When the mortgage obligations are
prepaid, the Portfolio may reinvest the prepaid amounts in securities, the yield
of which reflects interest rates prevailing at the time. Moreover, prepayments
of mortgages which underlie securities purchased at a premium could result in
capital losses.
Certain CMOs and REMICs may have variable or floating interest rates and others
may be stripped. Stripped mortgage securities have greater market volatility
than other types of mortgage securities in which the Portfolios may invest.
Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped
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mortgage security will have one class receiving some of the interest and most of
the principal from the mortgage assets, while the other class will receive most
of the interest and the remainder of the principal. In the most extreme case,
one class will receive all of the interest (the "interest-only" class), while
the other class will receive all of the principal (the "principal-only" class).
The yield to maturity on an interest-only class is extremely sensitive not only
to changes in prevailing interest rates but also to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
a rapid rate of principal payments may have a material adverse effect on a
Portfolio's yield to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Portfolio may fail to fully
recoup its initial investment in these securities even if the securities are
rated in the highest rating categories.
Although stripped mortgage securities are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers,
these securities were only recently developed. As a result, established trading
markets have not yet been fully developed and, accordingly, these securities are
generally illiquid and to such extent, together with any other illiquid
investments, will not exceed 10% of a Portfolio's net assets.
CMOs and REMICs issued by private entities are not government securities and are
not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. Each of the Portfolios may invest
in such private-backed securities but, the Portfolios, other than The Fixed
Income Portfolio, 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 Fixed Income Portfolio 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.
ASSET-BACKED SECURITIES
The Fixed Income and Limited-Term Maturity Portfolios may also invest in
securities which are backed by assets such as receivables on home equity and
credit card loans, receivables regarding automobile, mobile home and
recreational vehicle loans, wholesale dealer floor plans and leases or other
loans or financial receivables currently available or which may be developed in
the future. All such securities must be rated in one of the four highest rating
categories by a reputable credit rating agency (e.g., BBB by S&P or Baa by
Moody's). Such receivables are securitized in either a
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pass-through or a pay-through structure. Pass-through securities provide
investors with an income stream consisting of both principal and interest
payments in respect of the receivables in the underlying pool. Pay-through
asset-backed securities are debt obligations issued usually by a special purpose
entity, which are collateralized by the various receivables and in which the
payments on the underlying receivables provide the funds to pay the debt service
on the debt obligations issued.
The rate of principal payment on asset-backed securities generally depends upon
the rate of principal payments received on the underlying assets. Such rate of
payments may be affected by economic and various other factors such as changes
in interest rates 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. See "MORTGAGE-BACKED SECURITIES,"
above. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately or in many cases, ever, established 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.
SHORT-TERM INVESTMENTS
The short-term investments in which The Defensive Equity, The Aggressive Growth,
The International Equity, The Defensive Equity Small/Mid-Cap, The Labor Select
International Equity, The Real Estate Investment Trust, The Global Fixed Income,
The International Fixed Income, The High-Yield Bond, The Global Equity and The
Emerging Markets Portfolios may invest consistent with the limits recited above
(see "INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS") are:
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a U.S. commercial
bank. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits maturing in more than seven days will not be purchased by a Portfolio,
and time deposits maturing from two business days through seven calendar days
will not exceed 10% of the total assets of a Portfolio, in the case of The
Defensive Equity, The Aggressive Growth, The International Equity, The Global
Fixed Income and The International Fixed Income Portfolios, and 15% of the total
assets of a Portfolio, in the case of The Defensive Equity Small/Mid-Cap, The
Labor Select International Equity, The Real Estate Investment Trust, The Global
Equity, The Emerging Markets and The High-Yield Bond Portfolios. Certificates of
deposit are negotiable short-term obligations issued by commercial banks against
funds deposited in the issuing institution. Variable rate certificates of
deposit are certificates of deposit on which the interest rate is periodically
adjusted prior to their stated maturity based upon a specified market rate. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods).
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A Portfolio will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion or, in the case of a bank
which does not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the principal
amount of such investment is insured in full by the Federal Deposit Insurance
Corporation, (ii) it is a member of the Federal Deposit Insurance Corporation,
and (iii) the bank or its securities have received the highest quality rating by
a nationally-recognized statistical rating organization;
(2) Commercial paper with the highest quality rating by a nationally-recognized
statistical rating organization (e.g., A-1 by S&P or Prime-1 by Moody's) or, if
not so rated, of comparable quality as determined by a Portfolio's investment
adviser;
(3) Short-term corporate obligations with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if not so rated, of comparable quality as determined by a
Portfolio's investment adviser;
(4) U.S. government securities (see "U.S. GOVERNMENT SECURITIES"); and
(5) Repurchase agreements collateralized by securities listed above.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Portfolio of the Fund may purchase securities on a when-issued or delayed
delivery basis. In such transactions, instruments are purchased with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. Each Portfolio will maintain with its Custodian Bank
a separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. The payment obligation and the interest rates
that will be received are each fixed at the time a Portfolio enters into the
commitment and no interest accrues to the Portfolio until settlement. Thus, it
is possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. It is a current policy of the Portfolios not to enter into when-issued
commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with brokers, dealers or
banks deemed to be creditworthy by a Portfolio's investment adviser under
guidelines of the Fund's directors. In a repurchase agreement, a Portfolio buys
securities from a seller that has agreed to repurchase it at a mutually agreed
upon date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week
and never exceeds one year. Not more than 10% of a Portfolio's assets may be
invested in repurchase agreements having a maturity in excess of seven days in
the case of The Defensive Equity, The Aggressive Growth, The International
Equity, The Global Fixed Income and The International Fixed Income Portfolios,
and 15% of the total assets of a Portfolio, in the case of The Defensive Equity
Small/Mid-Cap, The Labor Select International Equity, The Real Estate Investment
Trust and The High-Yield Bond Portfolios. Repurchase agreements may be viewed as
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a fully collateralized loan of money by a Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price and this value is maintained during the term of the
agreement. If the seller defaults and the collateral value declines, a Portfolio
might incur a loss. If bankruptcy proceedings are commenced with respect to the
seller, a Portfolio's realization upon the collateral may be delayed or limited.
Each Portfolio may invest cash balances in a joint repurchase agreement in
accordance with an Order the Delaware Group has obtained from the Commission
under Section 17(d) of the 1940 Act.
SECURITIES LENDING ACTIVITIES
Each Portfolio may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which a Portfolio 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 Portfolio will only enter into loan arrangements
after a review of all pertinent facts by the investment adviser, subject to
overall supervision by the Board of Directors, including the creditworthiness of
the borrowing broker, dealer or institution and then only if the consideration
to be received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the investment adviser.
BORROWING FROM BANKS
Each Portfolio may borrow money as a temporary measure or to facilitate
redemptions. No Portfolio has the intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and, consistent with
Commission rules, immediately after any borrowing is in an amount which exceeds
5% of its net assets, there must be asset coverage of at least 300%. In the
event the asset coverage declines below 300%, a Portfolio would take steps to
reduce the amount of its borrowings so that asset coverage would equal at least
300%. Securities will not be purchased while a Portfolio has an outstanding
borrowing.
FOREIGN INVESTMENT INFORMATION
The International Equity Portfolio, The Labor Select International Equity
Portfolio, The Global Equity Portfolio, The Emerging Markets Portfolio, The
Global Fixed Income Portfolio and The International Fixed Income Portfolio (and
The Real Estate Investment Trust and The High-Yield Bond Portfolios, up to 10%
of their total assets) will invest in securities of foreign issuers and may hold
foreign currency. Each of these Portfolios has the right to purchase securities
in any developed, underdeveloped or emerging country. The Emerging Markets
Portfolio, under normal market conditions, will invest at least 65% of its total
assets in securities of issuers in emerging markets. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations. These risks are in addition to the
usual risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments in
foreign nations, foreign exchange control (which may include suspension of the
ability to transfer currency from a given country), default in foreign
government securities, political or social
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instability or diplomatic developments which could affect investments in
securities of issuers in those nations.
In addition, in many countries, there is substantially less publicly available
information about issuers than is available in reports about companies in the
United States and this information tends to be of a lesser quality. Foreign
companies are not subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. In particular, the
assets and profits appearing on the financial statements of a developing or
emerging country issuer may not reflect its financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require for both tax and accounting purposes,
that certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses or profits. Consequently,
financial data may be materially affected by restatements for inflation and may
not accurately reflect the real condition of those issuers and securities
markets.
It is also expected that the expenses for custodial arrangements of The
International Equity, The Labor Select International Equity, The Real Estate
Investment Trust, The Global Fixed Income, The International Fixed Income, The
High-Yield Bond, The Global Equity and The Emerging Markets Portfolios' foreign
securities will be somewhat greater than the expenses for the custodial
arrangements for U.S. securities of equal value. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes. Although
in some countries a portion of these taxes is recoverable, the non-recovered
portion of foreign withholding taxes will reduce the income a Portfolio receives
from the companies comprising the Portfolio's investments. See "TAXES."
Further, a Portfolio may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which a Portfolio may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Compared to the United States and other developed countries, emerging countries
may have volatile social conditions, relatively unstable governments and
political systems, economies based on only a few industries and economic
structures that are less diverse and mature, and securities markets that trade a
small number of securities, which can result in a low or nonexistent volume of
trading. Prices in these securities markets tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries. Until
recently, there has been an absence of a capital market structure or
market-oriented economy in certain emerging countries. Further, investments and
opportunities for investments by foreign investors are subject to a variety of
national policies and restrictions in many emerging countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, limits on the types of
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companies in which foreigners may invest and prohibitions on foreign investments
in issuers or industries deemed sensitive to national interests. Additional
restrictions may be imposed at any time by these or other countries in which a
Portfolio invests. Also, the repatriation of both investment income and capital
from several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging countries, the investment managers for the Portfolios do not
believe that any current repatriation restrictions would affect their decision
to invest in such countries. Countries such as those in which a Portfolio may
invest, and in which The Emerging Markets Portfolio will primarily invest, have
historically experienced and may continue to experience, substantial, and in
some periods extremely high rates of inflation for many years, high interest
rates, exchange rate fluctuations or currency depreciation, large amounts of
external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Other factors which may influence the ability or willingness
to service debt include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of its debt service burden to the economy as a whole,
its government's policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints to which a
government debtor may be subject.
With respect to investment in debt issues of foreign governments, the ability of
a foreign government or government-related issuer to make timely and ultimate
payments on its external debt obligations will also be strongly influenced by
the issuer's balance of payments, including export performance, its access to
international credits and investments, fluctuations in interest rates and the
extent of its foreign reserves. A country whose exports are concentrated in a
few commodities or whose economy depends on certain strategic imports could be
vulnerable to fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for its exports in
currencies other than dollars, its ability to make debt payments denominated in
dollars could be adversely affected. If a foreign government or
government-related issuer cannot generate sufficient earnings from foreign trade
to service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the issuer's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a government issuer to obtain sufficient foreign exchange
to service its external debt.
As a result of the foregoing, a foreign governmental issuer may default on its
obligations. If such a default occurs, a Portfolio may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the ability
of the holder of foreign government and government-related debt securities to
obtain recourse may be subject to the political climate in the relevant country.
In addition, no assurance can be given that the holders of commercial bank debt
will not contest payments to the holders of other foreign government and
government-related debt obligations in the event of default under their
commercial bank loan agreements.
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Among the foreign government and government related issuers in which The
Emerging Markets, The International Fixed Income and The Global Fixed Income
Portfolios may invest are certain high-yield securities, including so-called
Brady Bonds. Brady Bonds are debt securities issued under the framework of the
Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas
F. Brady in 1989 as a mechanism for debtor nations to restructure their
outstanding external indebtedness (generally, commercial bank debt). In
restructuring its external debt under the Brady Plan framework, a debtor nation
negotiates with its existing bank lenders as well as multilateral institutions
such as the World Bank and the International Monetary Fund. The Brady Plan
framework, as it has developed, contemplates the exchange of commercial bank
debt for new issued bonds (Brady Bonds). The investment advisers believe that
economic reforms undertaken by countries in connection with the issuance of
Brady Bonds make the debt of countries which have issued or have announced plans
to issue Brady Bonds an attractive opportunity for investment. Investors,
however, should recognize that the Brady Plan only sets forth general guiding
principles for economic reform and debt reduction, emphasizing that solutions
must be negotiated on a case-by-case basis between debtor nations and their
creditors. In addition, Brady Bonds have been issued only recently and,
accordingly, do not have a long payment history. See "BRADY BONDS" in the
Statement of Additional Information for further information.
The issuers of the foreign government and government-related high-yield
securities, including Brady Bonds, in which The Emerging Markets, The
International Fixed Income and The Global Fixed Income Portfolios expect to
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 The Emerging Markets, The
International Fixed Income and The Global Fixed Income Portfolios 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.
With respect to forward foreign currency exchange, the precise matching of
forward contract amounts and the value of the securities involved is generally
not possible since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date it
matures. The projection of short-term currency strategy is highly uncertain. See
"FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS," below.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As noted above, the foreign investments made by The International Equity, The
Labor Select International Equity, The Real Estate Investment Trust, The Global
Fixed Income, The International Fixed Income, The Global Equity and The Emerging
Markets Portfolios present currency considerations which pose special risks. The
investment advisers use a purchasing power parity approach to evaluate currency
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risk. A purchasing power parity approach attempts to identify the amount of
goods and services that a dollar will buy in the United States and compares that
to the amount of a foreign currency required to buy the same amount of goods and
services in another country. When the dollar buys less abroad, the foreign
currency may be considered to be overvalued. When the dollar buys more abroad,
the foreign currency may be considered to be undervalued. Eventually, currencies
should trade at levels that should make it possible for the dollar to buy the
same amount of goods and services overseas as in the United States.
Although The International Equity, The Labor Select International Equity, The
Real Estate Investment Trust, The Global Fixed Income, The International Fixed
Income, The Global Equity and The Emerging Markets Portfolios value their assets
daily in terms of U.S. dollars, they do not intend to convert their holdings of
foreign currencies into U.S. dollars on a daily basis. A Portfolio will,
however, from time to time, purchase or sell foreign currencies and/or engage in
forward foreign currency transactions in order to expedite settlement of
Portfolio transactions and to minimize currency value fluctuations. A Portfolio
may conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market or
through entering into contracts to purchase or sell foreign currencies at a
future date (i.e., a "forward foreign currency" contract or "forward" contract).
A Portfolio will convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract.
A Portfolio may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, a Portfolio will be able to protect itself against a
possible loss resulting from an adverse change in currency exchange rates during
the period between the date the security is purchased or sold and the date on
which payment is made or received.
For example, when the investment adviser believes that the currency of a
particular foreign country may suffer a significant decline against the U.S.
dollar or against another currency, a Portfolio may enter into a forward
contract to sell, for a fixed amount of U.S. dollars or other appropriate
currency, the amount of foreign currency approximating the value of some or all
of the Portfolio's securities denominated in such foreign currency. A Portfolio
will not enter into forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the Portfolio
to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities or other assets denominated in that currency.
The Portfolios may enter into forward contracts to hedge the currency risk
associated with the purchase of individual securities denominated in particular
currencies. In the alternative, the Portfolios may also engage in currency
"cross hedging" when, in the opinion of the investment advisers, as appropriate,
the historical relationship among foreign currencies suggests that the
Portfolios may achieve the same protection for a foreign security at reduced
cost and/or administrative burden through the use of a forward contract relating
to a currency other than the U.S. dollar or the foreign currency in which the
security is denominated.
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At the maturity of a forward contract, a Portfolio may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Portfolio may realize gain or loss from currency
transactions.
With respect to forward foreign currency contracts, the precise matching of
forward contract amounts and the value of the securities involved is generally
not possible since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date it
matures. The projection of short-term currency strategy is highly uncertain.
It is impossible to forecast the market value of Portfolio securities at the
expiration of the contract. Accordingly, it may be necessary for a Portfolio to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Portfolio is obligated to deliver and if a decision is made
to sell the security and make delivery of the foreign currency. Conversely, it
may be necessary to sell on the spot market some of the foreign currency
received upon the sale of a Portfolio security if its market value exceeds the
amount of foreign currency the Portfolio is obligated to deliver.
HIGH-YIELD, HIGH RISK SECURITIES
The International Fixed Income Portfolio and The Global Fixed Income Portfolio
may each invest up to 5% of its assets in high risk, high-yield fixed-income
securities of foreign governments, including so-called Brady Bonds. The Emerging
Markets Portfolio may invest up to 35% of its net assets in fixed-income
securities issued by emerging country companies, and foreign governments, their
agencies and instrumentalities or political sub-divisions, all of which may be
high-yield, high risk securities, including Brady Bonds. For a description of
Brady Bonds and their attendant risks, see "ADDITIONAL INVESTMENT INFORMATION -
FOREIGN INVESTMENT INFORMATION." These high-yield, high risk securities are
rated lower than BBB by S&P and Baa by Moody's or, if unrated, are considered by
the investment adviser to have characteristics similar to such rated securities.
In addition, The High-Yield Bond Portfolio invests primarily in securities rated
B- or higher by S&P or B3 or higher by Moody's or, if unrated, judged to be of
comparable quality by the investment adviser. See "APPENDIX A--RATINGS" to this
Prospectus for more rating information. The discussion in this section
supplements the description of the risks of high-yield securities found earlier
in this Prospectus in "INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS -
THE HIGH- YIELD BOND PORTFOLIO," and investors should refer to that section for
a further discussion of the risks of high-yield bonds.
Fixed-income securities of this type are considered to be of poor standing and
predominantly speculative. Such securities are subject to a substantial degree
of credit risk. In the past, the high-yields from these bonds have more than
compensated for their higher default rates. There can be no assurance, however,
that yields will continue to offset default rates on these bonds in the future.
The Portfolios' investment advisers intend to maintain an adequately diversified
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portfolio of these bonds. While diversification can help to reduce the effect of
an individual default on the Portfolios, there can be no assurance that
diversification will protect the Portfolios from widespread bond defaults
brought about by a sustained economic downturn.
Medium and low-grade bonds held by the Portfolios may be issued as a consequence
of corporate restructurings, such as leveraged buy-outs, mergers, acquisitions,
debt recapitalizations or similar events. Also, these bonds are often issued by
smaller, less creditworthy companies or by highly leveraged (indebted) firms,
which are generally 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.
The economy and interest rates may affect these high-yield, high risk securities
differently from other securities. Prices have been found to be less sensitive
to interest rate changes than higher rated investments, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress which would adversely affect
their ability to service principal and interest payment obligations, to meet
projected business goals and to obtain additional financing. Changes by
recognized rating agencies in their rating of any security and in the ability of
an issuer to make payments of interest and principal will also ordinarily have a
more dramatic effect on the values of these investments than on the values of
higher rated securities. Such changes in value will not affect cash income
derived from these securities, unless the issuers fail to pay interest or
dividends when due. Such changes will, however, affect the Portfolios' net asset
value per share.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
In order to remain fully invested, to facilitate investments in equity
securities and to reduce transaction costs, The Aggressive Growth, The Real
Estate Investment Trust, The Global Equity and The Emerging Markets Portfolios
may, to a limited extent, enter into futures contracts, purchase or sell options
on futures contracts and engage in certain transactions in options on
securities, and may enter into closing transactions with respect to such
activities. The Portfolios will only enter into these transactions for hedging
purposes if it is consistent with the Portfolios' investment objectives and
policies and the Portfolios will not engage in such transactions to the extent
that obligations relating to futures contracts, options on futures contracts and
options on securities (see "FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS--OPTIONS ON SECURITIES"), in the aggregate, exceed 25% of the
Portfolios' assets.
Additionally, The International Fixed Income, The Global Equity and The Emerging
Markets Portfolios may enter into futures contracts, purchase or sell options on
futures contracts, and trade in options on foreign currencies, and may enter
into closing transactions with respect to such activities to hedge or "cross
hedge" the currency risks associated with its investments, as described under
"FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS," above.
The Aggressive Growth, The Real Estate Investment Trust, The Global Equity and
The Emerging Markets Portfolios may enter into contracts for the purchase or
sale for future delivery of securities. When a futures contract is sold, the
Portfolios incur a contractual obligation to deliver the securities underlying
the contract at a specified price on a specified date during a specified future
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month. A purchase of a futures contract means the acquisition of a contractual
right to obtain delivery to the Portfolio of the securities called for by the
contract at a specified price during a specified future month. Because futures
contracts require only a small initial margin deposit, the Portfolios would then
be able to keep a cash reserve applicable to meet potential redemptions while at
the same time being effectively fully invested.
Foreign currency futures contracts operate similarly to futures contracts
concerning securities. When The International Fixed Income, The Global Equity or
The Emerging Markets Portfolio sells a futures contract on a foreign currency,
it is obligated to deliver that foreign currency at a specified future date.
Similarly, a purchase by the Portfolio gives it a contractual right to receive a
foreign currency. This enables the Portfolio to "lock in" exchange rates.
The Portfolios may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options except that options on
futures give the purchaser the right, in return for the premium paid, to assume
a position in a futures contract, rather than actually to purchase or sell the
futures contract, at a specified exercise price at any time during the period of
the option. The Portfolios will not enter into futures contracts and options
thereon to the extent that more than 5% of a Portfolio's assets are required as
futures contract margin deposits and premiums on options and only to the extent
that obligations under such futures contracts and options thereon would not
exceed 20% of the Portfolio's total assets. In the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%.
To the extent that interest or exchange rates move in an unexpected direction,
the Portfolio may not achieve the anticipated benefits of investing in futures
contracts and options thereon, or may realize a loss. To the extent that a
Portfolio purchases an option on a futures contract and fails to exercise the
option prior to the exercise date, it will suffer a loss of the premium paid.
Further, the possible lack of a secondary market would prevent the Portfolio
from closing out its positions relating to futures.
OPTIONS
Options on Securities
The Aggressive Growth, The Real Estate Investment Trust, The Global Equity and
The Emerging Markets Portfolios may write covered call options on U.S.
securities, purchase call options on such securities and enter into closing
transactions related thereto. A Portfolio may also purchase put options on U.S.
securities, may write secured put options on such securities and enter into
closing transactions related thereto.
A covered call option obligates the writer, in return for the premium received,
to sell one of its securities to the purchaser of the option for an agreed price
up to an agreed date. The advantage is that the writer receives premium income
and the purchaser may hedge against an increase in the price of securities it
ultimately wishes to buy. A Portfolio will only purchase call options to the
extent that premiums paid on all outstanding call options do not exceed 2% of
the Portfolio's total assets.
A put option obligates the writer, in return for the premium received, to buy
the security underlying the option at the exercise price during the option
period, and the purchaser of the option has the right to sell the security to
the writer. Each Portfolio will only write put options on a secured basis which
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means that the Portfolio will maintain, in a segregated account with its
Custodian Bank, cash or U.S. government securities in an amount not less than
the exercise price of the option at all times during the option period. A
Portfolio will only purchase put options if the Portfolio owns the security
covered by the put option at the time of purchase and to the extent that the
premiums on all outstanding put options do not exceed 2% of the Portfolio's
total assets. The advantage is that the writer receives premium income while the
purchaser can be protected should the market value of the security decline.
Closing transactions essentially let the Portfolios offset put options or call
options prior to exercise or expiration. If a Portfolio cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Portfolios may use both exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Aggressive Growth
Portfolio will only invest in such options to the extent consistent with its 10%
limit on investments in illiquid securities, and The Real Estate Investment
Trust, The Global Equity and The Emerging Markets Portfolios will only invest in
such options to the extent consistent with their 15% limit on investments in
illiquid securities.
With respect to writing covered call options, the Portfolios may lose the
potential market appreciation of the securities subject to the option, if the
investment adviser's judgment is wrong and the price of the security moves in
the opposite direction from what was anticipated. In purchasing put and call
options, the premium paid by a Portfolio plus any transaction costs will reduce
any benefit realized by the Portfolio upon exercise of the option. When writing
put options, the Portfolios may be required, when the put is exercised, to
purchase securities at higher prices than current market prices.
Options on Stock Indices
The Global Equity Portfolio and The Emerging Markets Portfolio also may acquire
options on stock indices. 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 stock. Options on stock indices are similar to
options on stocks, but have different delivery requirements. See "OPTIONS ON
STOCK INDICES" in the Statement of Additional Information.
Options on Foreign Currencies
The International Fixed Income, The Global Equity and The Emerging Markets
Portfolios may purchase call options and write covered call options on foreign
currencies and enter into related closing transactions. A Portfolio may also
purchase put options and write secured put options on foreign currencies and
enter into related closing transactions. A Portfolio will enter into such
transactions to hedge or "cross hedge" the currency risks associated with its
investments, as described under "FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS,"
above.
Options on foreign currencies operate similarly to options on securities. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of a rate movement
adverse to a Portfolio's position, a Portfolio may forfeit the entire amount of
the premium plus any related transaction costs. As in the case of other types of
options, the writing of an option on a foreign currency will constitute only a
partial hedge, up to the amount of the premium received, and a Portfolio could
be required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses.
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A Portfolio will write call options only if they are "covered" and put options
only if they are secured. A call written by a Portfolio will be considered
covered if a Portfolio owns short-term debt securities with a value equal to the
face amount of the option contract and denominated in the currency upon which
the call is written. A put option written by a Portfolio will be considered
secured if, so long as a Portfolio is obligated as the writer of the put, it
segregates with its Custodian Bank cash or liquid high grade debt securities
equal at all times to the aggregate exercise price of the put.
RISKS OF TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS
The use of futures contracts, options on futures contracts, forward contracts
and certain options for hedging and other non-speculative purposes as described
above involves certain risks. For example, a lack of correlation between price
changes of an option or futures contract and the assets being hedged could
render a Portfolio's hedging strategy unsuccessful and could result in losses.
The same results could occur if movements of foreign currencies do not correlate
as expected by the investment adviser at a time when a Portfolio is using a
hedging instrument denominated in one foreign currency to protect the value of a
security denominated in a second foreign currency against changes caused by
fluctuations in the exchange rate for the dollar and the second currency. If the
direction of securities prices, interest rates or foreign currency prices is
incorrectly predicted, the Portfolio will be in a worse position than if such
transactions had not been entered into. In addition, since there can be no
assurance that a liquid secondary market will exist for any contract purchased
or sold, a Portfolio may be required to maintain a position (and in the case of
written options may be required to continue to hold the securities used as
cover) until exercise or expiration, which could result in losses. Further,
options and futures contracts on foreign currencies, and forward contracts,
entail particular risks related to conditions affecting the underlying currency.
Over-the-counter transactions in options and forward contracts also involve
risks arising from the lack of an organized exchange trading environment.
RESTRICTED/ILLIQUID SECURITIES
Each Portfolio may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933 ("1933 Act"). Rule 144A exempts
many privately placed and legally restricted securities from the registration
requirements of the 1933 Act and permits such securities to be freely traded
among certain institutional buyers such as the Portfolios.
Each Portfolio, other than The Defensive Equity Small/Mid-Cap, The Labor Select
International Equity, The Real Estate Investment Trust, The High-Yield Bond and
The International Fixed Income Portfolios, may invest no more than 10% of the
value of its net assets in illiquid securities. The Defensive Equity
Small/Mid-Cap, The Labor Select International Equity, The Real Estate Investment
Trust, The High-Yield Bond, The International Fixed Income, The Global Equity
and The Emerging Markets Portfolios may each invest no more than 15% of the
value of its net assets in illiquid securities. Illiquid securities, for
purposes of this policy, include repurchase agreements maturing in more than
seven days.
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While maintaining oversight, the Board of Directors has delegated to each
Portfolio's investment adviser the day-to-day functions of determining whether
or not individual Rule 144A Securities are liquid for purposes of a Portfolio's
limitation on investments in illiquid assets. The Board has instructed each
Portfolio's investment adviser to consider the following factors in determining
the liquidity of a Rule 144A Security: (i) the frequency of trades and trading
volume for the security; (ii) whether at least three dealers are willing to
purchase or sell the security and the number of potential purchasers; (iii)
whether at least two dealers are making a market in the security; and (iv) the
nature of the security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer).
If an investment adviser determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Portfolio's holdings of illiquid securities exceed the Portfolio's 10% or 15%
limit, as applicable, on investment in such securities, the investment adviser
will determine what action shall be taken to ensure that the Portfolio continues
to adhere to such limitation.
CONVERTIBLE, DEBT AND NON-TRADITIONAL EQUITY SECURITIES
A portion of The Defensive Equity Small/Mid-Cap and The High-Yield Bond
Portfolios' assets may be invested in convertible and debt securities of issuers
in any industry, and The Real Estate Investment Trust Portfolios' assets may be
invested in convertible securities of issuers in the real estate industry. A
convertible security is a security which may be converted at a stated price
within a specified period of time into a certain quantity of the common stock of
the same or a different issuer. Convertible and debt securities are senior to
common stocks in a corporation's capital structure, although convertible
securities are usually subordinated to similar nonconvertible securities.
Convertible and debt securities provide a fixed-income stream and the
opportunity, through its conversion feature, to participate in the capital
appreciation resulting from a market price advance in the convertible security's
underlying common stock. Just as with debt securities, convertible securities
tend to increase in market value when interest rates decline and tend to
decrease in value when interest rates rise. However, the price of a convertible
security is also influenced by the market value of the security's underlying
common stock and tends to increase as the market value of the underlying stock
rises, whereas it tends to decrease as the market value of the underlying stock
declines. Convertible and debt securities acquired by The Defensive Equity
Small/Mid-Cap, The Real Estate Investment Trust, and The High-Yield Bond
Portfolios may be rated below investment grade, or unrated. These lower rated
convertible and debt securities are subject to credit risk considerations
substantially similar to such considerations affecting high risk, high-yield
bonds, commonly referred to as "junk bonds." See "INVESTMENT OBJECTIVES,
POLICIES AND RISK CONSIDERATIONS--THE HIGH-YIELD BOND PORTFOLIO" and
"HIGH-YIELD, HIGH RISK SECURITIES" for a further discussion of these types of
investments.
The Defensive Equity Small/Mid-Cap, The Real Estate Investment Trust, The
High-Yield Bond and The Emerging Markets Portfolios may invest in convertible
preferred stocks that offer enhanced yield features, such as Preferred Equity
Redemption Cumulative Stock ("PERCS"), which provide an investor, such as a
Portfolio, 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
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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.
The Defensive Equity Small/Mid-Cap, The Real Estate Investment Trust, The
High-Yield Bond and The Emerging Markets Portfolios 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.
REITS
The Real Estate Investment Trust Portfolios' investment in REITs presents
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.
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DEPOSITARY RECEIPTS
The Defensive Equity, The International Equity, The Defensive Equity
Small/Mid-Cap, The Real Estate Investment Trust, The Global Fixed Income, The
International Fixed Income, The Global Equity and The Emerging Markets
Portfolios may invest in sponsored and unsponsored American Depositary Receipts
("ADRs") that are actively traded in the United States. The Global Fixed Income
Portfolio and International Fixed Income Portfolios may also invest in sponsored
and unsponsored European Depositary Receipts ("EDRs") and The International
Equity, The Global Equity and The Emerging Markets Portfolios may also invest in
sponsored and unsponsored EDRs and Global Depositary Receipts ("GDRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs and
GDRs are receipts issued by non-U.S. Banks or trust companies and foreign
branches of U.S. banks that evidence ownership of the underlying foreign or U.S.
securities. "Sponsored" ADRs, EDRs or GDRs are issued jointly by the issuer of
the underlying security and a Depositary, and "unsponsored" ADRs, EDRs or GDRs
are issued without the participation of the issuer of the deposited security.
Holders of unsponsored ADRs, EDRs or GDRs generally bear all the costs of such
facilities and the Depositary of an unsponsored ADR, EDR or GDR facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR, EDR or GDR.
ADRs may be listed on a national securities exchange or may be traded in the
over-the-counter market. EDRs and GDRs traded in the over-the-counter market
which do not have an active or substantial secondary market will be considered
illiquid and therefore will be subject to a Portfolio's limitation with respect
to such securities. ADR prices are denominated in U.S. dollars although the
underlying securities are denominated in a foreign currency. Investments in
ADRs, EDRs and GDRs involve risks similar to those accompanying direct
investments in foreign securities.
INVESTMENT COMPANY SECURITIES
Any investments that The Emerging Markets Portfolio and The Global Equity
Portfolio make in either closed-end or open-end investment companies will be
limited by the 1940 Act, and would involve an indirect payment of a portion of
the expenses, including advisory fees, of such other investment companies. Under
the 1940 Act's limitations, The Emerging Markets Portfolio may not (1) own more
than 3% of the voting stock of another investment company; (2) invest more than
5% of the Portfolio's total assets in the shares of any one investment company;
nor (3) invest more than 10% of the Portfolio's total assets in shares of other
investment companies. These percentage limitations also apply to the Portfolio's
investments in unregistered investment companies.
ZERO COUPON SECURITIES
The market prices of zero coupon securities are generally more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than do non-zero coupon
securities having similar maturities and credit quality. Current federal income
tax law requires that a holder of a taxable zero coupon security report as
income each year the portion of the original issue discount of such security
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that accrues that year, even though the holder receives no cash payments of
interest during the year. The Portfolio intends to qualify as a regulated
investment company under the Code. Accordingly, during periods when the
Portfolio receives no interest payments on its zero coupon securities, it will
be required, in order to maintain its desired tax treatment, to distribute cash
approximating the income attributable to such securities. Such distribution may
require the sale of portfolio securities to meet the distribution requirements
and such sales may be subject to the risk factor discussed above.
INVESTMENT LIMITATIONS
Each Portfolio's investment objectives, their designation as a diversified
portfolio or, in the case of The Real Estate Investment Trust, The Global Fixed
Income, The International Fixed Income and The Emerging Markets Portfolios, as
non-diversified portfolios, and their policies concerning portfolio lending,
borrowing from a bank and concentration of investments in specific industries
may not be changed unless authorized by the vote of a majority of a Portfolio's
outstanding voting securities. A "majority vote of the outstanding voting
securities" is the vote by the holders of the lesser of a) 67% or more of a
Portfolio's voting securities present in person or represented by proxy; or b)
more than 50% of the outstanding voting securities. The Statement of Additional
Information lists other more specific investment restrictions of each Portfolio
which may not be changed without a majority shareholder vote.
Except as specified above and under the heading "INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS" in this Prospectus and as described under "INVESTMENT
POLICIES, PORTFOLIO TECHNIQUES AND RISK CONSIDERATIONS" in the Statement of
Additional Information, the foregoing investment policies are not fundamental
and the directors may change such policies without an affirmative vote of a
"majority of the Fund's outstanding voting securities," as defined in the 1940
Act.
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund and its Portfolios are managed under the
direction of the Fund's Board of Directors. See "FUND OFFICERS AND PORTFOLIO
MANAGERS" in the Prospectus Summary and the Fund's Statement of Additional
Information for additional information about the Fund's officers and directors.
Investment Advisers
Delaware Investment Advisers, a division of Delaware Management Company, Inc.
("Delaware"), furnishes investment advisory services to The Defensive Equity,
The Aggressive Growth, The Defensive Equity Small/Mid-Cap, The Real Estate
Investment Trust, The Fixed Income, The Limited-Term Maturity and The High-Yield
Bond Portfolios and furnishes sub-investment advisory services to The Global
Equity Fund related to the U.S. securities portion of that Portfolio. Lincoln
Investment Management, Inc. ("Lincoln"), a wholly owned subsidiary of Lincoln
National Corporation, acts as sub-adviser to Delaware with respect to The Real
Estate Investment Trust Portfolios. In its capacity as sub-adviser, Lincoln
furnishes Delaware with investment recommendations, asset allocation advice,
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research, economic analysis and other investment services with respect to the
securities in which The Real Estate Investment Trust Portfolios may invest.
Delaware and its predecessors have been managing the funds in the Delaware Group
since 1938. On October 31, 1996, Delaware and its affiliates within the Delaware
Group, including Delaware International, were supervising in the aggregate more
than $30 billion in assets in various institutional or separately managed
(approximately $19,214,690,000) and investment company (approximately
$11,539,873,000) accounts. Lincoln (formerly named Lincoln National Investment
Management Company) was incorporated in 1930. Lincoln's primary activity is
institutional fixed-income investment management and consulting. Such activity
includes fixed-income portfolios, private placements, real estate debt and
equity, and asset/liability management. As of October 31, 1996, Lincoln had over
$39 billion in assets under management. Lincoln provides investment management
services to Lincoln National Corporation, its principal subsidiaries and
affiliated registered investment companies, and acts as investment adviser to
other unaffiliated clients.
Delaware International Advisers Ltd. ("Delaware International") furnishes
investment advisory services to The International Equity, The Labor Select
International Equity, The Global Fixed Income, The International Fixed Income,
The Global Equity and The Emerging Markets Portfolios. Several of the principals
of Delaware International were previously associated with a registered
investment adviser which managed the assets of a registered investment company.
Delaware International commenced operations as a registered investment adviser
in December 1990.
Delaware has entered into Investment Advisory Agreements with the Fund on behalf
of The Defensive Equity, The Aggressive Growth, The Defensive Equity
Small/Mid-Cap, The Real Estate Investment Trust, The Fixed Income, The
Limited-Term Maturity and The High-Yield Bond Portfolios. Delaware has also
entered into a Sub-Advisory Agreement with Lincoln with respect to The Real
Estate Investment Trust Portfolios. Delaware International has entered into
Investment Advisory Agreements with the Fund on behalf of The International
Equity, The Labor Select International Equity, The Global Fixed Income, The
International Fixed Income, The Global Equity and The Emerging Markets
Portfolios. Delaware acts as sub-adviser to Delaware International with respect
to The Global Equity Portfolio managing the U.S. securities portion of that
Portfolio. Under these Agreements, Delaware and Delaware International, subject
to the control and supervision of the Fund's Board of Directors and in
conformance with the stated investment objectives and policies of the Portfolios
with which they have an agreement, manage the investment and reinvestment of the
assets of the Portfolios with which they have agreements. In this regard, it is
their responsibility to make investment decisions for the respective Portfolios.
As compensation for the services to be rendered under their advisory agreements,
Delaware or, as relevant, Delaware International is entitled to an advisory fee
calculated by applying a quarterly rate, based on the following annual
percentage rates, to the Portfolio's average daily net assets for the quarter:
Portfolio Rate
The Defensive Equity Portfolio 0.55%
The Aggressive Growth Portfolio 0.80%
The International Equity Portfolio 0.75%
The Defensive Equity Small/Mid-Cap Portfolio 0.65%
The Labor Select International Equity Portfolio 0.75%
The Real Estate Investment Trust Portfolio 0.75%*
The Real Estate Investment Trust Portfolio II 0.75%*
The Global Equity Portfolio 0.75%**
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The Emerging Markets Portfolio 1.20%
The Fixed Income Portfolio 0.40%
The Limited-Term Maturity Portfolio 0.30%
The Global Fixed Income Portfolio 0.50%
The International Fixed Income Portfolio 0.50%
The High-Yield Bond Portfolio 0.45%
* Lincoln receives 30% of the advisory fee paid to Delaware for acting as
sub-adviser to Delaware with respect to The Real Estate Investment
Trust Portfolios.
** Delaware receives 0.50% of the advisory fee paid to Delaware
International for acting as sub-adviser to Delaware International with
respect to the U.S. securities portion of The Global Equity Portfolio.
As noted in "FUND EXPENSES," Delaware or, as relevant, Delaware International
elected voluntarily to waive that portion, if any, of its investment advisory
fees and to pay a Portfolio's expenses to the extent necessary to ensure that a
Portfolio's expenses (investment advisory fees, plus certain other noted
expenses) do not exceed, on an annualized basis, the amounts noted in that
section of this Prospectus through October 31, 1997. In addition, out of the
investment advisory fees to which they are otherwise entitled, Delaware and
Delaware International pay their proportionate share of the fees paid to
unaffiliated directors by the Fund, except that Delaware will make no such
payments out of the fees it receives for managing The Defensive Equity
Small/Mid-Cap, The Real Estate Investment Trust and The High-Yield Bond
Portfolios and Delaware International will make no such payments out of the fees
it receives for managing The Labor Select International Equity, The
International Fixed Income and The Emerging Markets Portfolios. With respect to
The Defensive Equity, The Aggressive Growth, The Global Fixed Income, The Fixed
Income, and The Labor Select International Equity Portfolios, the investment
management fees earned were 0.55%, 0.79%, 0.50%, 0.38% (annualized), 0.75%
(annualized), respectively, of average daily net assets for the fiscal year
ended October 31, 1996. After considering the waiver of fees by the respective
investment adviser, as described above, the fees paid by The Defensive Equity,
The Aggressive Growth, The Global Fixed Income, and The Labor Select
International Equity Portfolios amounted to 0.52%, 0.69%, 0.43%, and 0.32%
(annualized), respectively, of average daily net assets. No fees were paid by
The Fixed Income Portfolio. For the fiscal year ended October 31, 1996, the
investment management fee paid by The International Equity Portfolio amounted to
0.75% of average daily net assets. The advisory fees payable by The Aggressive
Growth, The International Equity, The Labor Select International Equity, The
Real Estate Investment Trust, The Global Equity and The Emerging Markets
Portfolios, while higher than the advisory fees paid by other mutual funds in
general, are comparable to fees paid by other mutual funds with similar
objectives and policies to the Portfolios.
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Delaware is an indirect, wholly owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH, Delaware and Delaware International are now indirect, wholly
owned subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln Investment Management, Inc. ("Lincoln"), the sub-adviser to Delaware
with respect to The Real Estate Investment Trust Portfolios is a wholly owned
subsidiary of Lincoln National. Delaware, Delaware International and Lincoln may
be deemed to be affiliated persons under the 1940 Act, as the three companies
are each under the ultimate control of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management. In connection with the merger, new
Investment Management Agreements between the Fund on behalf of The Defensive
Equity Portfolio, The Aggressive Growth Portfolio, The Fixed Income Portfolio
and The Limited-Term Maturity Portfolio and Delaware, and new Investment
Management Agreements between the Fund on behalf of The International Equity
Portfolio, The Global Fixed Income Portfolio and The International Fixed Income
Portfolio and Delaware International were executed following shareholder
approval. Delaware's address is One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103. Delaware International's address is Veritas House, 125
Finsbury Pavement, London, England EC2A INQ. Lincoln's address is 200 E. Berry
Street, Fort Wayne, IN 46802.
Comparative Performance - The Real Estate Investment Trust Portfolio II
The investment objectives, policies and strategies of The Real Estate Investment
Trust Portfolio and The Real Estate Investment Trust Portfolio II are identical.
Mr. Zenouzi makes comparable selections of securities for each Portfolio. The
table below presents total return performance as of October 31, 1996 on an
annualized basis for The Real Estate Investment Trust Portfolio compared with
The NAREIT Equity REIT Index:
Since Inception
(12/6/95)
The Real Estate Investment Trust Portfolio (1) 26.12%
The NAREIT Equity REIT Index (2) _____%
(1) Shares of The Real Estate Investment Trust Portfolio class of The Real
Estate Investment Trust Portfolio being offered in this Prospectus were
made available for sale beginning October ___, 1997. The historical
performance presented above is that of the original (and then only)
class of shares offered by The Real Estate Investment Trust Portfolio.
That original class has been redesignated The REIT Fund A Class and is
offered in a separate prospectus. Like The Real Estate Investment Trust
Portfolio class, the original class, prior to its redesignation, did
not carry a front-end sales charge and was not subject to Rule 12b-1
distribution expenses. Total return reflects changes in share prices
and reinvestment of dividends and distributions and are net of all
expenses. The expense ratio of the Portfolio has been capped at 0.89%
since inception.
(2) The NAREIT Equity REIT Index is an unmanaged index and a theoretical
measure of the performance of real estate investment trust stocks in
aggregate rather than an actual available investment.
Please note that this historical performance presented above is for The Real
Estate Investment Trust Portfolio, a separate Portfolio of the Fund, and its
performance is not indicative of the potential performance of The Real Estate
Investment Trust Portfolio II. Share prices and investment returns will
fluctuate reflecting market conditions.
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Administrator
Delaware Service Company, Inc., an affiliate of Delaware and an indirect, wholly
owned subsidiary of DMH, provides the Fund with administrative services pursuant
to the Amended and Restated Shareholders Services Agreement with the Fund on
behalf of the Portfolios. The services provided under the Amended and Restated
Shareholders Services Agreement are subject to the supervision of the officers
and directors of the Fund, and include day-to-day administration of matters
related to the corporate existence of the Fund, maintenance of its records,
preparation of reports, supervision of the Fund's arrangements with its
Custodian Banks, and assistance in the preparation of the Fund's registration
statements under Federal and State laws. The Amended and Restated Shareholders
Services Agreement also provides that Delaware Service Company, Inc. will
provide the Fund with dividend disbursing and transfer agent services. Delaware
Service Company, Inc. is located at 1818 Market Street, Philadelphia, PA 19103.
For its services under the Amended and Restated Shareholders Services Agreement,
the Fund pays Delaware Service Company, Inc. an annual fixed fee, payable
monthly, and allocated among the Portfolios of the Fund based on the relative
percentage of assets of each Portfolio. Delaware Service Company, Inc. also
provides accounting services to the Fund pursuant to the terms of a separate
Fund Accounting Agreement.
Distributor
Delaware Distributors, L.P. ("DDLP"), 1818 Market Street, Philadelphia, PA
19103, serves as the exclusive Distributor of the shares of the Fund's
Portfolios. Under its Distribution Agreements with the Fund on behalf of each
Portfolio, DDLP sells shares of the Fund upon the terms and at the current
offering price described in this Prospectus. DDLP is not obligated to sell any
certain number of shares of the Fund. DDLP is an indirect, wholly owned
subsidiary of DMH.
Expenses
Each Portfolio is responsible for payment of certain other fees and expenses
(including legal fees, accountants' fees, custodial fees and printing and
mailing costs) specified in the Amended and Restated Shareholders Services
Agreement and each of the respective Distribution Agreements. For the fiscal
year ended October 31, 1996, the ratios of expenses to average daily net assets
for The Defensive Equity, The Aggressive Growth, The Global Fixed Income, The
Labor Select International Equity, The International Equity and The Fixed Income
(from period of initial sale on March 6, 1996) Portfolios were 0.67%, 0.90%,
0.60%, 0.92% (annualized), 0.89% (annualized) and 0.53% (annualized),
respectively. For each Portfolio other than The International Equity Portfolio,
these ratios reflect the waiver and payment of fees by the respective investment
adviser, as described above.
SHAREHOLDER SERVICES
Special Reports and Other Services
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The Fund provides client shareholders with annual audited financial reports and
unaudited semi-annual financial reports. In addition, the investment advisers'
dedicated service staff may also provide client shareholders a detailed monthly
appraisal of the status of their account and a complete review of portfolio
assets, performance results and other pertinent data. Finally, the investment
advisers expect to conduct personal reviews no less than annually with each
client shareholder, with interim telephone updates and other communication, as
appropriate. The Fund's dedicated telephone number (1-800-231-8002) is available
for shareholder inquiries during normal business hours. The net asset values for
the Portfolios are also available by using the above "800" telephone number.
Exchange Privilege
Each Portfolio's shares may be exchanged for shares of the Fund's other
Portfolios or the institutional class shares of the other funds in the Delaware
Group based on the respective net asset values of the shares involved and as
long as a Portfolio's minimum is satisfied. With respect to exchanges involving
The Emerging Markets Portfolio, however, an investor will be assessed a purchase
reimbursement fee by that Portfolio when exchanging from another Portfolio into
The Emerging Markets Portfolio and a shareholder of The Emerging Markets
Portfolio will be assessed a redemption reimbursement fee by that Portfolio when
exchanging out of The Emerging Markets Portfolio into another Portfolio. See
"HOW TO INVEST," "HOW TO REDEEM" and "PURPOSE OF REIMBURSEMENT FEES -- THE
EMERGING MARKETS PORTFOLIO." There are no minimum purchase requirements for the
institutional class shares of the other Delaware Group funds, but certain
eligibility requirements must be satisfied. Exchange requests should be sent to
Delaware Pooled Trust, Inc., One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103, Attn: Client Services. Such an exchange would be
considered a taxable event in instances where an institutional shareholder is
subject to tax. The exchange privilege is only available with respect to
Portfolios that are registered for sale in a shareholder's state of residence.
The Fund reserves the right to suspend or terminate, or amend the terms of, the
exchange privilege upon 60 days' written notice to client shareholders.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund maintains the following dividend and capital gains policies for its 14
Portfolios.
The Fixed Income, The Limited-Term Maturity and The International Fixed Income
Portfolios expect to declare dividends daily and distribute them monthly. The
High-Yield Bond and The Global Fixed Income Portfolios expect to declare
dividends monthly and distribute them monthly. The Defensive Equity
Small/Mid-Cap, The Defensive Equity, The International Equity and The Labor
Select International Equity Portfolios expect to declare and distribute all of
their net investment income to shareholders as dividends quarterly. The
Aggressive Growth, The Real Estate Investment Trust, The Global Equity and The
Emerging Markets Portfolios expect to declare and distribute all of their net
investment income to shareholders as dividends annually.
Net capital gains, if any, will be distributed annually. Unless a shareholder
elects to receive dividends and capital gains distributions in cash, all
dividends and capital gains distributions shall be automatically paid in
additional shares at net asset value of the Portfolio.
In addition, in order to satisfy certain distribution requirements of the Tax
Reform Act of 1986, each Portfolio may declare special year-end dividend and
capital gains distributions during November or December to shareholders of
record on a date in such month. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by a Portfolio and received by
shareholders on the earlier of the date paid or December 31 of the prior year.
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TAXES
General
Each Portfolio within the Fund has qualified or intends to qualify, and each
intends to continue to qualify, as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). As such, a Portfolio
will not be subject to federal income or excise tax to the extent its earnings
are distributed to its shareholders as provided in the Code.
Each Portfolio intends to distribute substantially all of its net investment
income and net capital gains. Dividends from net investment income or net
short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. For corporate investors, dividends
paid by the Equity Oriented Portfolios, with the exception of The International
Equity, The Labor Select International Equity, The Global Equity and The
Emerging Markets Portfolios, from net investment income will generally qualify,
in part, for the intercorporate dividends-received deduction. However, the
portion of the dividends so qualified depends on the aggregate qualifying
dividend income received by a Portfolio from domestic (U.S.) sources. Of the
dividends paid by The Defensive Equity and The Aggressive Growth Portfolios for
the fiscal year ended October 31, 1996, 55% and 5%, respectively, were eligible
for this deduction.
Distributions paid by a Portfolio from long-term capital gains, whether received
in cash or in additional shares, are taxable to those investors who are subject
to income taxes as long-term capital gains, regardless of the length of time an
investor has owned shares in a Portfolio. The Portfolios do not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a by-product of Portfolio management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in a Portfolio are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
The sale of shares of a Portfolio is a taxable event and may result in a capital
gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two portfolios of a mutual fund). Any loss incurred on the
sale or exchange of the shares of a Portfolio, held for six months or less, will
be treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
Each year, the Fund will mail to you information on the amount and tax status of
each Portfolio's dividends and distributions. Shareholders should consult their
own tax advisers regarding specific questions as to federal, state, local or
foreign taxes.
The Fund is required to withhold 31% of taxable dividends capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
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The International Equity Portfolio, The Labor Select International Equity
Portfolio, The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The Global Equity and The Emerging Markets Portfolio - Foreign Taxes
Each of The International Equity, The Labor Select International Equity, The
Global Fixed Income, The International Fixed Income, The Global Equity and The
Emerging Markets Portfolios may elect to "pass-through" to its shareholders the
amount of foreign income taxes paid by such Portfolio. A Portfolio will make
such an election only if it deems it to be in the best interests of its
shareholders.
If this election is made, shareholders of a Portfolio will be required to
include in their gross income their pro-rata share of foreign taxes paid by the
Portfolio. However, shareholders will be able to treat their pro-rata share of
foreign taxes as either an itemized deduction or a foreign tax credit (but not
both) against U.S. income taxes on their tax return.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the Fund.
Additional information on tax matters is included in the Statement of Additional
Information.
VALUATION OF SHARES
The net asset value per share of each Portfolio is determined by dividing the
total market value of the Portfolio's investments and other assets, less any
liabilities, by the total outstanding shares of the Portfolio. Net asset value
per share is determined as of the close of regular trading on the NYSE on each
day the NYSE is open for business. Securities listed on a U.S. securities
exchange for which market quotations are available are valued at the last quoted
sale price on the day the valuation is made. Price information on listed
securities is taken from the exchange where the security is primarily traded.
Securities listed on a foreign exchange are valued at the last quoted sale price
available before the time when net assets are valued. Unlisted securities and
listed securities not traded on the valuation date for which market quotations
are readily available are valued at a price that is considered to best represent
fair value within a range not in excess of the current asked price nor less than
the current bid prices. Domestic equity securities traded over-the-counter,
domestic equity securities which are not traded on the valuation date and U.S.
government securities are priced at the mean of the bid and ask price.
Bonds and other fixed-income securities are valued according to the broadest and
most representative market, which will ordinarily be the over-the-counter
market. In addition, bonds and other fixed-income securities may be valued on
the basis of prices provided by a pricing service when such prices are believed
to reflect the fair market value of such securities. The prices provided by a
pricing service are determined without regard to bid or last sale prices but
take into account institutional size trading in similar groups of securities and
any developments related to the specific securities. Securities not priced in
this manner are valued at the most recent quoted mean price, or, when stock
exchange valuations are used, at the latest quoted sale price on the day of
valuation. If there is no such reported sale, the latest quoted mean price will
be used. Securities with remaining maturities of 60 days or less are valued at
amortized cost, if it approximates market value. In the event that amortized
cost does not approximate market value, market prices as determined above will
be used.
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Exchange-traded options are valued at the last reported sales price or, if no
sales are reported, at the mean between the last reported bid and ask prices.
Non-exchange traded options are valued at fair value using a mathematical model.
Futures contracts are valued at their daily quoted settlement price. The value
of other assets and securities for which no quotations are readily available
(including restricted securities) are determined in good faith at fair value
using methods determined by the Fund's Board of Directors. The securities in
which The International Equity, The Labor Select International Equity, The
Global Fixed Income, The International Fixed Income, The Global Equity and The
Emerging Markets Portfolios (and, to a limited extent, The Real Estate
Investment Trust and The High-Yield Bond Portfolios) may invest from time to
time may be listed primarily on foreign exchanges which trade on days when the
NYSE is closed (such as Saturday). As a result, the net asset value of those
Portfolios may be significantly affected by such trading on days when
shareholders have no access to the Portfolios.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the mean between the bid and ask price of such currencies
against the U.S. dollar as provided by an independent pricing service or any
major bank, including the Custodian Banks. Forward foreign currency contracts
are valued at the mean price of the contracts. Interpolated values will be
derived when the settlement date of the contract is on an interim period for
which quotations are not available.
PORTFOLIO TRANSACTIONS
In purchasing and selling securities for each of the Portfolios, the Fund (and,
in the case of The International Equity, The Labor Select International Equity,
The Global Fixed Income, The International Fixed Income, The Global Equity and
The Emerging Markets Portfolios, the investment adviser) uses its best efforts
to obtain the best available price and most favorable execution and may, where
relevant, pay higher commissions in recognition of brokerage services which in
the opinion of the Fund's trading department (and, in the case of The
International Equity, The Labor Select International Equity, The Global Fixed
Income, The International Fixed Income, The Global Equity and The Emerging
Markets Portfolios, the investment adviser) are necessary and in the best
interest of the Fund's shareholders. In selecting broker/dealers to execute the
securities transactions for the Portfolios, consideration will be given to such
factors as the price of the security, the rate of any commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing broker/dealers, and
any brokerage and research services which they provide to the Fund. These
services may be used by the investment advisers in servicing any of their other
accounts. Some securities considered for investment by each of the Fund's
Portfolios may also be appropriate for other clients served by the investment
advisers. If a purchase or sale of securities consistent with the investment
policies of a Portfolio and one or more of these other clients served by the
investment advisers is considered at or about the same time, transactions in
such securities will be allocated among the Portfolio and clients in a manner
deemed fair and reasonable. Although there is no specified formula for
allocating such transactions, the various allocation methods used and the
results of such allocations are subject to periodic review by the Fund's
directors.
-79-
<PAGE>
(DPT-I)
Subject to best price and execution, Portfolio orders may be placed with
qualified broker/dealers who recommend the Fund's Portfolios or who act as
agents in the purchase of shares of the Portfolios for their clients.
PERFORMANCE INFORMATION
From time to time, the Portfolios may quote yield in advertising and other types
of sales literature. The current yield for each of these Portfolios will be
calculated by dividing the annualized net investment income earned by each of
the Portfolios during a recent 30-day period by the offering price per share
(net asset value) on the last day of the period. The yield information provides
for semi-annual compounding which assumes that net investment income is earned
and reinvested at a constant rate and annualized at the end of a six-month
period. Each Portfolio also may quote total return performance in advertising
and other types of literature. Total return will be based on a hypothetical
$1,000 investment, reflecting the reinvestment of all distributions at net asset
value at the beginning of the specific period. Each presentation will include,
as relevant, the average annual total
return for one-, five- and ten-year periods. Each Portfolio may also advertise
aggregate and average total return information over additional periods of time.
Yield and net asset value fluctuate and are not guaranteed. Past performance is
not an indication of future results.
GENERAL INFORMATION
Description of Common Stock
The Fund was organized as a Maryland corporation on May 30, 1991. The Articles
of Incorporation permit the Fund to issue one billion shares of common stock
with $.01 par value and fifty million shares have been allocated to each
Portfolio. The Board of Directors has the power to designate one or more classes
of shares of common stock and to classify and reclassify any unissued shares
with respect to such classes.
-80-
<PAGE>
(DPT-I)
The shares of each Portfolio, when issued, will be fully paid, non-assessable,
fully transferable and redeemable at the option of the holder. The shares have
no preference as to the conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of each Portfolio have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of directors can elect 100% of the directors
if they choose to do so. Shares of each Portfolio entitled to vote on a matter
will vote in the aggregate and not by Portfolio, except when the matter to be
voted upon affects only the interests of shareholders of a particular Portfolio
or when otherwise expressly required by law. The Fund does not issue
certificates for shares unless a shareholder submits a specific request. Under
Maryland law, the Fund is not required, and does not intend, to hold annual
meetings of its shareholders unless, under certain circumstances, it is required
to do so under the 1940 Act.
Lincoln National Corporation Employees' Retirement Trust (the "Trust") made an
initial investment in the Emerging Markets Portfolio, which resulted in the
Trust owning approximately 100% of the outstanding shares of the Portfolio.
Subject to certain limited exceptions, there would be no limitation on the
Trust's ability to redeem its shares of the Portfolio and it may elect to do so
at any time.
Custodian Banks
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245 serves as
custodian for The Global Fixed Income, The International Equity, The Labor
Select International Equity, The Real Estate Investment Trust, The High-Yield
Bond, The International Fixed Income, The Global Equity and The Emerging Markets
Portfolios. Bankers Trust Company, One Bankers Trust Plaza, New York, NY 10006
serves as custodian for The Defensive Equity, The Aggressive Growth, The Fixed
Income, The Limited-Term Maturity and The Defensive Equity Small/Mid-Cap
Portfolios.
Independent Auditors
Ernst & Young LLP, Two Commerce Square, 2001 Market Street, Suite 4000,
Philadelphia, PA 19103, serves as independent auditors for the Fund.
Expenses
Each Portfolio is responsible for all its own expenses other than those borne by
its investment adviser under the relevant Investment Advisory Agreement and the
distributor under the Distribution Agreement.
Litigation
The Fund is not involved in any litigation.
-81-
<PAGE>
(DPT-I)
APPENDIX A--RATINGS
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to be the
best quality. They carry the smallest degree of investment risk; Aa--judged to
be of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations; Baa--considered as medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; Ba--judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that company ranks in the
higher end of its generic category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the company ranks in the lower end of
its generic rating category.
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.
Plus (+) or minus (-) Ratings may be modified by a plus or minus sign,
reflecting the relative standing within the major rating categories.
Commercial Paper
Excerpts from Moody's description of its two highest commercial paper ratings:
P-1--the highest grade possessing greatest relative strength; P-2--second
highest grade possessing less relative strength than the highest grade.
Excerpts from S&P's description of its two highest commercial paper ratings:
A-1--judged to be the highest investment grade category possessing the highest
relative strength; A-2--investment grade category possessing less relative
strength than the highest rating.
-82-
<PAGE>
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
PROSPECTUS
___________, 1997
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes The REIT Fund A Class shares ("Class A Shares"),
The REIT Fund B Class shares ("Class B Shares") and The REIT Fund C Class shares
("Class C Shares") of The Real Estate Investment Trust Portfolio series (the
"Fund") of Delaware Pooled Trust, Inc., a professionally-managed mutual fund.
The Fund's objective is to seek to achieve maximum long-term total return.
Capital appreciation is a secondary objective. It seeks to achieve its
objectives by investing in securities of companies primarily engaged in the real
estate industry.
This Prospectus relates only to the classes listed above (individually, a
"Class" and collectively, the "Classes") and sets forth information that you
should read and consider before you invest. Please retain it for future
reference. The Fund's Statement of Additional Information ("Part B" of the
Fund's registration statement), dated __________, 1997, as it may be amended
from time to time, contains additional information about the Fund and has been
filed with the Securities and Exchange Commission. Part B is incorporated by
reference into this Prospectus and is available, without charge, by writing to
Delaware Distributors, L.P. at the above address or by calling the above
telephone numbers.
The Fund also offers The REIT Fund Institutional Class and The Real Estate
Investment Portfolio class, which are available for purchase only by certain
investors. A prospectus for those classes can be obtained by writing to Delaware
Distributors, L.P. at the above address or by calling the above telephone
numbers.
<PAGE>
TABLE OF CONTENTS
COVER PAGE
SYNOPSIS
SUMMARY OF EXPENSES
FINANCIAL HIGHLIGHTS
SUITABILITY
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
THE DELAWARE DIFFERENCE
Plans and Services
RETIREMENT PLANNING
CLASSES OF SHARES
HOW TO BUY SHARES
REDEMPTION AND EXCHANGE
DIVIDENDS AND DISTRIBUTIONS
TAXES
CALCULATION OF OFFERING PRICE
AND NET ASSET VALUE PER SHARE
MANAGEMENT OF THE FUND
ADDITIONAL INVESTMENT INFORMATION ON
POLICIES AND RISK CONSIDERATIONS
APPENDIX A - INVESTMENT ILLUSTRATIONS
APPENDIX B - CLASSES OFFERED
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek to achieve maximum long-term
total return. Capital appreciation is a secondary objective. It seeks to achieve
its objectives by investing in securities of companies primarily engaged in the
real estate industry. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate investment
trusts ("REITs"). For further details, see Investment Objective and Policies and
Additional Information on Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
The Fund is considered a nondiversified investment company under the
Investment Company Act of 1940 (the "1940 Act") and may be subject to greater
risks than if the Fund were diversified. The Fund concentrates its investments
in the real estate industry, so its net asset value can be expected to fluctuate
in light of factors affecting that industry and may fluctuate more widely than a
portfolio that invests in a broader range of industries. By investing primarily
in securities of REITs, the Fund is also subject to interest rate risk. The Fund
may invest up to 10% of its total assets in foreign securities, including
securities of issuers in emerging markets. Those new securities pose special
risks that do not typically arise in connection with investments in U.S.
securities. The Fund may use futures contracts, options on futures contracts and
options on stock and may engage in foreign currency options and futures
transactions for hedging purposes. There are special risks that result from the
use of options and futures. See Investment Objectives, Policies, and Risk
Considerations.
Investment Manager, Distributor and Service Agent
Delaware Investment Advisers, a division of Delaware Management Company,
Inc. (the "Manager") furnishes investment management services to the Fund,
subject to the supervision and direction of the Board of Directors. The Manager
also provides investment management services to certain of the other funds in
the Delaware Group. Lincoln Investment Management, Inc. ("Lincoln"), a wholly
owned subsidiary of Lincoln National Corporation, acts as sub-adviser to the
Manager with respect to the Fund. Delaware Distributors, L.P. (the
"Distributor") is the national distributor for the Fund and for all of the other
mutual funds in the Delaware Group. Delaware Service Company, Inc. (the
"Transfer Agent") is the shareholder servicing, dividend disbursing, accounting
services and transfer agent for the Fund and for all of the other mutual funds
in the Delaware Group. See Summary of Expenses and Management of the Fund for
further information regarding the Manager and the fees payable under the Fund's
Investment Management Agreement.
Sales Charges
The price of the Class A Shares includes a maximum front-end sales charge of
4.75% of the offering price. The sales charge is reduced on certain transactions
of at least $100,000 but under $1,000,000. For purchases of $1,000,000 or more,
the front-end sales charge is eliminated. Class A Shares are subject to annual
12b-1 Plan expenses.
The price of the Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a contingent deferred sales charge ("CDSC") of:
(i) 4% if shares are redeemed within two years of purchase; (ii) 3% if shares
are redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; and (iv) 1% if
-3-
<PAGE>
shares are redeemed during the sixth year following purchase. Class B Shares are
subject to annual 12b-1 Plan expenses which are assessed against the Class B
Shares for approximately eight years after purchase. See Deferred Sales Charge
Alternative--Class B Shares and Automatic Conversion of Class B Shares under
Classes of Shares.
The price of the Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under Management
of the Fund.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000. Subsequent
investments must generally be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase limitation
of $250,000. For Class C Shares, each purchase must be in an amount that is less
than $1,000,000. An investor may exceed the maximum purchase limitations for
Class B Shares and Class C Shares by making cumulative purchases over a period
of time. An investor should keep in mind, however, that reduced front-end sales
charges apply to investments of $100,000 or more of Class A Shares, which are
subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and generally are not subject to a CDSC. See How to Buy Shares.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Fund nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of shares purchased at net asset
value, which may be subject to a CDSC if a dealer's commission was paid in
connection with such purchases. See Front-End Sales Charge Alternative - Class A
Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered.
See Redemption and Exchange.
Open-End Investment Company
The Fund is a series of Delaware Pooled Trust, Inc. ("DPT"). DPT was
organized as a Maryland corporation on May 30, 1991, and is an open-end
management investment company. See Shares under Management of the Fund.
-4-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses applicable
to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...............................4.75%.............None.............None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price).....................None..............None.............None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable)...............................None*.............4.00%*...........1.00%*
Redemption Fees...................................................None**............None**...........None**
</TABLE>
*Class A purchases of $1 million or more may be made at net asset
value. However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a CDSC of
1% will be imposed on certain redemptions within 12 months of purchase ("Limited
CDSC"). Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during the fifth
year following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are subject to a CDSC
of 1% if the shares are redeemed within 12 months of purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange; Deferred Sales Charge Alternative -
Class B Shares and Level Sales Charge Alternative - Class C Shares under Classes
of Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
-5-
<PAGE>
<TABLE>
<CAPTION>
Annual Operating Expenses Class A Class B Class C
(as a percentage of average daily net assets) Shares Shares Shares
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees (after voluntary waivers).........................[ ]%.............[ ]%.............[ ]%
12b-1 Expenses (including service fees)...........................0.30%***..........1.00%***..........1.00%***
Other Operating Expenses (after
expense limitations)+........................................[ ]%.............[ ]%.............[ ]%
Total Operating Expenses (after voluntary
waivers and expense limitations)+.....................[ ]%.............[ ]%.............[ ]%
===== ===== =====
</TABLE>
***Class A Shares, Class B Shares and Class C Shares are subject to
separate 12b-1 Plans. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by rules of the
National Association of Securities Dealers, Inc. (the "NASD"). The annual 12b-1
Plan expenses for the Class A Shares under the 12b-1 Plan for Class A Shares are
.30% of the average daily net assets of such Class. See Distribution (12b-1) and
Service under Management of the Fund.
+"Other Operating Expenses" and "Total Operating Expenses" for Class
A Shares are based on the actual results for the original (and then only) class
of shares of the Fund as of the Fund's fiscal year ended October 31, 1996.
Effective _____________, 1997, such original class has been redesignated The
REIT Fund A Class. Prior to its redesignation, such original class carried no
front-end sales charge and was not subject to Rule 12b-1 distribution expenses.
"Other Operating Expenses" for Class B Shares and Class C Shares are estimates
for the first full fiscal year of the Classes and are based on the actual
results for the original (and then only) class of shares of the Fund as of the
Fund's fiscal year ended October 31, 1996. In each case the expense information
above has been restated to reflect the applicable Rule 12b-1 fee and the
shareholder services fee to which each Class is subject, which is higher than
the shareholder services fee to which the original class of shares of the Fund
was subject. The Manager has elected voluntarily to waive that portion, if any,
of the annual management fees payable by the Fund and to pay certain expenses of
the Fund to the extent necessary to ensure that the Total Operating Expenses
(after voluntary waivers and payments) of each Class does not exceed [ ]% (in
all cases exclusive of taxes, interest, brokerage commissions, extraordinary
expenses and 12b-1 fees) during the commencement of the public offering of the
Classes through October 31, 1997. If the voluntary fee waivers or payments were
not in effect, the Management Fees (as a percentage of average net assets) would
be 0.75%, 0.75% and 0.75%, respectively, and the Total Operating Expenses (as a
percentage of average daily net assets) would be [ ]%, [ ]% and [ ]%,
respectively, of Class A Shares, Class B Shares and Class C Shares.
Unless waived, investors utilizing the Delaware Group Asset Planner
asset allocation service will incur an annual maintenance fee of $35 per
Strategy. Investors who utilize the Asset Planner for an Individual Retirement
Account ("IRA") will pay an annual IRA fee of $15 per Social Security number.
See How to Buy Shares--Delaware Group Asset Planner.
-6-
<PAGE>
The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming (1) a 5%
annual rate of return, (2) redemption and no redemption at the end of each time
period and (3) for Class B Shares and Class C Shares, payment of a CDSC at the
time of redemption, if applicable. The example is based on the expenses incurred
by the original (and then only) class of shares offered by the Fund for the
Fund's fiscal year ended October 31, 1996. Such original class has been
redesignated The REIT Fund A Class and, prior to its redesignation, did not
carry a front-end sales charge and was not subject to a CDSC or Rule 12b-1
distribution expenses. In the following example of expenses, the expense
information has been restated to reflect the applicable Rule 12b-1 fee and the
shareholder services fee to which each Class is subject, which is higher than
the shareholder services fee to which the original class of shares of the Fund
was subject.
Assuming Redemption Assuming No Redemption
1 year 3 years 1 year 3 years
------ ------- ------ -------
Class A Shares $[](1) $[] $[] $[]
Class B Shares $[] $[] $[] $[]
Class C Shares $[] $[] $[] $[]
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has
not been reflected in this calculation, may be imposed in the event of
certain redemptions within 12 months of purchase. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
The purpose of the above tables is to assist the investor in understanding the
various costs and expenses that an investor in each Class will bear directly or
indirectly.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
the Fund included in, or incorporated by reference into the Part B and, for
periods ending on or before October 31, 1996 have been audited by Ernst & Young
LLP, independent auditors. The data should be read in conjunction with the
financial statements.
Further information about the performance of the Fund is contained in its Annual
Report. Both the Annual Report (which includes related notes and the report of
Ernst & Young LLP) and the Part B may be obtained from the Fund upon request at
no charge.
As of the date of this Prospectus the Fund has sold no Class B or Class C Shares
to public investors.
-7-
<PAGE>
The REIT Fund
A Class(1)
Period 12/6/95(2)
through
0/31/96
Net Asset Value, Beginning of Period......................... $10.0000
Income From Investment Operations
Net Investment Income........................................ 0.6515
Net Gains (Losses) on Securities
(both realized and unrealized)............................. 1.9385
------
Total from Investment Operations.................... 2.5900
------
Less Distributions
Dividends (from net investment income)....................... (0.1000)
Distributions (from capital gains)........................... none
Returns of Capital........................................... none
----
Total Distributions................................. (0.4100)
--------
Net Asset Value, End of Period............................... $12.4900
========
Total Return................................................. 26.12%(3)
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted).................... $26,468
Ratio of Expenses to Average Daily Net Assets................ 0.89%
Ratio of Expenses to Average Daily Net Assets
Prior to Expense Limitations............................... 1.02%
Ratio of Net Investment Income to Average Daily Net Assets... 6.70%
Ratio of Net Investment Income to Average Daily Net Assets
Prior to Expense Limitations............................... 6.57%
Portfolio Turnover Rate...................................... 109%
Average Commission Rate Paid................................. $ 0.06
- ---------------
(1) The financial highlights appearing above are derived from data
concerning the original (and then only) class of shares offered by the
Fund. That original class has been redesignated The REIT Fund A Class
and, prior to its redesignation, did not carry a front-end sales charge
and was not subject to Rule 12b-1 distribution expenses. The financial
highlights appearing above do not reflect the Rule 12b-1 distribution
expenses nor the shareholder services fees to which the Class A Shares
are subject.
(2) Date of initial sale of the original class (now The REIT Fund A Class);
ratios and total return have been annualized.
(3) Does not reflect the maximum sales charge that is in effect nor the 1%
Limited CDSC that would apply in the event of certain redemptions
within 12 months of purchase. Total return reflects the expense
limitation of 0.89% applicable to the original class of shares offered
by the Fund.
-8-
<PAGE>
SUITABILITY
The Fund may be suitable for the patient investor interested in
long-term capital appreciation with the potential for current income. Investors
should be willing to accept the risks associated with investments in a portfolio
of equity securities and convertible securities issued by domestic and foreign
issuers concentrated in the real estate industry. Because current income is a
secondary objective of the Fund, the Fund is not suitable as an investment
vehicle for investors whose primary investment goal is current income.
The risks associated with an investment in the Fund are discussed below
under Investment Objectives, Policies and Risk Considerations.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objectives of the Fund is described below, together with the
policies the Fund employs in its efforts to achieve its objectives. There is no
assurance that the Fund will attain its objectives. The investment objectives of
the Fund is fundamental and may only be changed by a majority approval of the
Fund's shareholders. Unless otherwise noted, the investment policies described
below are not fundamental policies and may be changed without shareholder
approval.
Investment Objectives and Policies
The investment objective of the Fund is to achieve maximum long-term total
return. Capital appreciation is a secondary objective. The Fund seeks to achieve
its objectives by investing in securities of companies principally engaged in
the real estate industry. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate investment
trusts ("REITs"). The Fund will operate as a nondiversified fund as defined by
the 1940 Act.
The Fund invests in equity securities of REITs and other real estate industry
operating companies ("REOCs"). For purposes of the Fund's investments, a REOC is
a company that derives at least 50% of its gross revenues or net profits from
either (1) the ownership, development, construction, financing, management or
sale of commercial, industrial or residential real estate, or (2) products or
services related to the real estate industry, such as building supplies or
mortgage servicing. The Fund's investments in equity securities of REITs and
REOCs may include, from time to time, sponsored or unsponsored American
Depositary Receipts actively traded in the United States. Equity securities for
this purpose include common stocks, securities convertible into common stocks
and securities having common stock characteristics, such as rights and warrants
to purchase common stocks. The Fund may also purchase preferred stock. The Fund
may invest up to 10% of its assets in foreign securities, and in convertible
securities. See Additional Investment Information--Foreign Investment
Information, Depositary Receipts and Convertible, Debt and NonTraditional Equity
Securities for further discussion of these investment policies. The Fund may
also invest in mortgage-backed securities. See Mortgage-Backed Securities for
more detailed information about this investment policy.
The Fund may hold cash or invest in short-term debt securities and other money
market instruments when, in the Manager's opinion, such holdings are prudent
given then prevailing
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<PAGE>
market conditions. Except when the Manager believes a temporary defensive
approach is appropriate, the Fund will not hold more than 5% of its total assets
in cash or such short-term investments. All these short-term investments will be
of the highest quality as determined by a nationally-recognized statistical
rating organization (e.g. AAA by S&P or Aaa by Moody's) or be of comparable
quality as determined by the Manager. See Additional Investment Information for
further details concerning these and other investment policies.
Although the Fund does not invest directly in real estate, the Fund does invest
primarily in REITs, and may purchase equity securities of REOCs. Thus, because
the Fund concentrates its investments in the real estate industry, an investment
in the Fund may be subject to certain risks associated with direct ownership of
real estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; risks related to
general and local economic conditions; possible lack of availability of mortgage
funds; overbuilding; extended vacancies of properties; increases in competition;
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties resulting from,
environmental problems; casualty for condemnation losses, uninsured damages from
floods, earthquakes or other natural disasters; limitations on and variations in
rents; and changes in interest rates.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income-producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Like investment companies such
as the Fund, REITs are not taxed on income distributed to shareholders provided
they comply with several requirements in the Internal Revenue Code of 1986, as
amended (the "Code"). REITs are subject to substantial cash flow dependency,
defaults by borrowers, self-liquidation, and the risk of failing to qualify for
tax-free pass-through of income under the Code, and/or to maintain exemptions
from the 1940 Act. By investing in REITs indirectly the Fund, a shareholder
bears not only a proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs. For a further discussion of the risks
presented by investing in REITs, see Additional Investment Information--REITs.
While the Fund does not intend to invest directly in real estate, the Fund
could, under certain circumstances, own real estate directly as a result of a
default on securities that it owns. In addition, if the Fund has rental income
or income from the direct disposition of real property, the receipt of such
income may adversely affect the Fund's ability to retain its tax status as a
regulated investment company.
The Fund may also, to a limited extent, enter into futures contracts on stocks,
purchase or sell options on such futures, engage in certain options transactions
on stocks and enter into closing transactions with respect to those activities.
However, these activities will not be entered into for speculative purposes, but
rather to facilitate the ability quickly to deploy into the stock market the
Fund's positions in cash, short-term debt securities and other money market
instruments, at times when the Fund's assets are not fully invested in equity
securities. Such positions will generally be eliminated when it becomes possible
to invest in securities that are appropriate for the Fund. See
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<PAGE>
Additional Investment Information--Futures Contracts and Options on Futures
Contracts and Options for a further discussion of these investment policies.
In connection with the Fund's ability to invest up to 10% of its total assets in
the securities of foreign issuers, currency considerations may present risks if
the Fund holds international securities. Currency considerations carry a special
risk for a portfolio of international securities. In this regard, the Fund may
actively carry on hedging activities, and may invest in forward foreign currency
exchange contracts to hedge currency risks associated with the purchase of
individual securities denominated in a particular currency. See Additional
Investment Information--Forward Foreign Currency Exchange Contracts.
The Manager does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Manager may take advantage of short-term opportunities that are
consistent with the Fund's investment objectives. It is anticipated that the
annual turnover rate of the Fund, under normal circumstances, will generally not
exceed 100%. See Portfolio Transactions."
Risk Considerations
An investment in the Fund entails certain risks and considerations about which
an investor should be aware.
The Fund may invest up to 10% of its total assets in securities of foreign
issuers which normally are denominated in foreign currencies, and may hold
foreign currency directly. Investments in securities of non-United States
issuers which are generally denominated in foreign currencies involve certain
risk and opportunity considerations not typically associated with investing in
United States companies. Consequently, the Fund may be affected by changes in
currency rates and exchange control regulations and may incur costs in
connection with conversions between currencies. To hedge this currency risk
associated with investments in non-U.S. dollar denominated securities, a Fund
may invest in forward foreign currency contracts. Those activities pose special
risks which do not typically arise in connection with investments in U.S.
securities. In addition, the Fund may engage in foreign currency options and
futures transactions. For a discussion of the risks associated with foreign
securities see Foreign Investment Information and for those concerning these
hedging instruments see Risks of Transactions in Options, Futures and Forward
Contracts, both of which references appear under the heading Additional
Investment Information."
The Fund may commit its assets eligible for foreign investment to securities of
issuers located in emerging markets. Investments in securities of companies in
emerging markets present a greater degree of risk than tends to be the case for
foreign investments in Western Europe and other developed markets. Among other
things, there is a greater possibility of expropriation, nationalization,
confiscatory taxation, income earned or other special taxes, foreign exchange
restrictions, limitations on the repatriation of income and capital from
investments, defaults in foreign government debt, and economic, political or
social instability. In addition, in many emerging markets, there is
substantially less publicly available information about issuers and the
information that is available tends to be of a lesser quality. Economic markets
and structures tend to be less mature and diverse and the securities markets
which are subject to less government regulation or supervision may also be
smaller, less liquid and subject to greater price volatility.
-11-
<PAGE>
See Additional Investment Information--Foreign Investment Information for a more
extensive discussion of these and other factors.
The foreign securities in which the Fund may invest from time to time may be
listed primarily on foreign exchanges which trade on days when the New York
Stock Exchange is closed (such as Saturday). As a result, the net asset value of
the Fund may be significantly affected by such trading on days when shareholders
will have no access to the Fund. See Valuation of Shares.
The Fund also may, under certain circumstances, use certain futures contracts
and options on futures contracts, as well as options on stock. The Fund will
only enter into these transactions for hedging purposes. See Futures Contracts
and Options on Futures Contracts and Risks of Transactions in Options, Futures
and Forward Contracts, both of which references appear under the heading
Additional Investment Information.
The Fund concentrates its investments in the real estate industry. As a
consequence, the net asset value of the Fund can be expected to fluctuate in
light of the factors affecting that industry, and may fluctuate more widely than
a portfolio that invests in a broader range of industries. The Fund may be more
susceptible to any single economic, political or regulatory occurrence affecting
the real estate industry.
The Fund, by investing primarily in securities of real estate investment trusts,
is subject to interest rate risk, in that as interest rates decline, the value
of the Fund's investments in REITs can be expected to rise. Conversely, when
interest rates rise, the value of the Fund's investments in REITs holding fixed
rate obligations can be expected to decline. See Additional Investment
Information--REITs.
The Fund may lend its portfolio securities, may invest in repurchase agreements
and may purchase securities on a when-issued basis.
While the Fund intends to seek to qualify as a "diversified" investment company
under provisions of Subchapter M of the Code, it will not be diversified under
the 1940 Act. Thus, while at least 50% of the Fund's total assets will be
represented by cash, cash items, certain qualifying securities and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Fund's total assets, it will not satisfy the 1940 Act requirement in this
respect, which applies that test to 75% of the Fund's assets. A nondiversified
portfolio is believed to be subject to greater risk because adverse effects on
the portfolio's security holdings may affect a larger portion of the overall
assets.
Each of the investment strategies identified above involves special risks which
are described under Additional Investment Information in this Prospectus and
Investment Policies, Portfolio Techniques
and Risk Considerations in Part B.
* * *
Part B sets forth other more specific investment restrictions and
descriptions of Moody's and S&P ratings.
-12-
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature; Price; Yield and Performance
Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment Accounts; Wire
Investments; Wire Liquidations;
Telephone Liquidations and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
During business hours, you can call the Investor Information Center for
current performance information. Current performance information may also be
included in advertisements and information given to shareholders. Yields are
computed on an annualized basis over a 30-day period.
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Fund, the various service features and other funds in the Delaware Group.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Fund, as well as other funds in the
Delaware Group. Delaphone is available seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
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<PAGE>
Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
MoneyLine Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. See Dividends and
Distributions. In addition, you may elect to have your Systematic Withdrawal
Plan payments transferred from your Fund account to your predesignated bank
account through this service. See Systematic Withdrawal Plans under Redemption
and Exchange. Your funds will normally be credited to your bank account two
business days after the payment date. There are no fees for this service. You
can initiate the MoneyLine Direct Deposit Service by completing an Authorization
Agreement. If the name and address on your designated bank account are not
identical to the name and address on your Fund account, you must have your
signature guaranteed.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of the Fund with the dollar amount of new
purchases of Class A Shares to qualify for a reduced front-end sales charge on
such purchases of Class A Shares. Under the Combined Purchases Privilege, you
may also include certain shares that you own in other funds in the Delaware
Group. See Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Group fund shares over a 13-month period. See Classes
of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part of your
shares into shares of other mutual funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
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<PAGE>
Wealth Builder Option
You may elect to invest in the Fund through regular liquidations of
shares in your accounts in other funds in the Delaware Group. Investments under
this feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of the Fund. See Additional Methods of Adding to
Your Investment -- Wealth Builder Option and Investing by Exchange under How to
Buy Shares and Redemption and Exchange.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives you,
when working with a professional financial adviser, the ability to more easily
design and maintain investments in a diversified selection of Delaware Group
mutual funds. The Asset Planner service offers a choice of four predesigned
allocation strategies (each with a different risk/reward profile) made up of
separate investments in predetermined percentages of Delaware Group funds. With
the guidance of a financial adviser, you may also tailor an allocation strategy
that meets your personal needs and goals. See How to Buy Shares.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. The Fund's fiscal year ends on the last
day of October.
RETIREMENT PLANNING
Under certain circumstances, an investment in the Fund may be suitable
for tax-deferred retirement plans. Among the retirement plans noted below, Class
B Shares are available for investment only by Individual Retirement Accounts,
Simplified Employee Pension Plans, 457 Deferred Compensation Plans and 403(b)(7)
Deferred Compensation Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request. Certain shareholder investment services available to
non-retirement plan shareholders may not be available to retirement plan
shareholders. Certain retirement plans may qualify to purchase Institutional
Class Shares. For additional information on any of the plans and Delaware's
retirement services, call the Shareholder Service Center or see Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program for investments in
each of the Classes. Contributions to an IRA may be tax-deductible and earnings
are tax-deferred. The tax deductibility of IRA contributions is restricted, and
in some cases eliminated, for individuals who participate in certain
employer-sponsored retirement plans and whose annual income exceeds certain
limits. Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn on a tax-deferred basis.
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<PAGE>
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
New SAR/SEP plans may not be established after December 31, 1996.
Employers must have no more than 25 employees to maintain an existing SEP/IRA
that permits salary deferral contributions. An employer may also elect to make
additional contributions to this plan. Class B Shares are not available for
purchase by such plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A Shares or Class C Shares. Class
B Shares are not available for purchase by such plans.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new purchases
by that Allied Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a
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<PAGE>
front-end sales charge, will be subject to the applicable sales charge if
exchanged for eligible Delaware Group fund shares to which a sales charge
applies. No sales charge will apply if the eligible fund shares were previously
acquired through the exchange of eligible shares on which a sales charge was
already paid or through the reinvestment of dividends. See Investing by
Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Group and non-Delaware Group fund shares. When
eligible Delaware Group fund shares are exchanged into eligible non-Delaware
Group fund shares, the Limited CDSC will be imposed at the time of the exchange,
unless the joint venture agreement specifies that the amount of the Limited CDSC
will be paid by the financial adviser or selling dealer. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares. Class A Shares, which incur a sales charge
when they are purchased, but generally are not subject to any sales charge when
they are redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of
up to a maximum of 0.30% of average daily net assets of such shares. Certain
purchases of Class A Shares qualify for reduced front-end sales charges. See
Front-End Sales Charge Alternative - Class A Shares, below. See also Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value and Distribution (12b-1) and Service.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when are purchased, but are subject to a contingent deferred sales charge if
they are redeemed within six years of purchase. Class B Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for approximately
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<PAGE>
eight years after purchase. Class B Shares permit all of the investor's dollars
to work from the time the investment is made. The higher 12b-1 Plan expenses
paid by Class B Shares will cause such shares to have a higher expense ratio and
to pay lower dividends than Class A Shares. At the end of approximately eight
years after purchase, Class B Shares are automatically converted into Class A
Shares of the Fund and, thereafter, for the remainder of the life of the
investment, the annual 12b-1 Plan fee of up to 0.30% for the Class A Shares will
apply. See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within 12 months of purchase. Class C Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for the life of the investment. The higher 12b-1 Plan expenses paid
by Class C Shares will cause such shares to have a higher expense ratio and to
pay lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares
do not convert to another class.
The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
C Shares and have the entire initial purchase amount invested in the Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition, investors should consider the level of annual 12b-1
Plan expenses applicable to each Class. The higher 12b-1 Plan expenses on Class
B Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested upon the purchase of such shares.
However, there can be no assurance as to the return, if any, that will be
realized on such additional money and the effect of earning a return on such
additional money will diminish over time. In comparing Class B Shares to Class C
Shares, investors should also consider the desirability of an automatic
conversion feature, which is available only for Class B Shares.
Prospective investors should refer to Appendix A--Investment
Illustrations in this Prospectus for an illustration of the potential effect
that each of the purchase options may have on a long-term shareholder's
investment.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of the Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of the Class B Shares and the Class C Shares,
from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred
upon redemption. Financial advisers may receive different compensation for
selling Class A, Class B and Class C Shares. Investors should understand that
the purpose and function of the respective 12b-1 Plans and the CDSCs applicable
to Class B Shares and Class C Shares are the same as those of the 12b-1 Plan and
the front-end sales charge applicable to Class A Shares in that
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<PAGE>
such fees and charges are used to finance the distribution of the respective
Classes. See 12b-1 Distribution Plans - Class A, Class B and Class C Shares.
Dividends paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that the additional
amount of 12b-1 Plan expenses relating to Class B Shares and Class C Shares will
be borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. The Fund and the Distributor intend to operate in compliance with these
rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
The REIT Fund A Class
<TABLE>
<CAPTION>
Dealer's
Front-End Sales Charge as % of Commission***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 4.75% [ . ]% 4.00%
$100,000 but under $250,000 3.75 [ . ] 3.00
$250,000 but under $500,000 2.50 [ . ] 2.00
$500,000 but under $1,000,000* 2.00 [ . ] 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based on the net asset value per share of the original class of shares
(now the Class A Shares) as of the end of the Fund's fiscal year ended
October 31, 1996.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
The Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced
front-end sales charges are not retroactive.
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<PAGE>
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of the
front-end sales charge shown above. In addition, certain dealers who
enter into an agreement to provide extra training and information on
Delaware Group products and services and who increase sales of Delaware
Group funds may receive an additional commission of up to 0.15% of the
offering price. Dealers who receive 90% or more of the sales charge may
be deemed to be underwriters under the Securities Act of 1933.
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ --------------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of the Fund. Financial advisers also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment
of the dealer's commission, unless a dealer's commission or similar payment has
not been previously paid on the assets being exchanged. The schedule and program
for payment of the dealer's commission are subject to change or termination at
any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of Class
B Shares and/or Class C Shares of the Fund and shares of the other funds in the
Delaware Group, except those noted below, you can reduce the front-end sales
charges on any additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included unless they were acquired through an exchange from a Delaware Group
fund that does carry a front-end sales charge or CDSC.
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This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares, above.
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances, the
Exchange Privilege and the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current and
former officers, trustees and employees (and members of their families) of the
Manager, any affiliate, any of the funds in the Delaware Group, certain of their
agents and registered representatives and employees of authorized investment
dealers and by employee benefit plans for such entities. Individual purchases,
including those in retirement accounts, must be for accounts in the name of the
individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. Officers, directors and key employees of institutional clients of the
Manager or any of its affiliates may purchase Class A Shares at net asset value.
Moreover, purchases may be effected at net asset value for the benefit of the
clients of brokers, dealers and registered investment advisers affiliated with a
broker or dealer, if such broker, dealer or investment adviser has entered into
an agreement with the Distributor providing specifically for the purchase of
Class A Shares in connection with special investment products, such as wrap
accounts or similar fee based programs.
The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount
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purchased. In addition, from time to time, upon written notice to all of its
dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for the Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after exchange. Such CDSC schedule may be
higher than the CDSC schedule relating to the Class B Shares acquired as a
result of the exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a
CDSC.
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Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares.
These payments support the compensation paid to dealers or brokers for
selling Class C Shares. Payments to the Distributor and others under the Class C
12b-1 Plan may be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For purposes
of this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of the Class B Shares or the Class C Shares of the Fund,
even if those shares are later exchanged for shares of another Delaware Group
fund. In the event of an exchange of the shares, the "net asset value of such
shares at the time of redemption" will be the net asset value of the shares that
were acquired in the exchange.
The following table sets forth the rates of the CDSC for Class B Shares
of the Fund:
Contingent Deferred Sales
Charge (as a Percentage
of Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ -------------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that the Class A Shares into which the Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B Shares,
it will be assumed that shares held for more than six years are redeemed first,
followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the
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six-year period. With respect to Class C Shares, it will be assumed that shares
held for more than 12 months are redeemed first followed by shares acquired
through the reinvestment of dividends or distributions, and finally by shares
held for 12 months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules, in connection
with the promotion of Delaware Group fund shares, the Distributor may, from time
to time, pay to participate in dealer-sponsored seminars and conferences,
reimburse dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising and may, from time to time, pay or allow additional
promotional incentives to dealers, which shall include non-cash concessions,
such as certain luxury merchandise or a trip to or attendance at a business or
investment seminar at a luxury resort, as part of preapproved sales contests.
Payment of non-cash compensation to dealers is currently under review by the
NASD and the Securities and Exchange Commission. It is likely that the NASD's
Conduct Rules will be amended such that the ability of the Distributor to pay
non-cash compensation as described above will be restricted in some fashion. The
Distributor intends to comply with the NASD's Conduct Rules as they may be
amended.
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is generally $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of shares of any
Class generally must be $100 or more. For purchases under a Uniform Gifts to
Minors Act or Uniform Transfers to Minors Act or through an Automatic Investing
Plan, there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC.
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Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application must be completed, signed and
sent with a check payable to The REIT Fund A Class, The REIT Fund B Class or The
REIT Fund C Class to Delaware Group at 1818 Market Street, Philadelphia, PA
19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to The REIT Fund A Class, The REIT Fund B Class or The REIT Fund
C Class. Your check should be identified with your name(s) and account number.
An investment slip (similar to a deposit slip) is provided at the bottom of
transaction confirmations and dividend statements that you will receive from the
Fund. Use of this investment slip can help expedite processing of your check
when making additional purchases. Your investment may be delayed if you send
additional purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 1412893401 (include
your name(s) and your Fund account number in the wire).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application to The REIT Fund A Class, The REIT Fund B Class or The REIT Fund C
Class at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.
Holders of Class A Shares of the Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Group, including
other Class A Shares, but may not exchange their Class A Shares for Class B
Shares or Class C Shares of the Fund or of any other fund in the Delaware Group.
Holders of Class B Shares of the Fund are permitted to exchange all or part of
their Class B Shares only into Class B Shares of other Delaware Group funds.
Similarly, holders of Class C Shares of the Fund are permitted to exchange all
or part of their Class C Shares only into Class C Shares of other Delaware Group
funds. See Appendix B--Classes Offered for a list of Delaware Group funds and
the classes they offer. Class B Shares of the Fund and Class C Shares of the
Fund acquired by exchange will continue to carry the CDSC
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and, in the case of Class B Shares, the automatic conversion schedule of the
fund from which the exchange is made. The holding period of Class B Shares of
the Fund acquired by exchange will be added to that of the shares that were
exchanged for purposes of determining the time of the automatic conversion into
Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize the Fund to
transfer a designated amount monthly from your checking account to your Fund
account. Many shareholders use this as an automatic savings plan. Shareholders
should allow a reasonable amount of time for initial purchases and changes to
these plans to become effective.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, the Fund has the right to
liquidate your shares to reimburse the government or transmitting bank. If there
are insufficient funds in your account, you are obligated to reimburse the Fund.
3. Wealth Builder Option
You can use the Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in the Delaware
Group. You also may elect to invest in other mutual funds in the Delaware Group
through the Wealth Builder Option through exchanges from your Fund account.
Under this automatic exchange program, you can authorize regular monthly
investments (minimum of $100 per fund) to be liquidated from your account in one
or more funds in the Delaware Group and invested automatically into any other
account in a Delaware Group mutual fund that you may specify. If in connection
with the election of the Wealth Builder Option, you wish to open a new account
to receive the automatic investment, such new account must meet the minimum
initial purchase requirements described in the prospectus of the fund that you
select. All investments under this option are exchanges and are therefore
subject to the same conditions and
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limitations as other exchanges noted above. You can terminate your participation
in Wealth Builder at any time by giving written notice to the fund from which
the exchanges are made. See Redemption and Exchange.
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Or, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Group funds or into Class C Shares of the Fund or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC if later redeemed. See Automatic Conversion of Class B Shares under Classes
of Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Fund. Holders of Class B Shares of the Fund may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares. Similarly, holders of Class C Shares of the
Fund may reinvest their distributions only into Class C Shares of the funds in
the Delaware Group which offer that class of shares. See Appendix B--Classes
Offered for a list of the funds offering those classes of shares. For more
information about reinvestments, call the Shareholder Service Center.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset Planner
asset allocation service, you should complete a Delaware Group Asset Planner
Account Registration Form, which is available only from a financial adviser or
investment dealer. As previously described under The Delaware Difference, the
Delaware Group Asset Planner service offers a choice of four predesigned asset
allocation strategies (each with a different risk/reward profile) in
predetermined percentages in Delaware Group funds. Or, with the help of a
financial adviser, you may design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange, above. The
minimum initial investment per Strategy is $2,000; subsequent investments must
be at least $100. Individual fund minimums do not apply to investments made
using the Asset Planner service. Generally, only shares within the same class
may be used within the same Strategy. However, Class A Shares of the Fund and of
other funds in the Delaware Group may be used in the same Strategy with
consultant class shares that are offered by certain other Delaware Group funds.
See Appendix B--Classes Offered for the funds in the Delaware Group that offer
consultant class shares.
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An annual maintenance fee, currently $35 per Strategy, is typically due
at the time of initial investment and by September 30th of each subsequent year.
The fee, payable to Delaware Service Company, Inc. to defray extra costs
associated with administering the Asset Planner service, will be deducted
automatically from one of the funds within your Asset Planner account if not
paid by September 30th. However, the annual fee is waived until further notice.
See Part B.
Investors will receive a customized quarterly Strategy Report summarizing
all Delaware Group Asset Planner investment performance and account activity
during the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and Class
C Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund. The effective date of a direct purchase
is the day your wire, electronic transfer or check is received unless it is
received after the time the offering price of shares is determined, as noted
above. Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on accounts that, as a result of a redemption, have
remained below the minimum stated account balance for a period of three or more
consecutive months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the end of the
current calendar quarter to raise their balance to the stated minimum. If the
account has not reached the minimum balance requirement by that time, the Fund
will charge a $9 fee for that quarter and each subsequent calendar quarter until
the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An
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investor making the minimum initial investment may be subject to involuntary
redemption without the imposition of a CDSC or Limited CDSC if he or she redeems
any portion of his or her account.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other tax-advantaged funds, equity funds, bond funds or
money market funds. This service is also useful if you are anticipating a major
expenditure and want to move a portion of your investment into a fund that has
the checkwriting feature. Exchanges are subject to the requirements of each fund
and all exchanges of shares constitute taxable events. See Taxes. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
the Delaware Group will best meet your changing objectives and the consequences
of any exchange transaction. You may also call the Delaware Group directly for
fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
Redemption or exchange requests received in good order after the time the
offering price of shares is determined, as noted above, will be processed on the
next business day. See Purchase Price and Effective Date under How to Buy
Shares. A shareholder submitting a redemption request may indicate that he or
she wishes to receive redemption proceeds of a specific dollar amount. In the
case of such a request, and in the case of certain redemptions from retirement
plan accounts, the Fund will redeem the number of shares necessary to deduct the
applicable CDSC in the case of Class B and Class C Shares and, if applicable,
the Limited CDSC in the case of Class A Shares and tender to the shareholder the
requested amount, assuming the shareholder holds enough shares in his or her
account for the redemption to be processed in this manner. Otherwise, the amount
tendered to the shareholder upon redemption will be reduced by the amount of the
applicable CDSC or Limited CDSC. Redemption proceeds will be distributed
promptly, as described below, but not later than seven days after receipt of a
redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918. The Fund may
suspend, terminate, or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor
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redemption requests as to shares for which a check was tendered as payment, but
the Fund will not mail or wire the proceeds until it is reasonably satisfied
that the purchase check has cleared, which may take up to 15 days from the
purchase date. You can avoid this potential delay if you purchase shares by
wiring Federal Funds. The Fund reserves the right to reject a written or
telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from the Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of the Fund for a longer period of time than if the investment in New
Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further
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documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate must accompany your request and also be in good order. Certificates
are issued for Class A Shares only if a shareholder submits a specific request.
Certificates are not issued for Class B Shares or Class C Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption--Check to Your Address of Record service and the
Telephone Exchange service, both of which are described below, are automatically
provided unless you notify the Fund in writing that you do not wish to have such
services available with respect to your account. The Fund reserves the right to
modify, terminate or suspend these procedures upon 60 days' written notice to
shareholders. It may be difficult to reach the Fund by telephone during periods
when market or economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have
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your signature guaranteed. For your protection, your authorization must be on
file. If you request a wire, your funds will normally be sent the next business
day. CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day after receipt of your redemption request to your predesignated bank account.
There are no fees for this redemption method, but the mail time may delay
getting funds into your bank account. Simply call the Shareholder Service Center
prior to the time the offering price and net asset value are determined, as
noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it provides them with a stable supplemental amount. With accounts of at
least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or more.
The Fund does not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. Your funds will normally be credited to your bank account two business
days after the payment date. There are no separate fees for this redemption
method. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service.
* * *
Shareholders should not purchase additional shares while participating in
a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission has been
paid on that purchase. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12%
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annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See Waiver of Contingent Deferred Sales Charge - Class B Shares and Class
C Shares, below.
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will not
be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of Class A
Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
Waiver of Limited Contingent Deferred Sales Charge -- Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; and (ii) redemptions by the classes of shareholders who
are permitted to purchase shares at net asset value, regardless of the size of
the purchase (see Buying Class A Shares at Net Asset Value under Classes of
Shares).
Waiver of Contingent Deferred Sales Charge -- Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in connection
with the following redemptions: (i) redemptions that result from the Fund's
right to liquidate a
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shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; and (ii)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
The CDSC of Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; and (ii)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and distribute all of its net investment
income to shareholders as dividends annually. Net capital gains, if any, will be
distributed annually.
In addition, in order to satisfy certain distribution requirements of the
Tax Reform Act of 1986, the Fund may declare special year-end dividend and
capital gains distributions during November or December to shareholders of
record on a date in such month. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by the Fund and received by
shareholders on the earlier of the date paid or December 31 of the prior year.
Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the per share dividends from net
investment income on the Class A Shares, the Class B Shares and the Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to each
Class. Generally, the dividends per share on Class B Shares and Class C Shares
can be expected to be lower than the dividends per share on Class A Shares
because the expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the Fund.
Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value unless you elect otherwise. Any check in payment
of dividends or other distributions which cannot be delivered by the United
States Post Office or which remains uncashed for a period of more than one year
may be reinvested in your account at the then-current net asset value and the
dividend option may be changed from cash to reinvest. If you elect to take your
dividends and distributions in cash and such dividends and distributions are in
an amount of $25 or more, you
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may choose the MoneyLine Direct Deposit Service and have such payments
transferred from your Fund account to your predesignated bank account. See
MoneyLine Direct Deposit Service under The Delaware Difference for more
information about this service.
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
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. The Fund intends to
distribute substantially all of its net investment income and net capital gains,
if any. Dividends from net investment income or net short-term capital gains
will be taxable to you as ordinary income, whether received in cash or in
additional shares.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a by-product of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a capital gains distribution, a portion of
the investment will be returned as taxable distribution.
Dividends or capital gains which are declared in October, November or
December to shareholders of record in such a month but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund and any other fund in the Delaware Group. Any loss incurred on a sale
or exchange of Fund shares that had been held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares and will be disallowed to the extent of
exempt-interest dividends paid with respect to such shares. All or a portion of
the sales charge incurred in acquiring the Fund's shares will be excluded from
the federal tax basis of any of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss upon sale of such
shares) if the sale proceeds are reinvested in the Fund or in another fund in
the Delaware Group of funds and a sales charge that would otherwise apply to the
reinvestment is reduced or eliminated. Any portion of such sales charge excluded
from the tax basis of the shares sold will be added to the tax basis of the
shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the end
of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
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Each year, the Fund will mail to you information on the tax status of the
Fund's dividends and distributions.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Taxes in Part B for additional information on tax matters relating to
the Fund and its shareholders.
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is determined by dividing the total
market value of the Fund's investments and other assets, less any liabilities,
by the total outstanding shares of the Fund. NAV per share is determined as of
the close of regular trading on the NYSE on each day the NYSE is open for
business.
Securities listed on a U.S. securities exchange for which market
quotations are available are valued at the last quoted sale price on the day the
valuation is made. Price information on listed securities is taken from the
exchange where the security is primarily traded. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the time when
net assets are valued. Unlisted securities and listed securities not traded on
the valuation date for which market quotations are readily available are valued
at a price that is considered to best represent fair value within a range not in
excess of the current asked price nor less than the current bid prices. Domestic
equity securities traded over-the-counter, domestic equity securities which are
not traded on the valuation date and U.S. government securities are priced at
the mean of the bid and ask price.
Bonds and other fixed-income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market. In addition, bonds and other fixed-income securities
may be valued on the basis of prices provided by a pricing service when such
prices are believed to reflect the fair market value of such securities. The
prices provided by a pricing service are determined without regard to bid or
last sale prices but take into account institutional size trading in similar
groups of securities and any developments related to the specific securities.
Securities not priced in this manner are valued at the most recent quoted mean
price, or, when stock exchange valuations are used, at the latest quoted sale
price on the day of valuation. If there is no such reported sale, the latest
quoted mean price will be used. Securities with remaining maturities of 60 days
or less are valued at amortized cost, if it approximates market value. In the
event that amortized cost does not approximate market value, market prices as
determined above will be used.
Exchange-traded options are valued at the last reported sales price or,
if no sales are reported, at the mean between the last reported bid and ask
prices. Non-exchange traded options are valued at fair value using a
mathematical model. Futures contracts are valued at their daily quoted
settlement price.
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The value of other assets and securities for which no quotations are
readily available (including restricted securities) are determined in good faith
at fair value using methods determined by the Fund's Board of Directors. The
securities in which the Fund may invest from time to time may be listed
primarily on foreign exchanges which trade on days when the NYSE is closed (such
as Saturday). As a result, the net asset value of the Fund may be significantly
affected by such trading on days when shareholders have no access to the Fund.
For purposes of calculating NAV, all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the mean
between the bid and ask price of such currencies against the U.S. dollar as
provided by an independent pricing service or any major bank, including the
Custodian Bank. Forward foreign currency contracts are valued at the mean price
of the contracts. Interpolated values will be derived when the settlement date
of the contract is on an interim period for which quotations are not available.
Class A Shares are purchased at the offering price per share, while Class
B Shares and Class C Shares are purchased at the NAV per share. The offering
price per share of Class A Shares consists of the NAV per share next computed
after the order is received, plus any applicable front-end sales charges.
The offering price and NAV are computed as of the close of regular
trading on the NYSE (ordinarily, 4 p.m., Eastern time) on days when the NYSE is
open.
The net asset values of all outstanding shares of each Class of the Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that Class. All income earned and expenses incurred by the Fund will be borne on
a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that shares of the Classes will bear only those 12b-1 Plan expenses
payable under their respective Plans. Due to the specific distribution expenses
and other costs that will be allocable to each Class, the dividends paid to each
Class of the Fund may vary. However, the NAV per share of each Class is expected
to be equivalent.
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund are managed under the direction of
the DPT's Board of Directors. Part B contains additional information regarding
DPT's directors and officers.
Investment Manager and Sub-Adviser
Delaware Investment Advisers, a division of Delaware Management Company,
Inc. (the "Manager"), furnishes investment advisory services to the Fund.
Lincoln Investment Management, Inc. ("Lincoln"), a wholly owned subsidiary of
Lincoln National Corporation, acts as sub-adviser to the Manager with respect to
Fund. In its capacity as sub-adviser, Lincoln furnishes the Manager with
investment recommendations, asset allocation advice, research, economic analysis
and other investment services with respect to the securities in which the Fund
may invest. The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers, Ltd., were
supervising in the aggregate more than $30 billion in
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assets in various institutional or separately managed (approximately
$19,214,690,000) and investment company (approximately $11,539,873,000)
accounts. Lincoln (formerly named Lincoln National Investment Management
Company) was incorporated in 1930. Lincoln's primary activity is institutional
fixed-income investment management and consulting. Such activity includes
fixed-income portfolios, private placements, real estate debt and equity, and
asset/liability management. As of October 31, 1996, Lincoln had over $39 billion
in assets under management. Lincoln provides investment management services to
Lincoln National Corporation, its principal subsidiaries and affiliated
registered investment companies, and acts as investment adviser to other
unaffiliated clients.
The Manager has entered into an Investment Advisory Agreement with DPT on
behalf of the Fund. The Manager has also entered into a Sub-Advisory Agreement
with Lincoln with respect to the Fund. Under that Agreement, the Manager,
subject to the control and supervision of the DPT's Board of Directors and in
conformance with the stated investment objectives and policies of the Fund,
manage the investment and reinvestment of the assets of the Fund. In this
regard, it is their responsibility to make investment decisions for the Fund.
As compensation for the services to be rendered under the advisory
agreement, the Manager is entitled to an advisory fee calculated by applying a
quarterly rate, based on an annual percentage rate, to the Fund's average daily
net assets for the quarter. Lincoln receives 30% of the advisory fee paid to the
Manager for acting as sub-adviser to the Manager with respect to the Fund. The
Manager has elected voluntarily to waive that portion, if any, of the annual
management fees payable by the Fund and to pay expenses of the Fund to the
extent necessary to ensure that the Total Operating Expenses (exclusive of
taxes, interest, brokerage commissions and extraordinary expenses) of Class A
Shares, Class B Shares and Class C Shares do not exceed [ ]%.
Babak Zenouzi has primary responsibility for making day-to-day investment
decisions for the Fund and has had such responsibility since its inception. Mr.
Zenouzi holds a BS in Finance and Economics from Babson College in Wellesley,
Massachusetts, and an MS in Finance from Boston College. Prior to joining the
Manager in 1992, he was with The Boston Company where he held the positions of
assistant vice president, senior financial analyst, financial analyst and
portfolio accountant. Steven R. Brody, John F. Robertson and Lawrence T. Kissko
have served as sub-advisers to the Fund since its inception. Mr. Brody, a
graduate of Miami (Ohio) University, joined Lincoln following 15 years in the
commercial mortgage and real estate industry with another insurance company, a
commercial bank and a mortgage banking firm. He is responsible for Lincoln's
mortgage, real estate equity, private placement and mezzanine finance
activities, and the day-to-day operations of Lincoln Investment Management. Mr.
Brody has been active in the Mortgage Bankers Association of America and the
Urban Land Institute and is a Fellow of the Life Office Management Association.
He serves on the boards of Lincoln Investment Management, Indiana Institute of
Technology, and The Malpas Trust. Mr. Robertson holds a BA from Wabash College
where he was graduated magna cum laude and awarded membership into Phi Beta
Kappa, and an MBA with emphasis in finance and real estate from Indiana
University. Prior to joining Lincoln Investment Management, Inc.'s Real Estate
Debt Group in 1993, he was a consultant with Ernst & Young's Special Services
Group where he specialized in the valuation of all types of commercial real
estate. Mr. Robertson is a CFA charterholder and has completed numerous courses
toward the MAI designation. Mr. Kissko holds a BS degree in Management Science
from Rensselaer Polytechnic Institute and an MBA in Finance from State
University of New York at Albany. He is responsible for real estate asset
management as well as the real estate equity production effort of Lincoln
Investment Management, Inc. Mr. Kissko joined Lincoln in 1983,
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following a five-year association with Union Mutual Life Insurance Company of
Portland, Maine. Prior to that, he was associated with Massachusetts Mutual Life
Insurance Company. He is a CFA charterholder.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH, Delaware and Delaware International Advisers, Ltd. are now
indirect, wholly owned subsidiaries, and subject to the ultimate control, of
Lincoln National. Lincoln Investment Management, Inc. ("Lincoln"), the
sub-adviser to the Manager with respect to the Fund, is a wholly owned
subsidiary of Lincoln National. The Manager, Delaware International Advisers,
Ltd. and Lincoln may be deemed to be affiliated persons under the 1940 Act, as
the three companies are each under the ultimate control of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management. The Manager's address is One
Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Lincoln's address
is 200 E. Berry Street, Fort Wayne, IN 46802.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders to the extent
that net capital gains are realized. Given the Fund's investment objective, it
is anticipated that the portfolio turnover rate of the Fund will not exceed
100%.
The Manager and the Sub-Adviser use their best efforts to obtain the best
available price and most favorable execution for portfolio transactions. Orders
may be placed with brokers or dealers who provide brokerage and research
services to the Manager or the Sub-Adviser or their advisory clients. These
services may be used by the Manager and the Sub-Adviser in servicing any of
their respective accounts. Subject to best price and execution, the Manager and
the Sub-Adviser may consider a broker/dealer's sales of a Fund's shares in
placing portfolio orders and may place orders with broker/dealers that have
agreed to defray certain Fund expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance of its
Classes in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and: (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge at
the beginning of each specified period; and (ii) in the case of Class B Shares
and Class C Shares, the deduction of any applicable CDSC at the end of the
relevant period. Each presentation will include the average annual total return
for one-, five- and ten-year or life-of-fund periods, as relevant. The Fund may
also advertise aggregate and average total return information concerning a Class
over additional periods of time. In addition, the Fund may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return information would
be more favorable than total return information that includes deductions of the
maximum front-end sales charge or any applicable CDSC.
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Because securities prices fluctuate, investment results of the Classes
will fluctuate over time. Past performance is not a guarantee of future results.
Distribution (12b-1) and Service
The Fund has adopted a separate distribution plan under Rule 12b-1 for
each of the Class A Shares, the Class B Shares and the Class C Shares of the
Fund (the "Plans"). Each Plan permits the Fund to pay the Distributor from the
assets of the respective Classes a monthly fee for the Distributor's services
and expenses in distributing and promoting sales of shares.
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, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of shares of the
Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
the Fund may make payments from the 12b-1 Plan fees of its respective Classes
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to service agreements with
the Fund.
The 12b-1 Plan expenses relating to each of the Class B Shares and the
Class C Shares of the Fund are also used to pay the Distributor for advancing
the commission costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed (i) .30% of
the Class A Shares' average daily net assets in any year, and (ii) 1.0% (.25% of
which are service fees to be paid by the Fund to the Distributor, dealers and
others, for providing personal service and/or maintaining shareholder accounts)
of the Fund's Class B Shares' and the Class C Shares' average daily net assets
in any year. The Class A, Class B and Class C Shares will not incur any
distribution expenses beyond these limits, which may not be increased without
shareholder approval.
While payments pursuant to the Plans may not exceed 0.30% annually with
respect to the Class A Shares and 1% annually with respect to each of the Class
B Shares and the Class C Shares, the Plans do 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 Plans. The Distributor may, however, incur additional expenses and
make additional payments to dealers from its own resources to promote the
distribution of shares of the Classes. The monthly fees paid to the Distributor
are subject to the review and approval of the DPT's unaffiliated directors, who
may reduce the fees or terminate the Plans at any time.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under its Distribution Agreement. The expense ratio of each
Class reflects the impact of its 12b-1 Plan.
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Shares
DPT is an open-end management investment company. The Fund's portfolio of
assets is nondiversified as defined by the 1940 Act. Commonly known as a mutual
fund, DPT was organized as a Maryland corporation on May 30, 1991. In addition
to the Fund, DPT presently offers 13 other series of shares. The Articles of
Incorporation permit the Fund to issue one billion shares of common stock with
$.01 par value and fifty million shares have been allocated to each series. The
Board of Directors has the power to designate one or more classes of shares of
common stock and to classify and reclassify any unissued shares with respect to
such classes.
The shares of each series, when issued, will be fully paid,
non-assessable, fully transferable and redeemable at the option of the holder.
The shares have no preference as to the conversion, exchange, dividends,
retirement or other features and have no preemptive rights. The shares of each
series have noncumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of directors can elect 100% of
the directors if they choose to do so. Shares of each series entitled to vote on
a matter will vote in the aggregate and not by series, except when the matter to
be voted upon affects only the interests of shareholders of a particular
Portfolio or when otherwise expressly required by law. DPT does not issue
certificates for shares unless a shareholder submits a specific request. Under
Maryland law, DPT is not required, and does not intend, to hold annual meetings
of its shareholders unless, under certain circumstances, it is required to do so
under the 1940 Act.
Custodian Bank
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245
serves as custodian for the Fund.
Independent Auditors
Ernst & Young LLP, Two Commerce Square, 2001 Market Street, Suite 4000,
Philadelphia, PA 19103, serves as independent auditors for the Fund.
Litigation
The Fund is not involved in any litigation.
ADDITIONAL INVESTMENT INFORMATION
U.S. Government Securities
The U.S. government securities in which the Fund may invest for temporary
purposes and otherwise (see Investment Objectives, Policies and Risk
Considerations), include a variety of securities which are issued or guaranteed
as to the payment of principal and interest by the U.S. government, and by
various agencies or instrumentalities which have been established or sponsored
by the U.S. government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by
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the full faith and credit of the United States include the Export-Import Bank,
Farmers Home Administration, Federal Financing Bank, and others. Certain
agencies and instrumentalities, such as the Government National Mortgage
Association ("GNMA"), are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, are not
guaranteed by the United States, but those institutions are protected by the
discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institutions in meeting their debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under U.S. government supervision, but their debt securities are
backed only by the creditworthiness of those institutions, not the U.S.
government.
Some of the U.S. government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks and the Federal National Mortgage Association.
Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or by government
sponsored corporations. Those securities include, but are not limited to, GNMA
certificates. Such securities differ from other fixed-income securities in that
principal is paid back by the borrower over the length of the loan rather than
returned in a lump sum at maturity. When prevailing interest rates rise, the
value of a GNMA security may decrease as do other debt securities. When
prevailing interest rates decline, however, the value of GNMA securities may not
rise on a comparable basis with other debt securities because of the prepayment
feature of GNMA securities. Additionally, if a GNMA certificate is purchased at
a premium above its principal value because its fixed rate of interest exceeds
the prevailing level of yields, the decline in price to par may result in a loss
of the premium in the event of prepayment. Funds received from prepayments may
be reinvested at the prevailing interest rates which may be lower than the rate
of interest that had previously been earned.
The Fund also may invest in collateralized mortgage obligations ("CMOs")
and real estate mortgage investment conduits ("REMICs"). CMOs are debt
securities issued by U.S. government agencies or by financial institutions and
other mortgage lenders and collateralized by a pool of mortgages held under an
indenture. CMOs are issued in a number of classes or series with different
maturities. The classes or series are retired in sequence as the underlying
mortgages are repaid. REMICs, which were authorized under the Tax Reform Act of
1986, are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities. To the extent any
privately-issued CMOs or REMICs in which the Fund may invest are considered by
the U.S. Securities and Exchange Commission (the "Commission") to be investment
companies, the
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Fund will limit its investments in such securities in a manner consistent with
the provisions of the 1940 Act.
The mortgages backing these securities include conventional 30-year fixed
rate mortgages, graduated payment mortgages and adjustable rate mortgages. These
mortgages may be supported by various types of insurance, may be backed by GNMA
certificates or other mortgage pass-throughs issued or guaranteed by the U.S.
government, its agencies or instrumentalities. However, the guarantees do not
extend to the mortgage-backed securities' value, which is likely to vary
inversely with fluctuations in interest rates. These certificates are in most
cases "pass-through" instruments, through which the holder receives a share of
all interest and principal payments from the mortgages underlying the
certificate. Because the prepayment characteristics of the underlying mortgages
vary, it is not possible to predict accurately the average life or realized
yield of a particular issue of pass-through certificates. During periods of
declining interest rates, prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. When the mortgage obligations are
prepaid, the Fund may reinvest the prepaid amounts in securities, the yield of
which reflects interest rates prevailing at the time. Moreover, prepayments of
mortgages which underlie securities purchased at a premium could result in
capital losses.
Certain CMOs and REMICs may have variable or floating interest rates and
others may be stripped. Stripped mortgage securities have greater market
volatility than other types of mortgage securities in which the Portfolios may
invest.
Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage security will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the "interest-only" class), while the other class will receive
all of the principal (the "principal-only" class). The yield to maturity on an
interest-only class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Fund's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed and, accordingly,
these securities are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed 10% of a Portfolio's net assets.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. The Fund may invest in such
private-backed securities but, the Fund will do so (i) only if the securities
are 100% collateralized at the time of issuance by securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and (ii)
currently, only if they are rated at the time of purchase in the two highest
grades by a nationally-recognized statistical rating agency.
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Short-Term Investments
The short-term investments in which the Fund may invest consistent with
the limits recited above (see Investment Objectives, Policies and Risk
Considerations) are:
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a U.S.
commercial bank. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.
Time deposits maturing in more than seven days will not be purchased by the
Fund, and time deposits maturing from two business days through seven calendar
days will not exceed 15% of the total assets of the Fund. Certificates of
deposit are negotiable short-term obligations issued by commercial banks against
funds deposited in the issuing institution. Variable rate certificates of
deposit are certificates of deposit on which the interest rate is periodically
adjusted prior to their stated maturity based upon a specified market rate. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods).
The Fund will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion or, in the case of a
bank which does not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the principal
amount of such investment is insured in full by the Federal Deposit Insurance
Corporation, (ii) it is a member of the Federal Deposit Insurance Corporation,
and (iii) the bank or its securities have received the highest quality rating by
a nationally-recognized statistical rating organization;
(2) Commercial paper with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., A-1 by S&P or
Prime-1 by Moody's) or, if not so rated, of comparable quality as determined by
the Manager;
(3) Short-term corporate obligations with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if not so rated, of comparable quality as determined by the
Manager;
(4) U.S. government securities (see U.S. Government Securities); and
(5) Repurchase agreements collateralized by securities listed above.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The Fund will maintain with its Custodian Bank a
separate account with a segregated portfolio of securities in an amount at least
equal to these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time the Fund enters into the commitment
and no interest accrues to the Fund until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. It is a
current policy of the Fund not to enter into when-issued commitments exceeding
in the aggregate 15% of the market
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value of the Fund's total assets less liabilities other than the obligations
created by these commitments.
Repurchase Agreements
The Fund may enter into repurchase agreements with brokers, dealers or
banks deemed to be creditworthy by the Manager under guidelines of DPT's
directors. In a repurchase agreement, a Portfolio buys securities from a seller
that has agreed to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. The term
of these agreements is usually from overnight to one week and never exceeds one
year. Not more than 15% of the Fund's assets may be invested in repurchase
agreements having a maturity in excess of seven days. Repurchase agreements may
be viewed as a fully collateralized loan of money by the Fund to the seller. The
Fund always receives securities as collateral with a market value at least equal
to the purchase price and this value is maintained during the term of the
agreement. If the seller defaults and the collateral value declines, the Fund
might incur a loss. If bankruptcy proceedings are commenced with respect to the
seller, the Fund's realization upon the collateral may be delayed or limited.
The Fund may invest cash balances in a joint repurchase agreement in accordance
with an Order the Delaware Group has obtained from the Commission under Section
17(d) of the 1940 Act.
Securities Lending Activities
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which the Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the investment adviser.
Borrowing from Banks
The Fund may borrow money as a temporary measure or to facilitate
redemptions. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and, consistent with
Commission rules, immediately after any borrowing is in an amount which exceeds
5% of its net assets, there must be asset coverage of at least 300%. In the
event the asset coverage declines below 300%, the Fund would take steps to
reduce the amount of its borrowings so that asset coverage would equal at least
300%. Securities will not be purchased while the Fund has an outstanding
borrowing.
Foreign Investment Information
Up to 10% of the total assets of the Fund may be invested in securities
of foreign issuers and foreign currency. The Fund has the right to purchase
securities in any developed, underdeveloped or emerging country. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations. These risks
are in addition to the usual risks inherent in domestic investments. There is
the possibility of expropriation, nationalization or confiscatory taxation,
taxation of income earned in foreign nations or other taxes imposed with respect
to investments in foreign nations, foreign exchange control (which may include
suspension of the ability to transfer currency from a given country), default in
foreign
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government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about companies
in the United States and this information tends to be of a lesser quality.
Foreign companies are not subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. In particular, the
assets and profits appearing on the financial statements of a developing or
emerging country issuer may not reflect its financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require for both tax and accounting purposes,
that certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses or profits. Consequently,
financial data may be materially affected by restatements for inflation and may
not accurately reflect the real condition of those issuers and securities
markets.
It is also expected that the expenses for custodial arrangements of the
Fund's foreign securities will be somewhat greater than the expenses for the
custodial arrangements for U.S. securities of equal value. Dividends and
interest paid by foreign issuers may be subject to withholding and other foreign
taxes. Although in some countries a portion of these taxes is recoverable, the
non-recovered portion of foreign withholding taxes will reduce the income the
Fund receives from the companies comprising the Fund's investments.
Further, the Fund may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which the Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Compared to the United States and other developed countries, emerging
countries may have volatile social conditions, relatively unstable governments
and political systems, economies based on only a few industries and economic
structures that are less diverse and mature, and securities markets that trade a
small number of securities, which can result in a low or nonexistent volume of
trading. Prices in these securities markets tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries. Until
recently, there has been an absence of a capital market structure or
market-oriented economy in certain emerging countries. Further, investments and
opportunities for investments by foreign investors are subject to a variety of
national policies and restrictions in many emerging countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, limits on the types of
companies in which foreigners may invest and prohibitions on foreign investments
in issuers or industries deemed sensitive to national interests. Additional
restrictions may be imposed
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at any time by these or other countries in which the Fund invests. Also, the
repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including, in
some cases, the need for certain governmental consents. Although these
restrictions may in the future make it undesirable to invest in emerging
countries, the Manager does not believe that any current repatriation
restrictions would affect their decision to invest in such countries. Countries
such as those in which the Fund may invest have historically experienced and may
continue to experience, substantial, and in some periods extremely high rates of
inflation for many years, high interest rates, exchange rate fluctuations or
currency depreciation, large amounts of external debt, balance of payments and
trade difficulties and extreme poverty and unemployment. Other factors which may
influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies and
the political constraints to which a government debtor may be subject.
With respect to investment in debt issues of foreign governments, the
ability of a foreign government or government-related issuer to make timely and
ultimate payments on its external debt obligations will also be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected. If a foreign government or
government-related issuer cannot generate sufficient earnings from foreign trade
to service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the issuer's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a government issuer to obtain sufficient foreign exchange
to service its external debt.
As a result of the foregoing, a foreign governmental issuer may default
on its obligations. If such a default occurs, the Fund may have limited
effective legal recourse against the issuer and/or guarantor. Remedies must, in
some cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government and government-related debt obligations in the event of default under
their commercial bank loan agreements.
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With respect to forward foreign currency exchange, the precise matching
of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain. See Forward Foreign Currency Exchange Contracts, below.
Forward Foreign Currency Exchange Contracts
As noted above, the foreign investments made by the Fund present currency
considerations which pose special risks. The Manager uses a purchasing power
parity approach to evaluate currency risk. A purchasing power parity approach
attempts to identify the amount of goods and services that a dollar will buy in
the United States and compares that to the amount of a foreign currency required
to buy the same amount of goods and services in another country. When the dollar
buys less abroad, the foreign currency may be considered to be overvalued. When
the dollar buys more abroad, the foreign currency may be considered to be
undervalued. Eventually, currencies should trade at levels that should make it
possible for the dollar to buy the same amount of goods and services overseas as
in the United States.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will, however, from time to time, purchase or sell
foreign currencies and/or engage in forward foreign currency transactions in
order to expedite settlement of transactions and to minimize currency value
fluctuations. The Fund may conduct its foreign currency exchange transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase or sell foreign
currencies at a future date (i.e., a "forward foreign currency" contract or
"forward" contract). The Fund will convert currency on a spot basis from time to
time, and investors should be aware of the costs of currency conversion.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract.
The Fund may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
For example, when the Manager believes that the currency of a particular
foreign country may suffer a significant decline against the U.S. dollar or
against another currency, the Fund may enter into a forward contract to sell,
for a fixed amount of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets
denominated in that currency.
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The Fund may enter into forward contracts to hedge the currency risk
associated with the purchase of individual securities denominated in particular
currencies. In the alternative, the Fund may also engage in currency "cross
hedging" when, in the opinion of the Manager, as appropriate, the historical
relationship among foreign currencies suggests that the Fund may achieve the
same protection for a foreign security at reduced cost and/or administrative
burden through the use of a forward contract relating to a currency other than
the U.S. dollar or the foreign currency in which the security is denominated.
At the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize gain or loss from currency transactions.
With respect to forward foreign currency contracts, the precise matching
of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain.
It is impossible to forecast the market value of the Fund securities at
the expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of a security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
Futures Contracts and Options on Futures Contracts
In order to remain fully invested, to facilitate investments in equity
securities and to reduce transaction costs, the Fund may, to a limited extent,
enter into futures contracts, purchase or sell options on futures contracts and
engage in certain transactions in options on securities, and may enter into
closing transactions with respect to such activities. The Fund will only enter
into these transactions for hedging purposes if it is consistent with the Fund's
investment objectives and policies and the Fund will not engage in such
transactions to the extent that obligations relating to futures contracts,
options on futures contracts and options on securities (see Futures Contracts
and Options on Futures Contracts--Options on Securities), in the aggregate,
exceed 25% of the Fund's assets.
The Fund may enter into contracts for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incur a
contractual obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month. A purchase
of a futures contract means the acquisition of a contractual right to obtain
delivery to the Fund of the securities called for by the contract at a specified
price during a specified future month. Because futures contracts require only a
small initial margin deposit, the Fund would then be able to keep a cash reserve
applicable to meet potential redemptions while at the same time being
effectively fully invested.
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The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options except that options on
futures give the purchaser the right, in return for the premium paid, to assume
a position in a futures contract, rather than actually to purchase or sell the
futures contract, at a specified exercise price at any time during the period of
the option. The Fund will not enter into futures contracts and options thereon
to the extent that more than 5% of its assets are required as futures contract
margin deposits and premiums on options and only to the extent that obligations
under such futures contracts and options thereon would not exceed 20% of the
Fund's total assets. In the case of an option that is in-the-money at the time
of purchase, the in-the-money amount may be excluded in calculating the 5%.
To the extent that interest or exchange rates move in an unexpected
direction, the Fund may not achieve the anticipated benefits of investing in
futures contracts and options thereon, or may realize a loss. To the extent that
the Fund purchases an option on a futures contract and fails to exercise the
option prior to the exercise date, it will suffer a loss of the premium paid.
Further, the possible lack of a secondary market would prevent the Fund from
closing out its positions relating to futures.
Options
Options on Securities
The Fund may write covered call options on U.S. securities, purchase call
options on such securities and enter into closing transactions related thereto.
The Fund may also purchase put options on U.S. securities, may write secured put
options on such securities and enter into closing transactions related thereto.
A covered call option obligates the writer, in return for the premium
received, to sell one of its securities to the purchaser of the option for an
agreed price up to an agreed date. The advantage is that the writer receives
premium income and the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy. The Fund will only purchase call options
to the extent that premiums paid on all outstanding call options do not exceed
2% of the Fund's total assets.
A put option obligates the writer, in return for the premium received, to
buy the security underlying the option at the exercise price during the option
period, and the purchaser of the option has the right to sell the security to
the writer. The Fund will only write put options on a secured basis which means
that the Portfolio will maintain, in a segregated account with its Custodian
Bank, cash or U.S. government securities in an amount not less than the exercise
price of the option at all times during the option period. The Fund will only
purchase put options if the Portfolio owns the security covered by the put
option at the time of purchase and to the extent that the premiums on all
outstanding put options do not exceed 2% of the Fund's total assets. The
advantage is that the writer receives premium income while the purchaser can be
protected should the market value of the security decline.
Closing transactions essentially let the Fund offset put options or call
options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
-50-
<PAGE>
The Fund may use both exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will only invest in
such options to the extent consistent with their 15% limit on investments in
illiquid securities.
With respect to writing covered call options, the Portfolios may lose the
potential market appreciation of the securities subject to the option, if the
Manager's judgment is wrong and the price of the security moves in the opposite
direction from what was anticipated. In purchasing put and call options, the
premium paid by the Fund plus any transaction costs will reduce any benefit
realized by the Fund upon exercise of the option. When writing put options, the
Fund may be required, when the put is exercised, to purchase securities at
higher prices than current market prices.
Risks of Transactions in Options, Futures and Forward Contracts
The use of futures contracts, options on futures contracts, forward
contracts and certain options for hedging and other non-speculative purposes as
described above involves certain risks. For example, a lack of correlation
between price changes of an option or futures contract and the assets being
hedged could render the Fund's hedging strategy unsuccessful and could result in
losses. The same results could occur if movements of foreign currencies do not
correlate as expected by the investment adviser at a time when the Fund is using
a hedging instrument denominated in one foreign currency to protect the value of
a security denominated in a second foreign currency against changes caused by
fluctuations in the exchange rate for the dollar and the second currency. If the
direction of securities prices, interest rates or foreign currency prices is
incorrectly predicted, the Fund will be in a worse position than if such
transactions had not been entered into. In addition, since there can be no
assurance that a liquid secondary market will exist for any contract purchased
or sold, the Fund may be required to maintain a position (and in the case of
written options may be required to continue to hold the securities used as
cover) until exercise or expiration, which could result in losses. Further,
options and futures contracts on foreign currencies, and forward contracts,
entail particular risks related to conditions affecting the underlying currency.
Over-the-counter transactions in options and forward contracts also involve
risks arising from the lack of an organized exchange trading environment.
Restricted/Illiquid Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933 ("1933 Act"). Rule 144A exempts
many privately placed and legally restricted securities from the registration
requirements of the 1933 Act and permits such securities to be freely traded
among certain institutional buyers such as the Fund.
The Fund may invest no more than 15% of the value of its net assets in
illiquid securities. Illiquid securities, for purposes of this policy, include
repurchase agreements maturing in more than seven days.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day functions of determining whether or not individual Rule
144A Securities are liquid for purposes of the Fund's limitation on investments
in illiquid assets. The Board has instructed the Manager to consider the
following factors in determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; and (iv) the nature of the security and the
-51-
<PAGE>
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Fund's
holdings of illiquid securities exceed the Fund's 15% limit on investment in
such securities, the investment adviser will determine what action shall be
taken to ensure that the Fund continues to adhere to such limitation.
Convertible, Debt and Non-Traditional Equity Securities
A portion of the Fund's assets may be invested in convertible securities
of issuers in the real estate industry. A convertible security is a security
which may be converted at a stated price within a specified period of time into
a certain quantity of the common stock of the same or a different issuer.
Convertible and debt securities are senior to common stocks in a corporation's
capital structure, although convertible securities are usually subordinated to
similar nonconvertible securities. Convertible and debt securities provide a
fixed-income stream and the opportunity, through its conversion feature, to
participate in the capital appreciation resulting from a market price advance in
the convertible security's underlying common stock. Just as with debt
securities, convertible securities tend to increase in market value when
interest rates decline and tend to decrease in value when interest rates rise.
However, the price of a convertible security is also influenced by the market
value of the security's underlying common stock and tends to increase as the
market value of the underlying stock rises, whereas it tends to decrease as the
market value of the underlying stock declines. Convertible and debt securities
acquired by the Fund may be rated below investment grade, or unrated. These
lower rated convertible and debt securities are subject to credit risk
considerations substantially similar to such considerations affecting high risk,
high-yield bonds, commonly referred to as "junk bonds."
The Fund may invest in convertible preferred stocks that offer enhanced
yield features, such as Preferred Equity Redemption Cumulative Stock ("PERCS"),
which provide an investor, such as the Fund, 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.
The Fund 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).
-52-
<PAGE>
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.
REITS
The Fund's investment in REITs presents 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.
Depositary Receipts
The Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs") that are actively traded in the United States. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. "Sponsored"
ADRs are issued jointly by the issuer of the underlying security and a
Depositary, and "unsponsored" ADRs are issued without the participation of the
issuer of the deposited security. Holders of unsponsored ADRs generally bear all
the costs of such facilities and the Depositary of an unsponsored ADR facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR. ADRs may be
listed on a national securities exchange or may be traded in the
over-the-counter market. ADR prices are denominated in U.S. dollars although the
underlying securities are denominated in a foreign currency. Investments in ADRs
involve risks similar to those accompanying direct investments in foreign
securities.
Zero Coupon Securities
The market prices of zero coupon securities are generally more volatile
than the market prices of securities that pay interest periodically and are
likely to respond to changes in interest rates to a
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<PAGE>
greater degree than do non-zero coupon securities having similar maturities and
credit quality. Current federal income tax law requires that a holder of a
taxable zero coupon security report as income each year the portion of the
original issue discount of such security that accrues that year, even though the
holder receives no cash payments of interest during the year. The Fund intends
to qualify as a regulated investment company under the Code. Accordingly, during
periods when the Fund receives no interest payments on its zero coupon
securities, it will be required, in order to maintain its desired tax treatment,
to distribute cash approximating the income attributable to such securities.
Such distribution may require the sale of portfolio securities to meet the
distribution requirements and such sales may be subject to the risk factor
discussed above.
-54-
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
Illustrations of Hypothetical Returns on Investments Based on Purchase Option
$10,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,530 10,830+
2 11,525 11,946 11,946
3 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,599 15,599
6 16,874 17,050 17,050
7 18,562 18,636 18,636
8 20,418+ 20,369 20,369
9 22,459 22,405* 22,263
10 24,705 24,646* 24,333
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,478 10,930 10,930 10,478 10,930 10,930
2 11,525 11,946 11,946 11,525 11,946 11,946
3 12,678 12,758 13,058+ 12,678 13,058 13,058
4 13,946 14,272 14,272
5 15,340 15,399 15,599+
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
<PAGE>
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 263,250 270,750+
2 294,938 298,662 298,662
3 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 389,979 389,979
6 431,818 426,247 426,247
7 475,000 465,888 465,888
8 522,500 509,215 509,215
9 574,750 560,137* 556,572
10 632,225 616,150* 608,333
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 243,750 250,000 250,000 243,750 250,000 250,000
1 268,125 273,250 273,250 268,125 273,250 273,250
2 294,938 298,662 298,662 294,938 298,662 298,662
3 324,431 318,938 326,438+ 324,431 326,438 326,438
4 356,874+ 356,797 356,797
5 392,562 384,979 389,979
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares at the end of
the eighth year.
Assumes a hypothetical return for Class A of 10% per year, a hypothetical return
for Class B of 9.3% for years 1-8 and 10% for years 9-10, and a hypothetical
return for Class C of 9.3% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on the investment amount, the holding period and the expense structure of
each Class.
-56-
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B--CLASSES OFFERED
Growth of Capital A Class B Class C Class Consultant Class
<S> <C> <C> <C> <C>
Trend Fund x x x -
Enterprise Fund x x x -
DelCap Fund x x x -
Value Fund x x x -
U.S. Growth Fund x x x -
Quantum Fund x x x -
Total Return
Devon Fund x x x -
Decatur Total Return Fund x x x -
Decatur Income Fund x x x -
Delaware Fund x x x -
Blue Chip Fund x x x -
International Diversification
Emerging Markets Fund x x x -
New Pacific Fund x x x -
International Equity Fund x x x -
World Growth Fund x x x -
Global Assets Fund x x x -
Global Bond Fund x x x -
Current Income
Delchester Fund x x x -
Strategic Income Fund x x x -
Corporate Income Fund x x x -
Federal Bond Fund x x x -
U.S. Government Fund x x x -
Limited-Term Government Fund x x x -
Tax-Free Current Income
Tax-Free Pennsylvania Fund x x x -
Tax-Free USA Fund x x x -
Tax-Free Insured Fund x x x -
Tax-Free USA Intermediate Fund x x x -
Tax-Free New Jersey Fund x x x -
Tax-Free Ohio Fund x x x -
Money Market Funds
Delaware Cash Reserve x x x x
U.S. Government Money Fund x - - x
Tax-Free Money Fund x - - x
</TABLE>
-57-
<PAGE>
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free funds, money market funds, global and
international funds and closed-end equity funds give investors the ability to
create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
THE REAL ESTATE INVESTMENT
TRUST PORTFOLIO
A CLASS
B CLASS
C CLASS
P R O S P E C T U S
__________, 1997
DELAWARE
GROUP
------------
<PAGE>
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
INSTITUTIONAL CLASS
PROSPECTUS
___________, 1997
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes the Institutional Class (the "Class") of The Real
Estate Investment Trust Portfolio series (the "Fund") of Delaware Pooled Trust,
Inc., a professionally-managed mutual fund. The Fund's objective is to seek to
achieve maximum long-term total return. Capital appreciation is a secondary
objective. It seeks to achieve its objectives by investing in securities of
companies primarily engaged in the real estate industry.
This Prospectus relates only to the Class and sets forth information that
you should read and consider before you invest. Please retain it for future
reference. The Fund's Statement of Additional Information ("Part B" of the
Fund's registration statement), dated __________, 1997, as it may be amended
from time to time, contains additional information about the Fund and has been
filed with the Securities and Exchange Commission. Part B is incorporated by
reference into this Prospectus and is available, without charge, by writing to
Delaware Distributors, L.P. at the above address or by calling the above
telephone numbers.
The Fund also offers The REIT Fund A Class The REIT Fund B Class and The
REIT Fund C Class, which are subject to sales charges and other expenses that
may affect their performance, and The Real Estate Investment Portfolio class,
which is available for purchase only by certain investors. A prospectus for
those classes can be obtained by writing to Delaware Distributors, L.P. at the
above address or by calling the above telephone numbers.
<PAGE>
TABLE OF CONTENTS
COVER PAGE
SYNOPSIS
SUMMARY OF EXPENSES
SUITABILITY
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
CLASSES OF SHARES
HOW TO BUY SHARES
REDEMPTION AND EXCHANGE
DIVIDENDS AND DISTRIBUTIONS
TAXES
CALCULATION OF NET ASSET VALUE PER SHARE
MANAGEMENT OF THE FUND
ADDITIONAL INVESTMENT INFORMATION ON
POLICIES AND RISK CONSIDERATIONS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek to achieve maximum long-term
total return. Capital appreciation is a secondary objective. It seeks to achieve
its objectives by investing in securities of companies primarily engaged in the
real estate industry. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate investment
trusts ("REITs"). For further details, see Investment Objective and Policies and
Additional Information on Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
The Fund is considered a nondiversified investment company under the
Investment Company Act of 1940 (the "1940 Act") and may be subject to greater
risks than if the Fund were diversified. The Fund concentrates its investments
in the real estate industry, so its net asset value can be expected to fluctuate
in light of factors affecting that industry and may fluctuate more widely than a
portfolio that invests in a broader range of industries. By investing primarily
in securities of REITs, the Fund is also subject to interest rate risk. The Fund
may invest up to 10% of its total assets in foreign securities, including
securities of issuers in emerging markets. Those new securities pose special
risks that do not typically arise in connection with investments in U.S.
securities. The Fund may use futures contracts, options on futures contracts and
options on stock and may engage in foreign currency options and futures
transactions for hedging purposes. There are special risks that result from the
use of options and futures. See Investment Objectives, Policies, and Risk
Considerations.
Investment Manager, Distributor and Service Agent
Delaware Investment Advisers, a division of Delaware Management Company,
Inc. (the "Manager") furnishes investment management services to the Fund,
subject to the supervision and direction of the Board of Directors. The Manager
also provides investment management services to certain of the other funds in
the Delaware Group. Lincoln Investment Management, Inc. ("Lincoln"), a wholly
owned subsidiary of Lincoln National Corporation, acts as sub-adviser to the
Manager with respect to the Fund. Delaware Distributors, L.P. (the
"Distributor") is the national distributor for the Fund and for all of the other
mutual funds in the Delaware Group. Delaware Service Company, Inc. (the
"Transfer Agent") is the shareholder servicing, dividend disbursing, accounting
services and transfer agent for the Fund and for all of the other mutual funds
in the Delaware Group. See Summary of Expenses and Management of the Fund for
further information regarding the Manager and the fees payable under the Fund's
Investment Management Agreement.
Purchase Price
Shares of the Class may be purchased at net asset value, without a front-end
or contingent deferred sales charge and are not subject to distribution fees
under a Rule 12b-1 distribution plan.
Redemption and Exchange
Shares of the Class may be redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
-3-
<PAGE>
Open-End Investment Company
The Fund is a series of Delaware Pooled Trust, Inc. ("DPT"). DPT was
organized as a Maryland corporation on May 30, 1991, and is an open-end
management investment company. See Shares under Management of the Fund.
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses applicable
to shares of the Class follows:
Shareholder Transaction Expenses
- -------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...............................None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price).....................None
Redemption Fees...................................................None*
*Exchanges are subject to the requirements of each Fund a front-end sales
charge may apply.
Annual Operating Expenses
(as a percentage of average daily net assets)
- -------------------------------------------------------------------------------
Management Fees (after voluntary waivers).........................[ ]%
12b-1 Expenses ...................................................None
Other Operating Expenses (after
expense limitations)+........................................[ ]%
Total Operating Expenses (after voluntary
waivers and expense limitations)+.....................[ ]%
+"Other Operating Expenses" and "Total Operating Expenses" for the
Class are estimated amounts for the first full fiscal year of the Class and are
based on the actual results for the original (and then only) class of shares of
the Fund as of the Fund's fiscal year ended October 31, 1996. Effective , 1997,
such original class has been redesignated The REIT Fund A Class. Like the Class,
such original class, prior to its redesignation, carried no front-end sales
charge and was not subject to Rule 12b-1 distribution expenses. The Manager has
elected voluntarily to waive that portion, if any, of the annual management fees
payable by the Fund and to pay certain expenses of the Fund to the extent
necessary to ensure that the Total Operating Expenses (after voluntary waivers
and payments) of the Class does not exceed [ ]% during the
-4-
<PAGE>
commencement of the public offering of the Class through October 31, 1997. If
the voluntary fee waivers or payments were not in effect, the Management Fees
(as a percentage of average net assets) would be 0.75% and the Total Operating
Expenses (as a percentage of average daily net assets) would be [ ]%.
For expense information about The REIT Fund A Class, The REIT Fund B
Class, The REIT Fund C Class and The Real Estate Investment Trust Portfolio
class, see the separate prospectuses relating to those classes.
The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming (1) a 5%
annual rate of return and (2) redemption at the end of each time period. As
noted in the above table, the Fund does not charge any redemption fee. The
following example assumes the voluntary waiver of the management fee and/or
other payments of expenses as described in this Prospectus.
Assuming Redemption
1 year 3 years 5 years 10 years
$[] $[] N/A N/A
$[] $[]
$[] $[]
The purpose of the above tables is to assist the investor in understanding the
various costs and expenses that an investor in the Class will bear directly or
indirectly.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
SUITABILITY
The Fund may be suitable for the patient investor interested in long-term
capital appreciation with the potential for current income. Investors should be
willing to accept the risks associated with investments in a portfolio of equity
securities and convertible securities issued by domestic and foreign issuers
concentrated in the real estate industry. Because current income is a secondary
objective of the Fund, the Fund is not suitable as an investment vehicle for
investors whose primary investment goal is current income.
The risks associated with an investment in the Fund are discussed below
under Investment Objectives, Policies and Risk Considerations.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objectives of the Fund is described below, together with the
policies the Fund employs in its efforts to achieve its objectives. There is no
assurance that the Fund will attain its objectives. The investment objectives of
the Fund is fundamental and may only be changed by a
-5-
<PAGE>
majority approval of the Fund's shareholders. Unless otherwise noted, the
investment policies described below are not fundamental policies and may be
changed without shareholder approval.
Investment Objectives and Policies
The investment objective of the Fund is to achieve maximum long-term total
return. Capital appreciation is a secondary objective. The Fund seeks to achieve
its objectives by investing in securities of companies principally engaged in
the real estate industry. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate investment
trusts ("REITs"). The Fund will operate as a nondiversified fund as defined by
the 1940 Act.
The Fund invests in equity securities of REITs and other real estate industry
operating companies ("REOCs"). For purposes of the Fund's investments, a REOC is
a company that derives at least 50% of its gross revenues or net profits from
either (1) the ownership, development, construction, financing, management or
sale of commercial, industrial or residential real estate, or (2) products or
services related to the real estate industry, such as building supplies or
mortgage servicing. The Fund's investments in equity securities of REITs and
REOCs may include, from time to time, sponsored or unsponsored American
Depositary Receipts actively traded in the United States. Equity securities for
this purpose include common stocks, securities convertible into common stocks
and securities having common stock characteristics, such as rights and warrants
to purchase common stocks. The Fund may also purchase preferred stock. The Fund
may invest up to 10% of its assets in foreign securities, and in convertible
securities. See Additional Investment Information--Foreign Investment
Information, Depositary Receipts and Convertible, Debt and NonTraditional Equity
Securities for further discussion of these investment policies. The Fund may
also invest in mortgage-backed securities. See Mortgage-Backed Securities for
more detailed information about this investment policy.
The Fund may hold cash or invest in short-term debt securities and other money
market instruments when, in the Manager's opinion, such holdings are prudent
given then prevailing market conditions. Except when the Manager believes a
temporary defensive approach is appropriate, the Fund will not hold more than 5%
of its total assets in cash or such short-term investments. All these short-term
investments will be of the highest quality as determined by a
nationally-recognized statistical rating organization (e.g. AAA by S&P or Aaa by
Moody's) or be of comparable quality as determined by the Manager. See
Additional Investment Information for further details concerning these and other
investment policies.
Although the Fund does not invest directly in real estate, the Fund does invest
primarily in REITs, and may purchase equity securities of REOCs. Thus, because
the Fund concentrates its investments in the real estate industry, an investment
in the Fund may be subject to certain risks associated with direct ownership of
real estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; risks related to
general and local economic conditions; possible lack of availability of mortgage
funds; overbuilding; extended vacancies of properties; increases in competition;
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties resulting from,
environmental problems; casualty for condemnation losses, uninsured damages from
floods,
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earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income-producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Like investment companies such
as the Fund, REITs are not taxed on income distributed to shareholders provided
they comply with several requirements in the Internal Revenue Code of 1986, as
amended (the "Code"). REITs are subject to substantial cash flow dependency,
defaults by borrowers, self-liquidation, and the risk of failing to qualify for
tax-free pass-through of income under the Code, and/or to maintain exemptions
from the 1940 Act. By investing in REITs indirectly the Fund, a shareholder
bears not only a proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs. For a further discussion of the risks
presented by investing in REITs, see Additional Investment Information--REITs.
While the Fund does not intend to invest directly in real estate, the Fund
could, under certain circumstances, own real estate directly as a result of a
default on securities that it owns. In addition, if the Fund has rental income
or income from the direct disposition of real property, the receipt of such
income may adversely affect the Fund's ability to retain its tax status as a
regulated investment company.
The Fund may also, to a limited extent, enter into futures contracts on stocks,
purchase or sell options on such futures, engage in certain options transactions
on stocks and enter into closing transactions with respect to those activities.
However, these activities will not be entered into for speculative purposes, but
rather to facilitate the ability quickly to deploy into the stock market the
Fund's positions in cash, short-term debt securities and other money market
instruments, at times when the Fund assets are not fully invested in equity
securities. Such positions will generally be eliminated when it becomes possible
to invest in securities that are appropriate for the Fund. See Additional
Investment Information--Futures Contracts and Options on Futures Contracts and
Options for a further discussion of these investment policies.
In connection with the Fund's ability to invest up to 10% of its total assets in
the securities of foreign issuers, currency considerations may present risks if
the Fund holds international securities. Currency considerations carry a special
risk for a portfolio of international securities. In this regard, the Fund may
actively carry on hedging activities, and may invest in forward foreign currency
exchange contracts to hedge currency risks associated with the purchase of
individual securities denominated in a particular currency. See Additional
Investment Information--Forward Foreign Currency Exchange Contracts.
The Manager does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Manager may take advantage of short-term opportunities that are
consistent with the Fund's investment objectives. It is anticipated
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that the annual turnover rate of the Fund, under normal circumstances, will
generally not exceed 100%. See Portfolio Transactions."
Risk Considerations
An investment in the Fund entails certain risks and considerations about which
an investor should be aware.
The Fund may invest up to 10% of its total assets in securities of foreign
issuers which normally are denominated in foreign currencies, and may hold
foreign currency directly. Investments in securities of non-United States
issuers which are generally denominated in foreign currencies involve certain
risk and opportunity considerations not typically associated with investing in
United States companies. Consequently, the Fund may be affected by changes in
currency rates and exchange control regulations and may incur costs in
connection with conversions between currencies. To hedge this currency risk
associated with investments in non-U.S. dollar denominated securities, a Fund
may invest in forward foreign currency contracts. Those activities pose special
risks which do not typically arise in connection with investments in U.S.
securities. In addition, the Fund may engage in foreign currency options and
futures transactions. For a discussion of the risks associated with foreign
securities see Foreign Investment Information and for those concerning these
hedging instruments see Risks of Transactions in Options, Futures and Forward
Contracts, both of which references appear under the heading Additional
Investment Information."
The Fund may commit its assets eligible for foreign investment to securities of
issuers located in emerging markets. Investments in securities of companies in
emerging markets present a greater degree of risk than tends to be the case for
foreign investments in Western Europe and other developed markets. Among other
things, there is a greater possibility of expropriation, nationalization,
confiscatory taxation, income earned or other special taxes, foreign exchange
restrictions, limitations on the repatriation of income and capital from
investments, defaults in foreign government debt, and economic, political or
social instability. In addition, in many emerging markets, there is
substantially less publicly available information about issuers and the
information that is available tends to be of a lesser quality. Economic markets
and structures tend to be less mature and diverse and the securities markets
which are subject to less government regulation or supervision may also be
smaller, less liquid and subject to greater price volatility. See Additional
Investment Information--Foreign Investment Information for a more extensive
discussion of these and other factors.
The foreign securities in which the Fund may invest from time to time may be
listed primarily on foreign exchanges which trade on days when the New York
Stock Exchange is closed (such as Saturday). As a result, the net asset value of
the Fund may be significantly affected by such trading on days when shareholders
will have no access to the Fund. See Valuation of Shares.
The Fund also may, under certain circumstances, use certain futures contracts
and options on futures contracts, as well as options on stock. The Fund will
only enter into these transactions for hedging purposes. See Futures Contracts
and Options on Futures Contracts and Risks of
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Transactions in Options, Futures and Forward Contracts, both of which references
appear under the heading Additional Investment Information.
The Fund concentrates its investments in the real estate industry. As a
consequence, the net asset value of the Fund can be expected to fluctuate in
light of the factors affecting that industry, and may fluctuate more widely than
a portfolio that invests in a broader range of industries. The Fund may be more
susceptible to any single economic, political or regulatory occurrence affecting
the real estate industry.
The Fund, by investing primarily in securities of real estate investment trusts,
is subject to interest rate risk, in that as interest rates decline, the value
of the Fund's investments in REITs can be expected to rise. Conversely, when
interest rates rise, the value of the Fund's investments in REITs holding fixed
rate obligations can be expected to decline. See Additional Investment
Information--REITs.
The Fund may lend its portfolio securities, may invest in repurchase agreements
and may purchase securities on a when-issued basis.
While the Fund intends to seek to qualify as a "diversified" investment company
under provisions of Subchapter M of the Code, it will not be diversified under
the 1940 Act. Thus, while at least 50% of the Fund's total assets will be
represented by cash, cash items, certain qualifying securities and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Fund's total assets, it will not satisfy the 1940 Act requirement in this
respect, which applies that test to 75% of the Fund's assets. A nondiversified
portfolio is believed to be subject to greater risk because adverse effects on
the portfolio's security holdings may affect a larger portion of the overall
assets.
Each of the investment strategies identified above involves special risks which
are described under Additional Investment Information in this Prospectus and
Investment Policies, Portfolio Techniques and Risk Considerations in the Part B.
* * *
Part B sets forth other more specific investment restrictions and
descriptions of Moody's and S&P ratings.
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund. Shares
of the Class may be purchased directly by contacting a Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class are
made at net asset value. There is no front-end or contingent deferred sales
charge.
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Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
Class A Shares, Class B Shares and Class C Shares
In addition to offering shares of the Class, the Fund also offers
shares of The REIT Class A Class, The REIT Fund B Class and The REIT Fund C
Class which are described in a separate prospectus. Shares of such classes may
be purchased through authorized investment dealers or directly by contacting the
Fund or its Distributor. Class A Shares carry a front-end sales charge and have
annual 12b-1 expenses equal to a maximum of 0.30%. The maximum front-end sales
charge as a percentage of the offering price of Class A Shares is 4.75% and is
reduced on certain transactions of $100,000 or more. Class B Shares and Class C
Shares have no front-end sales charge but are subject to annual 12b-1 expenses
equal to a maximum of 1%. Class B Shares and Class C Shares and certain Class A
Shares may be subject to a contingent deferred sales charge upon redemption. To
obtain a prospectus relating to such classes, contact the Distributor by writing
to the address or by calling the phone number listed on the back cover of this
Prospectus.
The Fund also offers The Real Estate Investment Trust Portfolio class,
which are available for purchase only by certain investors. To obtain a
prospectus relating to such class, contact the Distributor by writing to the
address or by calling the phone number listed on the back cover of this
Prospectus.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
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Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application must be completed, signed
and sent with a check, payable to the Class, to Delaware Group at 1818 Market
Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the Class. Your check should be identified with your name(s)
and account number.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your Fund account number in the wire).
1. Initial Purchases--Before you invest, telephone the Client Services Center at
800-828-5052 to get an account number. If you do not call first, processing of
your investment may be delayed. In addition, you must promptly send your
Investment Application or, in the case of a retirement account, an appropriate
retirement plan application, to the Class, to Delaware Group at 1818 Market
Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise your
Client Services Representative by telephone at 800-828-5052 prior to sending
your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Fund. However, Class B
Shares and Class C Shares of the Fund and Class B Shares and Class C Shares of
the other funds in the Delaware Group offering such a class of shares may not be
exchanged into the Class. If you wish to open an account by exchange, call your
Client Services Representative at 800-828-5052 for more information. See
Redemption and Exchange for more complete information concerning your exchange
privileges.
Investing through Your Investment Dealer
You can make a purchase of shares of the Class through most investment
dealers who, as part of the service they provide, must transmit orders promptly
to the Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) of the Class is determined as of
the close of regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund in which the shares are being
purchased. The effective date of a direct purchase is the day your wire,
electronic transfer or check is received, unless it is received after the time
the share price is determined, as noted above. Purchase orders received after
such time will be effective the next business day.
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The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchases by third-party checks or checks that are not drawn on a domestic
branch of a United States financial institution. If a check drawn on a foreign
financial institution is accepted, you may be subject to additional bank charges
for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order.
For example, redemption or exchange requests received in good order after the
time the net asset value of shares is determined, will be processed on the next
business day. See Purchase Price and Effective Date under How to Buy Shares.
Except as otherwise noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. With regard to exchanges, you
must also provide the name of the fund you want to receive the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling a Fund at 800-828-5052. Redemption proceeds will be
distributed promptly, as described below, but not later than seven days after
receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will not honor redemption requests as to shares for which a
check was tendered as payment until the Fund is reasonably satisfied that the
check has cleared, which may take up to 15 days from the purchase date. You can
avoid this potential delay if you purchase shares by wiring Federal Funds. The
Fund reserves the right to reject a written or telephone redemption request or
delay payment of redemption proceeds if there has been a recent change to the
shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group
mutual fund provided (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge and (2) the
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shares of the fund being acquired are in a state where that fund is registered.
If exchanges are made into other shares that are eligible for purchase only by
those permitted to purchase shares of the Class, such shares will be exchanged
at net asset value. Shares of the Class may not be exchanged into the Class B
Shares or Class C Shares of the funds in the Delaware Group. Each Fund may
suspend, terminate or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption and Exchange
You can write to a Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares or to request an exchange of any or all
your shares into another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate must
accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
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days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request.
Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There are
no fees for this redemption method, but the mail time may delay getting funds
into your bank account. Simply call your Client Services Representative prior to
the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and distribute all of its net investment
income to shareholders as dividends annually. Net capital gains, if any, will be
distributed annually.
In addition, in order to satisfy certain distribution requirements of
the Tax Reform Act of 1986, Fund may declare special year-end dividend and
capital gains distributions during November or December to shareholders of
record on a date in such month. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by the Fund and received by
shareholders on the earlier of the date paid or December 31 of the prior year.
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Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur any
distribution fee under the Fund's 12-1 Plans, which apply The REIT Fund A Class,
The REIT Fund B Class and The REIT Fund C Class.
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As such, the Fund 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. The Fund intends to distribute substantially all of its
net investment income and net capital gains, if any. Dividends from net
investment income or net short-term capital gains will be taxable to those
investors who are subject to income taxes as ordinary income, whether received
in cash or in additional shares.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a by-product of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a capital gains distribution, a portion of
the investment will be returned as taxable distribution.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record in such a month but which, for operational reasons, may not be paid to
the shareholder until the following January, will be treated for tax purposes as
if paid by the Fund and received by the shareholder on December 31 of the
calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund and any other fund in the Delaware Group. Any loss incurred on a sale
or exchange of Fund shares that had been held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares and will be disallowed to the extent of
exempt-interest dividends paid with respect to such shares.
Each year, the Fund will mail to you information on the tax status of
the Fund's dividends and distributions.
The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification
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regulations. You may avoid this withholding requirement by certifying on your
Investment Application your proper Taxpayer Identification Number and by
certifying that you are not subject to backup withholding.
See Taxes in Part B for additional information on tax matters relating
to the Fund and its shareholders.
CALCULATION OF NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is determined by dividing the
total market value of the Fund's investments and other assets, less any
liabilities, by the total outstanding shares of the Fund. NAV per share is
determined as of the close of regular trading on the NYSE on each day the NYSE
is open for business.
Securities listed on a U.S. securities exchange for which market
quotations are available are valued at the last quoted sale price on the day the
valuation is made. Price information on listed securities is taken from the
exchange where the security is primarily traded. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the time when
net assets are valued. Unlisted securities and listed securities not traded on
the valuation date for which market quotations are readily available are valued
at a price that is considered to best represent fair value within a range not in
excess of the current asked price nor less than the current bid prices. Domestic
equity securities traded over-the-counter, domestic equity securities which are
not traded on the valuation date and U.S. government securities are priced at
the mean of the bid and ask price.
Bonds and other fixed-income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market. In addition, bonds and other fixed-income securities
may be valued on the basis of prices provided by a pricing service when such
prices are believed to reflect the fair market value of such securities. The
prices provided by a pricing service are determined without regard to bid or
last sale prices but take into account institutional size trading in similar
groups of securities and any developments related to the specific securities.
Securities not priced in this manner are valued at the most recent quoted mean
price, or, when stock exchange valuations are used, at the latest quoted sale
price on the day of valuation. If there is no such reported sale, the latest
quoted mean price will be used. Securities with remaining maturities of 60 days
or less are valued at amortized cost, if it approximates market value. In the
event that amortized cost does not approximate market value, market prices as
determined above will be used.
Exchange-traded options are valued at the last reported sales price or,
if no sales are reported, at the mean between the last reported bid and ask
prices. Non-exchange traded options are valued at fair value using a
mathematical model. Futures contracts are valued at their daily quoted
settlement price.
The value of other assets and securities for which no quotations are
readily available (including restricted securities) are determined in good faith
at fair value using methods determined by the Fund's Board of Directors. The
securities in which the Fund may invest from time to time may be listed
primarily on foreign exchanges which trade on days when the NYSE is closed (such
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as Saturday). As a result, the net asset value of the Fund may be significantly
affected by such trading on days when shareholders have no access to the Fund.
For purposes of calculating NAV, all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the mean
between the bid and ask price of such currencies against the U.S. dollar as
provided by an independent pricing service or any major bank, including the
Custodian Bank. Forward foreign currency contracts are valued at the mean price
of the contracts. Interpolated values will be derived when the settlement date
of the contract is on an interim period for which quotations are not available.
The offering price and NAV are computed as of the close of regular
trading on the NYSE (ordinarily, 4 p.m., Eastern time) on days when the NYSE is
open.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that shares of the Class will not incur any of the expenses under the
Fund's 12b-1 Plans and Class A, B and C shares alone bear only those 12b-1 Plan
expenses payable under their respective Plans. Due to the specific distribution
expenses and other costs that will be allocable to each class, the dividends
paid to each class of the Fund may vary. However, the NAV per share of each
class is expected to be equivalent.
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund are managed under the direction of
the DPT's Board of Directors. Part B contains additional information regarding
DPT's directors and officers.
Investment Advisers
Delaware Investment Advisers, a division of Delaware Management
Company, Inc. (the "Manager"), furnishes investment advisory services to the
Fund. Lincoln Investment Management, Inc. ("Lincoln"), a wholly owned subsidiary
of Lincoln National Corporation, acts as sub-adviser to the Manager with respect
to Fund. In its capacity as sub-adviser, Lincoln furnishes the Manager with
investment recommendations, asset allocation advice, research, economic analysis
and other investment services with respect to the securities in which the Fund
may invest. The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers, Ltd., were
supervising in the aggregate more than $30 billion in assets in various
institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) accounts. Lincoln (formerly
named Lincoln National Investment Management Company) was incorporated in 1930.
Lincoln's primary activity is institutional fixed-income investment management
and consulting. Such activity includes fixed-income portfolios, private
placements, real estate debt and equity, and asset/liability management. As of
October 31, 1996, Lincoln had over $39 billion in assets under management.
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Lincoln provides investment management services to Lincoln National Corporation,
its principal subsidiaries and affiliated registered investment companies, and
acts as investment adviser to other unaffiliated clients.
The Manager has entered into an Investment Advisory Agreement with DPT
on behalf of the Fund. The Manager has also entered into a Sub-Advisory
Agreement with Lincoln with respect to the Fund. Under that Agreement, the
Manager, subject to the control and supervision of the DPT's Board of Directors
and in conformance with the stated investment objectives and policies of the
Fund, manage the investment and reinvestment of the assets of the Fund. In this
regard, it is their responsibility to make investment decisions for the Fund.
As compensation for the services to be rendered under the advisory
agreement, the Manager is entitled to an advisory fee calculated by applying a
quarterly rate, based on an annual percentage rate, to the Fund's average daily
net assets for the quarter. Lincoln receives 30% of the advisory fee paid to the
Manager for acting as sub-adviser to the Manager with respect to the Fund.
Babak Zenouzi has primary responsibility for making day-to-day
investment decisions for the Fund and has had such responsibility since its
inception. Mr. Zenouzi holds a BS in Finance and Economics from Babson College
in Wellesley, Massachusetts, and an MS in Finance from Boston College. Prior to
joining the Manager in 1992, he was with The Boston Company where he held the
positions of assistant vice president, senior financial analyst, financial
analyst and portfolio accountant. Steven R. Brody, John F. Robertson and
Lawrence T. Kissko have served as sub-advisers to the Fund since its inception.
Mr. Brody, a graduate of Miami (Ohio) University, joined Lincoln following 15
years in the commercial mortgage and real estate industry with another insurance
company, a commercial bank and a mortgage banking firm. He is responsible for
Lincoln's mortgage, real estate equity, private placement and mezzanine finance
activities, and the day-to-day operations of Lincoln Investment Management. Mr.
Brody has been active in the Mortgage Bankers Association of America and the
Urban Land Institute and is a Fellow of the Life Office Management Association.
He serves on the boards of Lincoln Investment Management, Indiana Institute of
Technology, and The Malpas Trust. Mr. Robertson holds a BA from Wabash College
where he was graduated magna cum laude and awarded membership into Phi Beta
Kappa, and an MBA with emphasis in finance and real estate from Indiana
University. Prior to joining Lincoln Investment Management, Inc.'s Real Estate
Debt Group in 1993, he was a consultant with Ernst & Young's Special Services
Group where he specialized in the valuation of all types of commercial real
estate. Mr. Robertson is a CFA charterholder and has completed numerous courses
toward the MAI designation. Mr. Kissko holds a BS degree in Management Science
from Rensselaer Polytechnic Institute and an MBA in Finance from State
University of New York at Albany. He is responsible for real estate asset
management as well as the real estate equity production effort of Lincoln
Investment Management, Inc. Mr. Kissko joined Lincoln in 1983, following a
five-year association with Union Mutual Life Insurance Company of Portland,
Maine. Prior to that, he was associated with Massachusetts Mutual Life Insurance
Company. He is a CFA charterholder.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH, Delaware and
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Delaware International Advisers, Ltd. are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
Investment Management, Inc. ("Lincoln"), the sub-adviser to the Manager with
respect to the Fund, is a wholly owned subsidiary of Lincoln National. The
Manager, Delaware International Advisers, Ltd. and Lincoln may be deemed to be
affiliated persons under the 1940 Act, as the three companies are each under the
ultimate control of Lincoln National. Lincoln National, with headquarters in
Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. The Manager's address is One Commerce Square, 2005 Market Street,
Philadelphia, PA 19103. Lincoln's address is 200 E. Berry Street, Fort Wayne, IN
46802.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders to the extent
that net capital gains are realized. Given the Fund's investment objective, it
is anticipated that the portfolio turnover rate of the Fund will not exceed
100%.
The Manager and the Sub-Adviser use their best efforts to obtain the
best available price and most favorable execution for portfolio transactions.
Orders may be placed with brokers or dealers who provide brokerage and research
services to the Manager or the Sub-Adviser or their advisory clients. These
services may be used by the Manager and the Sub-Adviser in servicing any of
their respective accounts. Subject to best price and execution, the Manager and
the Sub-Adviser may consider a broker/dealer's sales of a Fund's shares in
placing portfolio orders and may place orders with broker/dealers that have
agreed to defray certain Fund expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote total return performance of the
Class in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions. Each presentation will include
the average annual total return for one-, five-and ten-year or life-of-fund
periods, as relevant. The Fund may also advertise aggregate and average total
return information concerning the Class over additional periods of time.
Because securities prices fluctuate, investment results of the Class
will fluctuate over time. Past performance is not a guarantee of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
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Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. DPT's fiscal year ends on October 31.
Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for the Fund's shares under a Distribution Agreement dated
__________, 19__.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
a Shareholders Services Agreement. The Transfer Agent also provides accounting
services to the Fund pursuant to the terms of a separate Fund Accounting
Agreement. The directors annually review service fees paid to the Transfer
Agent. Certain recordkeeping services and other shareholder services that
otherwise would be performed by the Transfer Agent may be performed by certain
other entities and the Transfer Agent may elect to enter into an agreement to
pay such other entities for those services. In addition, participant account
maintenance fees may be assessed for certain recordkeeping services provided as
part of retirement plan and administration service packages. These fees are
based on the number of participants in the plan and the various services
selected by the employer. Fees will be quoted upon request and are subject to
change.
The Distributor and the Transfer Agent are indirect, wholly owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreements and those borne
by the Distributor under the Distribution Agreement.
Shares
DPT is an open-end management investment company. The Fund's portfolio
of assets is nondiversified as defined by the 1940 Act. Commonly known as a
mutual fund, DPT was organized as a Maryland corporation on May 30, 1991. In
addition to the Fund, DPT presently offers 13 other series of shares. The
Articles of Incorporation permit the Fund to issue one billion shares of common
stock with $.01 par value and fifty million shares have been allocated to each
series. The Board of Directors has the power to designate one or more classes of
shares of common stock and to classify and reclassify any unissued shares with
respect to such classes.
The shares of each series, when issued, will be fully paid,
non-assessable, fully transferable and redeemable at the option of the holder.
The shares have no preference as to the conversion, exchange, dividends,
retirement or other features and have no preemptive rights. The shares of each
series have noncumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of directors can elect 100% of
the directors if they choose to do so. Shares of each series entitled to vote on
a matter will vote in the aggregate and not by series, except when the matter to
be voted upon affects only the interests of shareholders of a particular
Portfolio or when otherwise expressly required by law. DPT does not issue
certificates for shares unless a shareholder submits a specific request. Under
Maryland law, DPT is not required, and does not intend, to hold annual meetings
of its shareholders unless, under certain circumstances, it is required to do so
under the 1940 Act.
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ADDITIONAL INVESTMENT INFORMATION
U.S. Government Securities
The U.S. government securities in which the Fund may invest for
temporary purposes and otherwise (see Investment Objectives, Policies and Risk
Considerations), include a variety of securities which are issued or guaranteed
as to the payment of principal and interest by the U.S. government, and by
various agencies or instrumentalities which have been established or sponsored
by the U.S. government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are, in effect, backed
by the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the Treasury,
if needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S. Treasury
to purchase certain amounts of their securities to assist the institutions in
meeting their debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the Federal Home Loan Mortgage Corporation,
are federally chartered institutions under U.S. government supervision, but
their debt securities are backed only by the creditworthiness of those
institutions, not the U.S. government.
Some of the U.S. government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks and the Federal National Mortgage Association.
Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities or by government
sponsored corporations. Those securities include, but are not limited to, GNMA
certificates. Such securities differ from other fixed-income securities in that
principal is paid back by the borrower over the length of the loan rather than
returned in a lump sum at maturity. When prevailing interest rates rise, the
value of a GNMA security may decrease as do other debt securities. When
prevailing interest rates decline, however, the value of GNMA securities may not
rise on a comparable basis with other debt
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securities because of the prepayment feature of GNMA securities. Additionally,
if a GNMA certificate is purchased at a premium above its principal value
because its fixed rate of interest exceeds the prevailing level of yields, the
decline in price to par may result in a loss of the premium in the event of
prepayment. Funds received from prepayments may be reinvested at the prevailing
interest rates which may be lower than the rate of interest that had previously
been earned.
The Fund also may invest in collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs are debt
securities issued by U.S. government agencies or by financial institutions and
other mortgage lenders and collateralized by a pool of mortgages held under an
indenture. CMOs are issued in a number of classes or series with different
maturities. The classes or series are retired in sequence as the underlying
mortgages are repaid. REMICs, which were authorized under the Tax Reform Act of
1986, are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities. To the extent any
privately-issued CMOs or REMICs in which the Fund may invest are considered by
the U.S. Securities and Exchange Commission (the "Commission") to be investment
companies, the Fund will limit its investments in such securities in a manner
consistent with the provisions of the 1940 Act.
The mortgages backing these securities include conventional 30-year
fixed rate mortgages, graduated payment mortgages and adjustable rate mortgages.
These mortgages may be supported by various types of insurance, may be backed by
GNMA certificates or other mortgage pass-throughs issued or guaranteed by the
U.S. government, its agencies or instrumentalities. However, the guarantees do
not extend to the mortgage-backed securities' value, which is likely to vary
inversely with fluctuations in interest rates. These certificates are in most
cases "pass-through" instruments, through which the holder receives a share of
all interest and principal payments from the mortgages underlying the
certificate. Because the prepayment characteristics of the underlying mortgages
vary, it is not possible to predict accurately the average life or realized
yield of a particular issue of pass-through certificates. During periods of
declining interest rates, prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. When the mortgage obligations are
prepaid, the Fund may reinvest the prepaid amounts in securities, the yield of
which reflects interest rates prevailing at the time. Moreover, prepayments of
mortgages which underlie securities purchased at a premium could result in
capital losses.
Certain CMOs and REMICs may have variable or floating interest rates
and others may be stripped. Stripped mortgage securities have greater market
volatility than other types of mortgage securities in which the Portfolios may
invest.
Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the "interest-only" class), while the other class will receive
all of the principal (the "principal-only" class). The yield to maturity on an
interest-only class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
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prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Fund's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed and, accordingly,
these securities are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed 10% of a Portfolio's net assets.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. The Fund may invest
in such private-backed securities but, the Fund 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.
Short-Term Investments
The short-term investments in which the Fund may invest consistent with
the limits recited above (see Investment Objectives, Policies and Risk
Considerations) are:
(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a U.S.
commercial bank. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.
Time deposits maturing in more than seven days will not be purchased by the
Fund, and time deposits maturing from two business days through seven calendar
days will not exceed 15% of the total assets of the Fund. Certificates of
deposit are negotiable short-term obligations issued by commercial banks against
funds deposited in the issuing institution. Variable rate certificates of
deposit are certificates of deposit on which the interest rate is periodically
adjusted prior to their stated maturity based upon a specified market rate. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods).
The Fund will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion or, in the case of a
bank which does not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the principal
amount of such investment is insured in full by the Federal Deposit Insurance
Corporation, (ii) it is a member of the Federal Deposit Insurance Corporation,
and (iii) the bank or its securities have received the highest quality rating by
a nationally-recognized statistical rating organization;
(2) Commercial paper with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., A-1 by S&P or
Prime-1 by Moody's) or, if not so rated, of comparable quality as determined by
the Manager;
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(3) Short-term corporate obligations with the highest quality rating by
a nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if not so rated, of comparable quality as determined by the
Manager;
(4) U.S. government securities (see U.S. Government Securities); and
(5) Repurchase agreements collateralized by securities listed above.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The Fund will maintain with its Custodian Bank a
separate account with a segregated portfolio of securities in an amount at least
equal to these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time the Fund enters into the commitment
and no interest accrues to the Fund until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. It is a
current policy of the Fund not to enter into when-issued commitments exceeding
in the aggregate 15% of the market value of the Fund's total assets less
liabilities other than the obligations created by these commitments.
Repurchase Agreements
The Fund may enter into repurchase agreements with brokers, dealers or
banks deemed to be creditworthy by the Manager under guidelines of DPT's
directors. In a repurchase agreement, a Portfolio buys securities from a seller
that has agreed to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. The term
of these agreements is usually from overnight to one week and never exceeds one
year. Not more than 15% of the Fund's assets may be invested in repurchase
agreements having a maturity in excess of seven days. Repurchase agreements may
be viewed as a fully collateralized loan of money by the Fund to the seller. The
Fund always receives securities as collateral with a market value at least equal
to the purchase price and this value is maintained during the term of the
agreement. If the seller defaults and the collateral value declines, the Fund
might incur a loss. If bankruptcy proceedings are commenced with respect to the
seller, the Fund's realization upon the collateral may be delayed or limited.
The Fund may invest cash balances in a joint repurchase agreement in accordance
with an Order the Delaware Group has obtained from the Commission under Section
17(d) of the 1940 Act.
Securities Lending Activities
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
The major risk to which the Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
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borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the investment adviser.
Borrowing from Banks
The Fund may borrow money as a temporary measure or to facilitate
redemptions. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and, consistent with
Commission rules, immediately after any borrowing is in an amount which exceeds
5% of its net assets, there must be asset coverage of at least 300%. In the
event the asset coverage declines below 300%, the Fund would take steps to
reduce the amount of its borrowings so that asset coverage would equal at least
300%. Securities will not be purchased while the Fund has an outstanding
borrowing.
Foreign Investment Information
Up to 10% of the total assets of the Fund may be invested in securities
of foreign issuers and foreign currency. The Fund has the right to purchase
securities in any developed, underdeveloped or emerging country. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations. These risks
are in addition to the usual risks inherent in domestic investments. There is
the possibility of expropriation, nationalization or confiscatory taxation,
taxation of income earned in foreign nations or other taxes imposed with respect
to investments in foreign nations, foreign exchange control (which may include
suspension of the ability to transfer currency from a given country), default in
foreign government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about companies
in the United States and this information tends to be of a lesser quality.
Foreign companies are not subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. In particular, the
assets and profits appearing on the financial statements of a developing or
emerging country issuer may not reflect its financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require for both tax and accounting purposes,
that certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses or profits. Consequently,
financial data may be materially affected by restatements for inflation and may
not accurately reflect the real condition of those issuers and securities
markets.
It is also expected that the expenses for custodial arrangements of the
Fund's foreign securities will be somewhat greater than the expenses for the
custodial arrangements for U.S. securities of equal value. Dividends and
interest paid by foreign issuers may be subject to withholding and other foreign
taxes. Although in some countries a portion of these taxes is recoverable, the
non-recovered portion of foreign withholding taxes will reduce the income the
Fund receives from the companies comprising the Fund's investments.
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Further, the Fund may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which the Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Compared to the United States and other developed countries, emerging
countries may have volatile social conditions, relatively unstable governments
and political systems, economies based on only a few industries and economic
structures that are less diverse and mature, and securities markets that trade a
small number of securities, which can result in a low or nonexistent volume of
trading. Prices in these securities markets tend to be volatile and, in the
past, securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries. Until
recently, there has been an absence of a capital market structure or
market-oriented economy in certain emerging countries. Further, investments and
opportunities for investments by foreign investors are subject to a variety of
national policies and restrictions in many emerging countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, limits on the types of
companies in which foreigners may invest and prohibitions on foreign investments
in issuers or industries deemed sensitive to national interests. Additional
restrictions may be imposed at any time by these or other countries in which the
Fund invests. Also, the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging countries, the Manager does not believe that any current
repatriation restrictions would affect their decision to invest in such
countries. Countries such as those in which the Fund may invest have
historically experienced and may continue to experience, substantial, and in
some periods extremely high rates of inflation for many years, high interest
rates, exchange rate fluctuations or currency depreciation, large amounts of
external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Other factors which may influence the ability or willingness
to service debt include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of its debt service burden to the economy as a whole,
its government's policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints to which a
government debtor may be subject.
With respect to investment in debt issues of foreign governments, the
ability of a foreign government or government-related issuer to make timely and
ultimate payments on its external debt obligations will also be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives
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payment for its exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely affected. If a foreign
government or government-related issuer cannot generate sufficient earnings from
foreign trade to service its external debt, it may need to depend on continuing
loans and aid from foreign governments, commercial banks and multilateral
organizations, and inflows of foreign investment. The commitment on the part of
these foreign governments, multilateral organizations and others to make such
disbursements may be conditioned on the government's implementation of economic
reforms and/or economic performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may curtail the willingness of such
third parties to lend funds, which may further impair the issuer's ability or
willingness to service its debts in a timely manner. The cost of servicing
external debt will also generally be adversely affected by rising international
interest rates because many external debt obligations bear interest at rates
which are adjusted based upon international interest rates. The ability to
service external debt will also depend on the level of the relevant government's
international currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a government issuer to obtain sufficient
foreign exchange to service its external debt.
As a result of the foregoing, a foreign governmental issuer may default
on its obligations. If such a default occurs, the Fund may have limited
effective legal recourse against the issuer and/or guarantor. Remedies must, in
some cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government and government-related debt obligations in the event of default under
their commercial bank loan agreements.
With respect to forward foreign currency exchange, the precise matching
of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain. See Forward Foreign Currency Exchange Contracts, below.
Forward Foreign Currency Exchange Contracts
As noted above, the foreign investments made by the Fund present
currency considerations which pose special risks. The Manager uses a purchasing
power parity approach to evaluate currency risk. A purchasing power parity
approach attempts to identify the amount of goods and services that a dollar
will buy in the United States and compares that to the amount of a foreign
currency required to buy the same amount of goods and services in another
country. When the dollar buys less abroad, the foreign currency may be
considered to be overvalued. When the dollar buys more abroad, the foreign
currency may be considered to be undervalued. Eventually, currencies should
trade at levels that should make it possible for the dollar to buy the same
amount of goods and services overseas as in the United States.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will,
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<PAGE>
however, from time to time, purchase or sell foreign currencies and/or engage in
forward foreign currency transactions in order to expedite settlement of
transactions and to minimize currency value fluctuations. The Fund may conduct
its foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through entering
into contracts to purchase or sell foreign currencies at a future date (i.e., a
"forward foreign currency" contract or "forward" contract). The Fund will
convert currency on a spot basis from time to time, and investors should be
aware of the costs of currency conversion.
A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract, agreed upon by the parties, at a price set at the time
of the contract.
The Fund may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or other
currencies in which the transaction will be consummated. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
security transaction, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in currency exchange rates during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
For example, when the Manager believes that the currency of a
particular foreign country may suffer a significant decline against the U.S.
dollar or against another currency, the Fund may enter into a forward contract
to sell, for a fixed amount of U.S. dollars or other appropriate currency, the
amount of foreign currency approximating the value of some or all of the Fund's
securities denominated in such foreign currency. The Fund will not enter into
forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Portfolio to deliver an amount
of foreign currency in excess of the value of the Fund's securities or other
assets denominated in that currency.
The Fund may enter into forward contracts to hedge the currency risk
associated with the purchase of individual securities denominated in particular
currencies. In the alternative, the Fund may also engage in currency "cross
hedging" when, in the opinion of the Manager, as appropriate, the historical
relationship among foreign currencies suggests that the Fund may achieve the
same protection for a foreign security at reduced cost and/or administrative
burden through the use of a forward contract relating to a currency other than
the U.S. dollar or the foreign currency in which the security is denominated.
At the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize gain or loss from currency transactions.
With respect to forward foreign currency contracts, the precise
matching of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements
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in the value of those securities between the date the forward contract is
entered into and the date it matures. The projection of short-term currency
strategy is highly uncertain.
It is impossible to forecast the market value of the Fund securities at
the expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of a security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
Futures Contracts and Options on Futures Contracts
In order to remain fully invested, to facilitate investments in equity
securities and to reduce transaction costs, the Fund may, to a limited extent,
enter into futures contracts, purchase or sell options on futures contracts and
engage in certain transactions in options on securities, and may enter into
closing transactions with respect to such activities. The Fund will only enter
into these transactions for hedging purposes if it is consistent with the Fund's
investment objectives and policies and the Fund will not engage in such
transactions to the extent that obligations relating to futures contracts,
options on futures contracts and options on securities (see Futures Contracts
and Options on Futures Contracts --Options on Securities), in the aggregate,
exceed 25% of the Fund's assets.
The Fund may enter into contracts for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incur a
contractual obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month. A purchase
of a futures contract means the acquisition of a contractual right to obtain
delivery to the Fund of the securities called for by the contract at a specified
price during a specified future month. Because futures contracts require only a
small initial margin deposit, the Fund would then be able to keep a cash reserve
applicable to meet potential redemptions while at the same time being
effectively fully invested.
The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options except that options on
futures give the purchaser the right, in return for the premium paid, to assume
a position in a futures contract, rather than actually to purchase or sell the
futures contract, at a specified exercise price at any time during the period of
the option. The Fund will not enter into futures contracts and options thereon
to the extent that more than 5% of its assets are required as futures contract
margin deposits and premiums on options and only to the extent that obligations
under such futures contracts and options thereon would not exceed 20% of the
Fund's total assets. In the case of an option that is in-the-money at the time
of purchase, the in-the-money amount may be excluded in calculating the 5%.
To the extent that interest or exchange rates move in an unexpected
direction, the Fund may not achieve the anticipated benefits of investing in
futures contracts and options thereon, or may realize a loss. To the extent that
the Fund purchases an option on a futures contract and fails to exercise the
option prior to the exercise date, it will suffer a loss of the premium paid.
Further, the possible lack of a secondary market would prevent the Fund from
closing out its positions relating to futures.
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<PAGE>
Options
Options on Securities
The Fund may write covered call options on U.S. securities, purchase
call options on such securities and enter into closing transactions related
thereto. The Fund may also purchase put options on U.S. securities, may write
secured put options on such securities and enter into closing transactions
related thereto.
A covered call option obligates the writer, in return for the premium
received, to sell one of its securities to the purchaser of the option for an
agreed price up to an agreed date. The advantage is that the writer receives
premium income and the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy. The Fund will only purchase call options
to the extent that premiums paid on all outstanding call options do not exceed
2% of the Fund's total assets.
A put option obligates the writer, in return for the premium received,
to buy the security underlying the option at the exercise price during the
option period, and the purchaser of the option has the right to sell the
security to the writer. The Fund will only write put options on a secured basis
which means that the Portfolio will maintain, in a segregated account with its
Custodian Bank, cash or U.S. government securities in an amount not less than
the exercise price of the option at all times during the option period. The Fund
will only purchase put options if the Portfolio owns the security covered by the
put option at the time of purchase and to the extent that the premiums on all
outstanding put options do not exceed 2% of the Fund's total assets. The
advantage is that the writer receives premium income while the purchaser can be
protected should the market value of the security decline.
Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Fund may use both exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will only invest in
such options to the extent consistent with their 15% limit on investments in
illiquid securities.
With respect to writing covered call options, the Portfolios may lose
the potential market appreciation of the securities subject to the option, if
the Manager's judgment is wrong and the price of the security moves in the
opposite direction from what was anticipated. In purchasing put and call
options, the premium paid by the Fund plus any transaction costs will reduce any
benefit realized by the Fund upon exercise of the option. When writing put
options, the Fund may be required, when the put is exercised, to purchase
securities at higher prices than current market prices.
Risks of Transactions in Options, Futures and Forward Contracts
The use of futures contracts, options on futures contracts, forward
contracts and certain options for hedging and other non-speculative purposes as
described above involves certain risks. For example, a lack of correlation
between price changes of an option or futures contract and the assets being
hedged could render the Fund's hedging strategy unsuccessful and could result in
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<PAGE>
losses. The same results could occur if movements of foreign currencies do not
correlate as expected by the investment adviser at a time when the Fund is using
a hedging instrument denominated in one foreign currency to protect the value of
a security denominated in a second foreign currency against changes caused by
fluctuations in the exchange rate for the dollar and the second currency. If the
direction of securities prices, interest rates or foreign currency prices is
incorrectly predicted, the Fund will be in a worse position than if such
transactions had not been entered into. In addition, since there can be no
assurance that a liquid secondary market will exist for any contract purchased
or sold, the Fund may be required to maintain a position (and in the case of
written options may be required to continue to hold the securities used as
cover) until exercise or expiration, which could result in losses. Further,
options and futures contracts on foreign currencies, and forward contracts,
entail particular risks related to conditions affecting the underlying currency.
Over-the-counter transactions in options and forward contracts also involve
risks arising from the lack of an organized exchange trading environment.
Restricted/Illiquid Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933 ("1933 Act"). Rule 144A exempts
many privately placed and legally restricted securities from the registration
requirements of the 1933 Act and permits such securities to be freely traded
among certain institutional buyers such as the Fund.
The Fund may invest no more than 15% of the value of its net assets in
illiquid securities. Illiquid securities, for purposes of this policy, include
repurchase agreements maturing in more than seven days.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Fund's limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 15% limit on investment
in such securities, the investment adviser will determine what action shall be
taken to ensure that the Fund continues to adhere to such limitation.
Convertible, Debt and Non-Traditional Equity Securities
A portion of the Fund's assets may be invested in convertible
securities of issuers in the real estate industry. A convertible security is a
security which may be converted at a stated price within a specified period of
time into a certain quantity of the common stock of the same or a different
issuer. Convertible and debt securities are senior to common stocks in a
corporation's capital structure, although convertible securities are usually
subordinated to similar nonconvertible securities. Convertible and debt
securities provide a fixed-income stream and the opportunity,
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<PAGE>
through its conversion feature, to participate in the capital appreciation
resulting from a market price advance in the convertible security's underlying
common stock. Just as with debt securities, convertible securities tend to
increase in market value when interest rates decline and tend to decrease in
value when interest rates rise. However, the price of a convertible security is
also influenced by the market value of the security's underlying common stock
and tends to increase as the market value of the underlying stock rises, whereas
it tends to decrease as the market value of the underlying stock declines.
Convertible and debt securities acquired by the Fund may be rated below
investment grade, or unrated. These lower rated convertible and debt securities
are subject to credit risk considerations substantially similar to such
considerations affecting high risk, high-yield bonds, commonly referred to as
"junk bonds."
The Fund may invest in convertible preferred stocks that offer enhanced
yield features, such as Preferred Equity Redemption Cumulative Stock ("PERCS"),
which provide an investor, such as the Fund, 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.
The Fund 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.
REITS
The Fund's investment in REITs presents 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
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<PAGE>
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.
Depositary Receipts
The Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs") that are actively traded in the United States. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. "Sponsored"
ADRs are issued jointly by the issuer of the underlying security and a
Depositary, and "unsponsored" ADRs are issued without the participation of the
issuer of the deposited security. Holders of unsponsored ADRs generally bear all
the costs of such facilities and the Depositary of an unsponsored ADR facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR. ADRs may be
listed on a national securities exchange or may be traded in the
over-the-counter market. ADR prices are denominated in U.S. dollars although the
underlying securities are denominated in a foreign currency. Investments in ADRs
involve risks similar to those accompanying direct investments in foreign
securities.
Zero Coupon Securities
The market prices of zero coupon securities are generally more volatile
than the market prices of securities that pay interest periodically and are
likely to respond to changes in interest rates to a greater degree than do
non-zero coupon securities having similar maturities and credit quality. Current
federal income tax law requires that a holder of a taxable zero coupon security
report as income each year the portion of the original issue discount of such
security that accrues that year, even though the holder receives no cash
payments of interest during the year. The Fund intends to qualify as a regulated
investment company under the Code. Accordingly, during periods when the Fund
receives no interest payments on its zero coupon securities, it will be
required, in order to maintain its desired tax treatment, to distribute cash
approximating the income attributable to such securities. Such distribution may
require the sale of portfolio securities to meet the distribution requirements
and such sales may be subject to the risk factor discussed above.
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<PAGE>
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free funds, money market funds, global and
international funds and closed-end equity funds give investors the ability to
create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc. THE REAL ESTATE INVESTMENT
One Commerce Square TRUST PORTFOLIO
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR INSTITUTIONAL CLASS
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103 P R O S P E C T U S
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center ___________, 1997
Brooklyn, NY 11245
DELAWARE
GROUP
<PAGE>
PART B
DELAWARE POOLED TRUST, INC.
STATEMENT OF ADDITIONAL INFORMATION
__________, 1997
-----------------------------------
Delaware Pooled Trust, Inc. ("Fund") is an open-end management investment
company. The Fund consists of 14 series ("Portfolios") offering a broad range of
investment choices. The Fund is designed to provide clients with attractive
alternatives for meeting their investment needs. This Statement of Additional
Information (Part B of the Fund's registration statement) addresses information
of the Fund applicable to each of the 14 Portfolios.
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the related Prospectus of the Fund for each Portfolio.
To obtain a Prospectus, please write to the Delaware Pooled Trust, Inc. at One
Commerce Square, 2005 Market Street, Philadelphia, PA 19103, Attn: Client
Services or call the Fund at 1-800-231-8002.
TABLE OF CONTENTS
Page
----
Investment Policies, Portfolio Techniques and Risk Considerations
Accounting and Tax Issues
Performance Information
Trading Practices and Brokerage
Purchasing Shares
Determining Net Asset Value
Redemption and Repurchase
Dividends and Capital Gain Distributions
Taxes
Investment Management Agreements
Officers and Directors
General Information
Financial Statements
<PAGE>
(SAI-DPT/PART B)
INVESTMENT POLICIES, PORTFOLIO TECHNIQUES AND RISK CONSIDERATIONS
Investment Restrictions
The Fund has adopted the following restrictions for each of the Portfolios
(except where otherwise noted) which, along with its respective investment
objective, cannot be changed without approval by the holders of a "majority" of
the respective Portfolio's 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 Portfolio
purchases securities.
Each Portfolio (other than The Emerging Markets Portfolio and The Global
Equity Portfolio) shall not:
1. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with a Portfolio's investment
objective and policies, are considered loans, and except that each Portfolio may
loan up to 25% of its respective assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
2. Purchase or sell real estate or real estate limited partnerships, but
this shall not otherwise prevent a Portfolio from investing in securities
secured by real estate or interests therein, and except that The Real Estate
Investment Trust Portfolio and The Real Estate Investment Trust Portfolio II
(collectively, "The Real Estate Investment Trust Portfolios") may each own real
estate directly as a result of a default on securities the Portfolio owns.
3. Engage in the underwriting of securities of other issuers, except that in
connection with the disposition of a security, a Portfolio may be deemed to be
an "underwriter" as that term is defined in the Securities Act of 1933.
4. Make any investment which would cause more than 25% of the market or
other fair value of its respective total assets to be invested in the securities
of issuers all of which conduct their principal business activities in the same
industry, except that each of The Real Estate Investment Trust Portfolios shall
invest in excess of 25% of its total assets in the securities of issuers in the
real estate industry. This restriction does not apply to obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
5. Purchase or sell commodities or commodity contracts, except that The
Aggressive Growth Portfolio, The Real Estate Investment Trust Portfolios and The
International Fixed Income Portfolio may enter into futures contracts and may
purchase and sell options on futures contracts in accordance with the related
Prospectus, subject to investment restriction 6 below.
2
<PAGE>
(SAI-DPT/PART B)
6. Enter into futures contracts or options thereon, except that The
Aggressive Growth Portfolio, The Real Estate Investment Trust Portfolios and The
International Fixed Income Portfolio may each enter into futures contracts and
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 its total assets.
7. Make short sales of securities, or purchase securities on margin, except
that The Aggressive Growth Portfolio, The Real Estate Investment Trust
Portfolios and The International Fixed Income Portfolio may satisfy margin
requirements with respect to futures transactions.
8. Purchase or retain the securities of any issuer which has an officer,
director or security holder who is a director or officer of the Fund or of
either of the investment advisers if or so long as the directors and officers of
the Fund and of the investment advisers together own beneficially more than 5%
of any class of securities of such issuer.
9. Invest in interests in oil, gas and other mineral leases or other mineral
exploration or development programs.
10. Borrow money, except as a temporary measure for extraordinary purposes
or to facilitate redemptions. Any borrowing will be done from a bank and to the
extent that such borrowing exceeds 5% of the value of its respective net assets,
asset coverage of at least 300% is required. In the event that such asset
coverage shall at any time fall below 300%, a Portfolio shall, within three days
thereafter (not including Sunday or holidays) or such longer period as the
Securities and Exchange Commission ("Commission") may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. No investment
securities will be purchased while a Portfolio has an outstanding borrowing. A
Portfolio will not pledge more than 10% of its respective net assets. A
Portfolio will not issue senior securities as defined in the Investment Company
Act of 1940 (the "1940 Act"), except for notes to banks.
In addition to the restrictions set forth above, in connection with the
qualification of a Portfolio's shares for sale in certain states, a Portfolio
may not invest in warrants if such warrants, valued at the lower of cost or
market, would exceed 5% of the value of a Portfolio's net assets. Included
within such amount, but not to exceed 2% of a Portfolio's net assets may be
warrants which are not listed on the New York Stock Exchange or American Stock
Exchange. Warrants acquired by a Portfolio in units or attached to securities
may be deemed to be without value.
Additional Fundamental Investment Restrictions
The following additional investment restrictions apply to each of the
Portfolios, except The Defensive Equity Small/Mid-Cap Portfolio, The Labor
Select International Equity Portfolio, The Real Estate Investment Trust
Portfolios, The International Fixed Income Portfolio, The High-Yield Bond
Portfolio and The Emerging Markets Portfolio, or as otherwise noted. They cannot
be
3
<PAGE>
(SAI-DPT/PART B)
changed without approval by the holders of a "majority" of the respective
Portfolio's outstanding shares, as described above.
Each Portfolio shall not:
1. As to 75% of its respective total assets, invest more than 5% of its
respective total assets in the securities of any one issuer (other than
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities). This restriction shall also apply to The Defensive Equity
Small/Mid-Cap Portfolio, The Labor Select International Equity Portfolio and The
High-Yield Bond Portfolio. This restriction shall apply to only 50% of the total
assets of The Global Fixed Income Portfolio.
2. Invest in securities of other investment companies, except by purchase in
the open market involving only customary brokers' commissions or in connection
with a merger, consolidation or other acquisition or as may otherwise be
permitted by the 1940 Act.
3. Purchase more than 10% of the outstanding voting securities of any
issuer, or invest in companies for the purpose of exercising control or
management.
4. Write, purchase or sell options, puts, calls or combinations thereof with
respect to securities, except that The Aggressive Growth Portfolio may: (a)
write covered call options with respect to any or all parts of its portfolio
securities; (b) purchase call options to the extent that the premiums paid on
all outstanding call options do not exceed 2% of the Portfolio's total assets;
(c) write secured put options; and (d) purchase put options, if the Portfolio
owns the security covered by the put option at the time of purchase, and
provided that premiums paid on all put options outstanding do not exceed 2% of
its total assets. The Portfolio may sell call or put options previously
purchased and enter into closing transactions with respect to the activities
noted above.
5. Invest more than 5% of the value of its respective 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.
6. Invest more than 10% of its respective total assets in repurchase
agreements maturing in more than seven days and other illiquid assets.
For purposes of investment restriction 6, it is the Fund's policy,
changeable without shareholder vote, that "illiquid assets" include securities
of foreign issuers which are not listed on a recognized U.S. or foreign exchange
and for which a bona fide market does not exist at the time of purchase or
subsequent valuation.
4
<PAGE>
(SAI-DPT/PART B)
The Defensive Equity Small/Mid-Cap Portfolio, The Labor Select International
Equity Portfolio, The Real Estate Investment Trust Portfolios, The International
Fixed Income Portfolio and The High-Yield Bond Portfolio
The following additional investment restrictions apply to The Defensive
Equity Small/Mid-Cap Portfolio, The Labor Select International Equity Portfolio,
The Real Estate Investment Trust Portfolios, The International Fixed Income
Portfolio and The High-Yield Bond Portfolio. Unlike the investment restrictions
listed above, these are non-fundamental investment restrictions and may be
changed by the Fund's Board of Directors without shareholder approval.
Except as noted below, each of The Defensive Equity Small/Mid-Cap Portfolio,
The Labor Select International Equity Portfolio, The Real Estate Investment
Trust Portfolios, The International Fixed Income Portfolio and The High-Yield
Bond Portfolio shall not:
1. As to 50% of the respective total assets of The Real Estate Investment
Trust Portfolios and The International Fixed Income Portfolio, invest more than
5% of its respective total assets in the securities of any one issuer (other
than obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities).
2. Invest in securities of other investment companies, except by purchase in
the open market involving only customary brokers' commissions or in connection
with a merger, consolidation or other acquisition or as may otherwise be
permitted by the 1940 Act.
3. Invest more than 5% of the value of its respective total assets in
securities of companies less than three years old. Such three-year old period
shall include the operation of any predecessor company or companies. This
restriction shall not apply to The Real Estate Investment Trust Portfolios and
their investments in the securities of real estate investment trusts.
4. Purchase more than 10% of the outstanding voting securities of any
issuer, or invest in companies for the purpose of exercising control or
management.
5. Write, purchase or sell options, puts, calls or combinations thereof with
respect to securities, except that each of The Real Estate Investment Trust
Portfolios may: (a) write covered call options with respect to any or all parts
of its portfolio securities; (b) purchase call options to the extent that the
premiums paid on all outstanding call options do not exceed 2% of the
Portfolio's total assets; (c) write secured put options; and (d) purchase put
options, if the Portfolio owns the security covered by the put option at the
time of purchase, and provided that premiums paid on all put options outstanding
do not exceed 2% of its total assets. Each Portfolio may sell call or put
options previously purchased and enter into closing transactions with respect to
the activities noted above.
6. Invest more than 15% of its respective total assets, determined at the
time of purchase, in repurchase agreements maturing in more than seven days and
other illiquid assets.
5
<PAGE>
(SAI-DPT/PART B)
For purposes of investment restriction 6, it is the Fund's policy that
"illiquid assets" include securities of foreign issuers which are not listed on
a recognized U.S. or foreign exchange and for which no bona fide market exists
at the time of purchase.
The Emerging Markets Portfolio
The Fund has adopted the following restrictions for The Emerging Markets
Portfolio which, along with its investment objective, cannot be changed without
approval by a "majority" of the Portfolio's outstanding shares, as described
above. The percentage limitations contained in these restrictions and policies
apply at the time the Portfolio purchases securities.
The Emerging Markets Portfolio shall not:
1. 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.
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), whether or not the purchase was
made upon the original issuance of the securities, and except that the Portfolio
may loan its assets to qualified broker/dealers or institutional investors.
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 Portfolio might be deemed to
be an underwriter under the Securities Act of 1933. No limit is placed on the
proportion of the Portfolio's 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 Portfolio 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 options or futures contracts in a contract market
or other futures market.
6. Purchase or sell real estate; provided that the Portfolio may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
The Global Equity Portfolio
The Fund has adopted the following restrictions for The Global Equity
Portfolio which along with its investment objective, cannot be changed without
approval by a "majority" of its Portfolio's outstanding shares, as described
above. The percentage limitations contained in these restrictions and policies
apply at the time the Portfolio purchases securities.
6
<PAGE>
(SAI-DPT/PART B)
The Global Equity Portfolio shall not:
1. As to 75% of its total assets, invest more than 5% of its total assets in
the securities of any one issuer (other than obligations issued, or guaranteed
by, the U.S. government, its agencies or instrumentalities).
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 the Portfolio
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 Portfolio might be deemed to
be an underwriter under the Securities Act of 1933. No limit is placed on the
proportion of the Portfolio's assets which may be invested in such securities.
5. Borrow money or issue senior securities, except tot the extent permitted
by the 1940 Act or any rule or order thereunder or interpretation thereof.
Subject to the foregoing, the Portfolio 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 options or futures contracts in a contract market
or other futures market.
7. Purchase or sell real estate; provided that the Portfolio may invest in
securities secured by real estate or interest therein or issued by companies
which invest in real estate or interests therein.
Foreign Investment Information (The International Equity Portfolio, The Labor
Select International Equity Portfolio, The Real Estate Investment Trust
Portfolios, The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The High-Yield Bond Portfolio, The Emerging Markets Portfolio and The
Global Equity Portfolio)
Investors in The International Equity Portfolio, The Labor Select
International Equity Portfolio, The Global Fixed Income Portfolio, The
International Fixed Income Portfolio, The Emerging Markets Portfolio and The
Global Equity Portfolio (as well as in The Real Estate Investment Trust
Portfolios and The High-Yield Bond Portfolio, each of which possesses a limited
ability to invest in foreign securities) should recognize that investing in
securities issued by foreign corporations and foreign governments involves
certain considerations, including those set forth in the related Prospectus,
which are not typically associated with investments in United States issuers.
Since the securities of foreign issuers are frequently denominated in foreign
currencies, and since each
7
<PAGE>
(SAI-DPT/PART B)
Portfolio may temporarily hold uninvested reserves in bank deposits in foreign
currencies, these Portfolios 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 each Portfolio, except The High-Yield Bond Portfolio, permit each to
enter into forward foreign currency exchange contracts and permit The
International Fixed Income Portfolio, The Emerging Markets Portfolio and The
Global Equity Portfolio to engage in certain options and futures activities, in
order to hedge holdings and commitments against changes in the level of future
currency rates. See "FOREIGN CURRENCY TRANSACTIONS (THE INTERNATIONAL EQUITY
PORTFOLIO, THE LABOR SELECT INTERNATIONAL EQUITY PORTFOLIO, THE REAL ESTATE
INVESTMENT TRUST PORTFOLIOS, THE GLOBAL FIXED INCOME PORTFOLIO, THE
INTERNATIONAL FIXED INCOME PORTFOLIO, THE EMERGING MARKETS PORTFOLIO AND THE
GLOBAL EQUITY PORTFOLIO)," below.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Portfolios.
Payment of such interest equalization tax, if imposed, would reduce a
Portfolio's 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 a Portfolio by
United States issuers. Special rules govern the federal income tax treatment of
certain transactions denominated in terms of a currency other than the U.S.
dollar or determined by reference to the value of one or more currencies other
than the U.S. dollar. The types of transactions covered by the special rules
include, as relevant, the following: (i) the acquisition of, or becoming the
obligor under, a bond or other debt instrument (including, to the extent
provided in Treasury Regulations, preferred stock); (ii) the accruing of certain
trade receivables and payables; and (iii) the entering into or acquisition of
any forward contract and similar financial instrument if such instrument is not
"marked to market." The disposition of a currency other than the U.S. dollar by
a U.S. taxpayer is also treated as a transaction subject to the special currency
rules. With respect to transactions covered by the special rules, foreign
currency gain or loss is calculated separately from any gain or loss on the
underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts that are capital assets
in the hands of the taxpayer and which are not part of a straddle. The Treasury
Department has authority to issue regulations under which certain transactions
subject to the special currency rules that are part of a "section 988 hedging
transaction" (as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), and the Treasury Regulations) will be integrated and treated as a
single transaction or otherwise treated consistently for purposes of the Code.
Any gain or loss attributable to the foreign currency component of a transaction
engaged in by a Portfolio which is not subject to the special currency rules
(such as foreign equity investments other than certain preferred stocks) will be
treated as capital gain or loss and will not be segregated from the gain or loss
on the underlying transaction. It is anticipated that some of the non-U.S.
dollar denominated investments and foreign currency contracts the Portfolios may
make or enter into will be subject to the special currency rules described
above.
8
<PAGE>
(SAI-DPT/PART B)
Foreign Currency Transactions (The International Equity Portfolio, The Labor
Select International Equity Portfolio, The Real Estate Investment Trust
Portfolios, The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The Emerging Markets Portfolio and The Global Equity Portfolio)
The International Equity Portfolio, The Labor Select International Equity
Portfolio, The Global Fixed Income Portfolio, The International Fixed Income
Portfolio, The Emerging Markets Portfolio and The Global Equity Portfolio (as
well as The Real Estate Investment Trust Portfolios, consistent with their
limited ability to invest in foreign securities) may purchase or sell currencies
and/or engage in forward foreign currency transactions in order to expedite
settlement of portfolio transactions and to minimize currency value
fluctuations.
Forward foreign currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A Portfolio will account for
forward contracts by marking to market each day at daily exchange rates.
When a Portfolio enters into a forward contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of its assets denominated in such foreign
currency, its Custodian Bank will place or will cause to be placed cash or
liquid equity or debt securities in a separate account of that Portfolio in an
amount not less than the value of that Portfolio's 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 that Portfolio's commitments with respect to such contracts.
As noted in the related Prospectus, The International Fixed Income
Portfolio, The Emerging Markets Portfolio and The Global Equity Portfolio may
also enter into transactions involving foreign currency options, futures
contracts and options on futures contracts, in order to minimize the currency
risk in its investment portfolio.
Foreign currency options are traded in a manner substantially similar to
options on securities. In particular, an option on foreign currency provides the
holder with the right to purchase, in the case of a call option, or to sell, in
the case of a put option, a stated quantity of a particular currency for a fixed
price up to a stated expiration date. The writer of the option undertakes the
obligation to deliver, in the case of a call option, or to purchase, in the case
of a put option, the quantity of the currency called for in the option, upon
exercise of the option by the holder.
As in the case of other types of options, the holder of an option on foreign
currency is required to pay a one-time, non-refundable premium, which represents
the cost of purchasing the option. The holder can lose the entire amount of this
premium, as well as related transaction costs, but not more than this amount.
The writer of the option, in contrast, generally is required to make initial and
variation margin payments, similar to margin deposits required in the trading of
futures contacts and the writing of other types of options. The writer is
therefore subject to risk of loss
9
<PAGE>
(SAI-DPT/PART B)
beyond the amount originally invested and above the value of the option at the
time it is entered into.
Certain options on foreign currencies, like forward contracts, are traded
over-the-counter through financial institutions acting as market-makers in such
options and the underlying currencies. Such transactions therefore involve risks
not generally associated with exchange-traded instruments. Options on foreign
currencies may also be traded on national securities exchanges regulated by the
Commission or commodities exchanges regulated by the Commodity Futures Trading
Commission.
A foreign currency futures contract is a bilateral agreement providing for
the purchase and sale of a specified type and amount of a foreign currency. By
its terms, a futures contract provides for a specified settlement date on which,
in the case of the majority of foreign currency futures contracts, the currency
underlying the contract is delivered by the seller and paid for by the
purchaser, or on which, in the case of certain futures contracts, the difference
between the price at which the contract was entered into and the contract's
closing value is settled between the purchaser and seller in cash. Futures
contracts differ from options in that they are bilateral agreements, with both
the purchaser and the seller equally obligated to complete the transactions. In
addition, futures contracts call for settlement only on the expiration date, and
cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin" as a good faith deposit. Subsequent payments
to and from the broker referred to as "variation margin" are made on a daily
basis as the value of the currency underlying the futures contract fluctuates,
making positions in the futures contract more or less valuable, a process known
as "marking to the market."
A futures contract may be purchased or sold only on an exchange, known as a
"contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearinghouse
guarantees the performance of each party to a futures contract by in effect
taking the opposite side of such contract. At any time prior to the expiration
of a futures contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
A call option on a futures contract provides the holder with the right to
purchase, or enter into a "long" position in, the underlying futures contract. A
put option on a futures contract provides the holder with the right to sell, or
enter into a "short" position, in the underlying futures contract. In
10
<PAGE>
(SAI-DPT/PART B)
both cases, the option provides for a fixed exercise price up to a stated
expiration date. Upon exercise of the option by the holder, the contract market
clearinghouse establishes a corresponding short position for the writer of the
option, in the case of a call option, or a corresponding long position in the
case of a put option and the writer delivers to the holder the accumulated
balance in the writer's margin account which represents the amount by which the
market price of the futures contract at exercise exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. In the event that an option written by the Portfolio is
exercised, the Portfolio will be subject to all the risks associated with the
trading of futures contracts, such as payment of variation margin deposits. In
addition, the writer of an option on a futures contract, unlike the holder, is
subject to initial and variation margin requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option becomes worthless to the holder when it expires. Upon exercise of
an option, the exchange or contract market clearinghouse assigns exercise
notices on a random basis to those of its members which have written options of
the same series and with the same expiration date. A brokerage firm receiving
such notices then assigns them on a random basis to those of its customers which
have written options of the same series and expiration date. A writer therefore
has no control over whether an option will be exercised against it, nor over the
timing of such exercise.
Brady Bonds (The Global Fixed Income Portfolio, The International Fixed Income
Portfolio and The Emerging Markets Portfolio)
The Global Fixed Income Portfolio, The International Fixed Income Portfolio
and The Emerging Markets Portfolio may invest, within the limits specified in
the related Prospectus, in Brady Bonds and other sovereign debt securities of
countries that have restructured or are in the process of restructuring
sovereign debt pursuant to the Brady Plan. Brady Bonds are debt securities
issued under the framework of the Brady Plan, an initiative announced by then
U.S. Treasury Secretary Nicholas F. Brady in 1989, as a mechanism for debtor
nations to restructure their outstanding external indebtedness (generally,
commercial bank debt). In restructuring its external debt under the Brady Plan
framework, a debtor nation negotiates with its existing bank lenders as well as
multilateral institutions such as the World Bank and the International Monetary
Fund (the "IMF"). The Brady Plan framework, as it has developed, contemplates
the exchange of commercial bank debt for newly issued bonds (Brady Bonds). The
World Bank and/or the IMF support the restructuring by providing funds pursuant
to loan agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount. Under these arrangements with the World Bank and/or the IMF, debtor
nations have been required to agree to the implementation of certain domestic
monetary and fiscal
11
<PAGE>
(SAI-DPT/PART B)
reforms. Such reforms have included the liberalization of trade and foreign
investment, the privatization of state-owned enterprises and the setting of
targets for public spending and borrowing. These policies and programs seek to
promote the debtor country's ability to service its external obligations and
promote its economic growth and development. Investors should recognize that the
Brady Plan only sets forth general guiding principles for economic reform and
debt reduction, emphasizing that solutions must be negotiated on a case-by-case
basis between debtor nations and their creditors. The investment adviser to the
Portfolios believes that economic reforms undertaken by countries in connection
with the issuance of Brady Bonds make the debt of countries which have issued or
have announced plans to issue Brady Bonds an attractive opportunity for
investment.
To date, Mexico, Costa Rica, Venezuela, Uruguay and Nigeria have issued
approximately $50 billion of Brady Bonds, and Argentina, Brazil and the
Philippines have announced plans to issue approximately $90 billion, based on
current estimates, of Brady Bonds. Investors should recognize that Brady Bonds
have been issued only recently, and accordingly do not have a long payment
history. Agreements implemented under the Brady Plan to date are designed to
achieve debt and debt-service reduction through specific options negotiated by a
debtor nation with its creditors. As a result, the financial packages offered by
each country differ. The types of options have included the exchange of
outstanding commercial bank debt for bonds issued at 100% of face value of such
debt, bonds issued at a discount of face value of such debt, bonds bearing an
interest rate which increases over time and bonds issued in exchange for the
advancement of new money by existing lenders. Certain Brady Bonds have been
collateralized as to principal due at maturity by U.S. Treasury zero coupon
bonds with a maturity equal to the final maturity of such Brady Bonds, although
the collateral is not available to investors until the final maturity of the
Brady Bonds. Collateral purchases are financed by the IMF, the World Bank and
the debtor nations' reserves. In addition, the first two or three interest
payments on certain types of Brady Bonds may be collateralized by cash or
securities agreed upon by creditors.
Options on Securities, Futures Contracts and Options on Futures Contracts (The
Aggressive Growth Portfolio, The Real Estate Investment Trust Portfolios, The
Emerging Markets Portfolio and The Global Equity Portfolio)
In order to remain fully invested, and to reduce transaction costs, The
Aggressive Growth Portfolio, The Real Estate Investment Trust Portfolios, The
Emerging Markets Portfolio and The Global Equity Portfolio may, to the limited
extent identified in the related Prospectus, use futures contracts, options on
futures contracts and options on securities and may enter into closing
transactions with respect to such activities. The Portfolios may only enter into
these transactions for hedging purposes, if it is consistent with the
Portfolios' investment objectives and policies. The Portfolios will not engage
in such transactions to the extent that obligations resulting from these
activities in the aggregate exceed 25% of the Portfolios' assets.
12
<PAGE>
(SAI-DPT/PART B)
Options
The Aggressive Growth Portfolio, The Real Estate Investment Trust
Portfolios, The Emerging Markets Portfolio and The Global Equity Portfolio may
purchase call options, write call options on a covered basis, write secured put
options, which put options for The Aggressive Growth Portfolio and The Real
Estate Investment Portfolios will be on a covered basis only.
The Portfolios may invest in options that are either exchange-listed or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close options positions and this may have an adverse
impact on the Portfolios' ability to effectively hedge their securities. The
Aggressive Growth Portfolio will not invest more than 10% of its assets in
illiquid securities, and The Real Estate Investment Trust Portfolios, The
Emerging Markets Portfolio and The Global Equity Portfolio will not invest more
than 15% of their respective assets in illiquid securities.
A. Covered Call Writing--The Portfolios may write covered call options from
time to time on such portion of their securities as the investment adviser
determines is appropriate given the limited circumstances under which the
Portfolios intend to engage in this activity. A call option gives the purchaser
of such option the right to buy and the writer (in this case a Portfolio) the
obligation to sell the underlying security at the exercise price during the
option period. If the security rises in value, however, the Portfolio may not
fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to options on actual portfolio securities owned by the
Portfolios, a Portfolio may enter into closing purchase transactions. A closing
purchase transaction is one in which the Portfolio, when obligated as a writer
of an option, terminates its obligation by purchasing an option of the same
series as the option previously written.
Consistent with the limited purposes for which the Portfolios intend to
engage in the writing of covered calls, closing purchase transactions will
ordinarily be effected to realize a profit on an outstanding call option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to enable the Portfolios to write another call option on
the underlying security with either a different exercise price or expiration
date or both.
The Portfolios 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
13
<PAGE>
(SAI-DPT/PART B)
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, a Portfolio 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,
a Portfolio will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security, and the
proceeds of the sale of the security plus the amount of the premium on the
option, less the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
The Portfolios will write call options only on a covered basis, which means
that the Portfolios 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 Portfolios would be required to continue to hold a security which
they might otherwise wish to sell, or deliver a security it would want to hold.
Options written by the Portfolios will normally have expiration dates between
one and nine months from the date written. The exercise price of a call option
may be below, equal to, or above the current market value of the underlying
security at the time the option is written.
B. Purchasing Call Options--The Portfolios may purchase call options to the
extent that premiums paid by the Portfolios do not aggregate more than 2% of
their total assets. When a Portfolio purchases a call option, in return for a
premium paid by the Portfolio to the writer of the option, the Portfolio 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
Portfolios may alter portfolio characteristics and modify portfolio maturities
without incurring the cost associated with portfolio transactions.
The Portfolios may, following the purchase of a call option, liquidate their
positions by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Portfolios 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 Portfolios 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 Portfolios 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
14
<PAGE>
(SAI-DPT/PART B)
closing transactions in particular options, with the result that the Portfolios
would have to exercise their 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 a Portfolio may expire without
any value to the Portfolio.
C. Purchasing Put Options--The Portfolios may purchase put options to the
extent premiums paid by the Portfolios do not aggregate more than 2% of their
total assets. The Aggressive Growth and The Real Estate Investment Trust
Portfolios will, at all times during which they hold a put option, own the
security covered by such option.
A put option purchased by the Portfolios gives them the right to sell one of
their securities for an agreed price up to an agreed date. Consistent with the
limited purposes for which the Portfolios intend to purchase put options, the
Portfolios intend to purchase put options in order to protect against a decline
in the market value of the underlying security below the exercise price less the
premium paid for the option ("protective puts"). The ability to purchase put
options will allow a Portfolio to protect unrealized gain in an appreciated
security in its portfolio without actually selling the security. If the security
does not drop in value, the Portfolio will lose the value of the premium paid.
The Portfolio 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 Portfolios may sell a put option purchased on individual portfolio
securities. Additionally, the Portfolios may enter into closing sale
transactions. A closing sale transaction is one in which a Portfolio, when it is
the holder of an outstanding option, liquidates its position by selling an
option of the same series as the option previously purchased.
D. Writing Put Options--A put option written by a Portfolio obligates it to
buy the security underlying the option at the exercise price during the option
period and the purchaser of the option has the right to sell the security to the
Portfolio. During the option period, the Portfolio, as writer of the put option,
may be assigned an exercise notice by the broker/dealer through whom the option
was sold requiring the Portfolio to make payment of the exercise price against
delivery of the underlying security. The obligation terminates upon expiration
of the put option or at such earlier time at which the writer effects a closing
purchase transaction. A Portfolio may write put options on a secured basis which
means that the Portfolio will maintain in a segregated account with its
Custodian Bank, cash or U.S. government securities in an amount not less than
the exercise price of the option at all times during the option period. The
amount of cash or U.S. government securities held in the segregated account will
be adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Portfolios. Consistent with
the limited purposes for which the Portfolios intend to engage in the writing of
put options, secured put options will generally be written in circumstances
where the investment adviser wishes to purchase the underlying security for the
Portfolios at a price lower than the current market price of the security. In
such event, a Portfolio would write a secured put option at
15
<PAGE>
(SAI-DPT/PART B)
an exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay.
Following the writing of a put option, the Portfolios may wish to terminate
the obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Portfolios may not, however, effect
such a closing transaction after they have been notified of the exercise of the
option.
Options on Stock Indices
The Emerging Markets Portfolio and The Global Equity Portfolio may acquire
option on stock indices. A stock index assigns relative values to the common
stocks included in the index with the index fluctuating with changes in the
market values of the underlying common stock.
Options on stock indices are similar to options on stocks but have different
delivery requirements. Stock options provide the right to take or make delivery
of the underlying stock at a specified price. A stock index option gives the
holder the right to receive a cash "exercise settlement amount" equal to (i) the
amount by which the fixed exercise price of the option exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
index on the date of exercise, multiplied by (ii) a fixed "index multiplier."
Receipt of this cash amount will depend upon the closing level of the stock
index upon which the option is based being greater than (in the case of a call)
or less than (in the case of a put) the exercise price of the option. The amount
of cash received will be equal to such difference between the closing price of
the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received to make delivery of this amount. Gain or loss to a Portfolio 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, a
Portfolio may offset its position in stock index options prior to expiration by
entering into a closing transaction on an Exchange or it 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 domestic exchanges such as: The Chicago Board Options Exchange, the
New York Stock Exchange and American Stock Exchange as well as on foreign
exchanges.
A Portfolio's 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 Portfolio's securities. Since a Portfolio
will not duplicate the components of an index, the correlation will not be
exact. Consequently, a Portfolio bears 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
16
<PAGE>
(SAI-DPT/PART B)
a negative correlation between the index or other 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 a Portfolio's ability effectively to hedge its
securities. A Portfolio will enter into an option position only if there appears
to be a liquid secondary market for such options.
A Portfolio will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained and to take
advantage of the liquidity available in the option markets.
Futures and Options on Futures
Consistent with the limited circumstances under which The Aggressive Growth
Portfolio, The Real Estate Investment Trust Portfolios, The Emerging Markets
Portfolio and The Global Equity Portfolio will use futures, the Portfolios may
enter into contracts for the purchase or sale for future delivery of securities.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into an
offsetting transaction. When a Portfolio enters into a futures transaction, it
must deliver to the futures commission merchant selected by the Portfolio an
amount referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Portfolio's Custodian Bank. Thereafter,
a "variation margin" may be paid by the Portfolio to, or drawn by the Portfolio
from, such account in accordance with controls set for such account, depending
upon changes in the price of the underlying securities subject to the futures
contract.
Consistent with the limited purposes for which the Portfolios may engage in
these transactions, a Portfolio may enter into such futures contracts to protect
against the adverse effects of fluctuations in interest rates without actually
buying or selling the securities. For example, if interest rates are expected to
increase, a Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the futures contracts to the Portfolio would increase at
approximately the same rate, thereby keeping the net asset value of the
Portfolio from declining as much as it otherwise would have. Similarly, when it
is expected that interest rates may decline, futures contracts may be purchased
to hedge in anticipation of subsequent purchases of securities at higher prices.
Because the fluctuations in the value of futures contracts should be similar to
those of debt securities, a Portfolio could take advantage of the anticipated
rise in value of debt securities without actually buying them until the market
had stabilized. At that time, the futures contracts could be liquidated and the
Portfolio could then buy debt securities on the cash market.
17
<PAGE>
(SAI-DPT/PART B)
With respect to options on futures contracts, when a Portfolio is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based, or the price of
the underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a partial
hedge against the declining price of the security which is deliverable upon
exercise of the futures contract. If the futures price at the expiration of the
option is below the exercise price, the Portfolio will retain the full amount of
the option premium which provides a partial hedge against any decline that may
have occurred in the Portfolio's holdings. The writing of a put option on a
futures contract constitutes a partial hedge against the increasing price of the
security which is deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is higher than the exercise price,
the Portfolio will retain the full amount of option premium which provides a
partial hedge against any increase in the price of securities which the
Portfolio intends to purchase.
If a put or call option that a Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions, a
Portfolio's losses from existing options on futures may, to some extent, be
reduced or increased by changes in the value of portfolio securities. The
purchase of a put option on a futures contract is similar in some respects to
the purchase of protective puts on portfolio securities. For example, consistent
with the limited purposes for which the Portfolios will engage in these
activities, a Portfolio will purchase a put option on a futures contract to
hedge the Portfolio's securities against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Portfolios may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if a Portfolio
is hedged against the possibility of an increase in interest rates which would
adversely affect the price of securities held in its portfolio and interest
rates decrease instead, the Portfolio will lose part or all of the benefit of
the increased value of its securities which it has because it will have
offsetting losses in its futures position. In addition, in such situations, if
the Portfolio had insufficient cash, it may be required to sell securities from
its portfolio to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the rising market. The Portfolios may be required to sell securities at a time
when it may be disadvantageous to do so.
18
<PAGE>
(SAI-DPT/PART B)
Further, with respect to options on futures contracts, the Portfolios may
seek to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
* * *
From time to time, the Portfolios may also, as noted below, engage in the
following investment techniques:
Asset-Backed Securities (The Fixed Income Portfolio and The Limited-Term
Maturity Portfolio)
The Fixed Income and The Limited-Term Maturity Portfolios may invest a
portion of their assets in asset-backed securities. The rate of principal
payment on asset-backed securities generally depends on the rate of principal
payments received on the underlying assets. Such rate of payments may be
affected by economic and various other factors such as changes in interest rates
or the concentration of collateral in a particular geographic area. Therefore,
the yield may be difficult to predict and actual yield to maturity may be more
or less than the anticipated yield to maturity. The credit quality of most
asset-backed securities depends primarily on the credit quality of the assets
underlying such securities, how well the entities issuing the securities are
insulated from the credit risk of the originator or affiliated entities, and the
amount of credit support provided to the securities.
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on underlying assets to make payments, such securities may
contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection, and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Portfolios will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over collateralization"
19
<PAGE>
(SAI-DPT/PART B)
(where the scheduled payments on, or the principal amount of, the underlying
assets exceeds that required to make payments of the securities and pay any
servicing or other fees). The degree of credit support provided for each issue
is generally based on historical information respecting the level of credit risk
associated with the underlying assets. Delinquencies or losses in excess of
those anticipated could adversely affect the return on an investment in such
issue.
Repurchase Agreements
While each Portfolio is permitted to do so, it normally does not invest in
repurchase agreements, except to invest cash balances or for temporary defensive
purposes.
The funds in the Delaware Group, including the Fund, have obtained an
exemption from the joint-transaction prohibitions of Section 17(d) of the 1940
Act to allow the Delaware Group funds jointly to invest cash balances. Each
Portfolio may invest cash balances in a joint repurchase agreement in accordance
with the terms of the Order and subject generally to the conditions described
below.
A repurchase agreement is a short-term investment by which the purchaser
acquires ownership of a debt security and the seller agrees to repurchase the
obligation at a future time and set price, thereby determining the yield during
the purchaser's holding period. Should an issuer of a repurchase agreement fail
to repurchase the underlying security, the loss to a Portfolio, if any, would be
the difference between the repurchase price and the market value of the
security. Each Portfolio will limit its investments in repurchase agreements to
those which its respective investment adviser, under the guidelines of the Board
of Directors, determines to present minimal credit risks and which are of high
quality. In addition, a Portfolio must have collateral of at least 100% of the
repurchase price, including the portion representing the Portfolio's yield under
such agreements which is monitored on a daily basis.
Portfolio Loan Transactions
Each Portfolio may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Fund that the staff of the Commission permits
portfolio lending by registered investment companies if certain conditions are
met. These conditions are as follows: 1) each transaction must have 100%
collateral in the form of cash, short-term U.S. government securities, or
irrevocable letters of credit payable by banks acceptable to the Fund from the
borrower; 2) this collateral must be valued daily and should the market value of
the loaned securities increase, the borrower must furnish additional collateral
to a Portfolio; 3) a Portfolio must be able to terminate the loan after notice,
at any time; 4) a Portfolio 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) a Portfolio may pay
reasonable custodian fees in connection with the loan; and 6) the voting rights
on the lent securities may pass to the borrower; however, if the Board of
Directors of the Fund know that a material event will occur affecting an
investment loan, they must either terminate the loan in order to vote the proxy
or enter into an alternative arrangement with the borrower to enable the
directors to vote the proxy.
20
<PAGE>
(SAI-DPT/PART B)
The major risk to which a Portfolio 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 Portfolio will only enter into loan arrangements
after a review of all pertinent facts by the respective investment adviser,
under the supervision of the Board of Directors, including the creditworthiness
of the borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the respective
investment adviser.
Rule 144A Securities
Each Portfolio may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A Securities are traded
among qualified institutional investors. While maintaining oversight, the Board
of Directors has delegated to the respective investment adviser the day-to-day
function of determining whether or not individual Rule 144A Securities are
liquid for purposes of each Portfolio's limitation (whether 15% or 10% of total
assets) on investments in illiquid assets. The Board has instructed the
respective investment adviser to consider the following factors in determining
the liquidity of a Rule 144A Security: (i) the frequency of trades and trading
volume for the security; (ii) whether at least three dealers are willing to
purchase or sell the security and the number of other potential purchasers;
(iii) whether at least two dealers are making a market in the security; and (iv)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer).
Investing in Rule 144A Securities could have the effect of increasing the
level of a Portfolio's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. After
the purchase of a Rule 144A Security, however, the Board of Directors and the
respective investment adviser will continue to monitor the liquidity of that
security to ensure that a Portfolio has no more than 10% or 15%, as appropriate,
of its total assets in illiquid securities.
Non-Traditional Equity Securities (The Emerging Markets Portfolio)
The Emerging Markets Portfolio may invest in convertible preferred stocks
that offer enhanced yield features, such as Preferred Equity Redemption
Cumulative Stock ("PERCS"), which provide an investor, such as the Portfolio,
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. 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
21
<PAGE>
(SAI-DPT/PART B)
stock. The amount of that fractional share of common stock received by the PERCS
holder is determined by dividing the price set by the capital appreciation limit
of the PERCS by the market price of the issuer's common stock. PERCS can be
called at any time prior to maturity, and hence do not provide call protection.
However, if called early, the issuer may pay a call premium over the market
price to the investor. This call premium declines at a preset rate daily, up to
the maturity date of the PERCS.
The Emerging Markets Portfolio 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 (Stocks
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.
ACCOUNTING AND TAX ISSUES
When The Aggressive Growth Portfolio, either of The Real Estate Investment
Trust Portfolios, The International Fixed Income Portfolio, The Emerging Markets
Portfolio or The Global Equity Portfolio writes a call, or purchases a put
option, an amount equal to the premium received or paid by it is included in the
section of the Portfolio's assets and liabilities as an asset and as an
equivalent liability.
In writing a call, the amount of the liability is subsequently "marked to
market" to reflect the current market value of the option written. The current
market value of a written option is the last sale price on the principal
exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and ask prices. If an option which a Portfolio has written
expires on its stipulated expiration date, the Portfolio recognizes a short-term
capital gain. If a Portfolio enters into a closing purchase transaction with
respect to an option which the Portfolio has written, the Portfolio realizes a
short-term gain (or loss if the cost of the closing transaction exceeds the
premium received when the option was sold) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which a Portfolio has written is exercised, the
Portfolio realizes a capital gain or loss from the sale of the underlying
security on foreign currency and the proceeds from such sale are increased by
the premium originally received.
The premium paid by a Portfolio for the purchase of a put option is reported
in the section of the Portfolio's assets and liabilities as an investment and
subsequently adjusted daily to the current
22
<PAGE>
(SAI-DPT/PART B)
market value of the option. For example, if the current market value of the
option exceeds the premium paid, the excess would be unrealized appreciation
and, conversely, if the premium exceeds the current market value, such excess
would be unrealized depreciation. The current market value of a purchased option
is the last sale price on the principal exchange on which such option is traded
or, in the absence of a sale, the mean between the last bid and ask prices. If
an option which the Portfolio has purchased expires on the stipulated expiration
date, the Portfolio realizes a short-term or long-term capital loss for federal
income tax purposes in the amount of the cost of the option. If the Portfolio
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 a Portfolio at the end of each fiscal year on
a broad-based stock index will be required to be "marked to market" for federal
income tax purposes. Generally, 60% of any net gain or loss recognized on such
deemed sales or on any actual sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss.
Other Tax Requirements
Each Portfolio has qualified or intends to qualify, and each that has
qualified intends to continue to qualify, as a regulated investment company
under Subchapter M of the Code. Accordingly, a Portfolio will not be subject to
federal income tax to the extent its earnings are distributed. Each Portfolio
must meet several requirements to maintain its status as a regulated investment
company. Among these requirements are: (i) that at least 90% of its investment
company taxable income be derived from dividends, interest, payment with respect
to securities loans and gains from the sale or disposition of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies; (ii) that at the close of each
quarter of its taxable year at least 50% of the value of its assets consist of
cash and cash items, government securities, securities of other regulated
investment companies and, subject to certain diversification requirements, other
securities, and, with respect to its remaining assets, no more than 25% of the
value of such assets is invested in the securities (other than U.S. government
securities and securities of other regulated investment companies) of any one
issuer, or of two or more issuers which are controlled by a Portfolio and which
are engaged in the same or similar trades or businesses; and (iii) that less
than 30% of its gross income be derived from sales of securities held for less
than three months.
The requirement that not more than 30% of gross income be derived from gains
from the sale or other disposition of securities held for less than three months
may restrict The Aggressive Growth Portfolio, The Real Estate Investment Trust
Portfolios, The Emerging Markets Portfolios and The Global Equity Portfolio in
their ability to write covered call options on securities which they have held
less than three months, to write options which expire in less than three months,
to
23
<PAGE>
(SAI-DPT/PART B)
sell securities which have been held less than three months and to effect
closing purchase transactions with respect to options which have been written
less than three months prior to such transactions. Consequently, in order to
avoid realizing a gain within the three-month period, the Portfolios may be
required to defer the closing out of a contract beyond the time when it might
otherwise be advantageous to do so. The Portfolios may also be restricted in the
sale of purchased put options and the purchase of put options for the purpose of
hedging underlying securities because of the application of the short sale
holding period rules with respect to such underlying securities.
The straddle rules of Section 1092 may apply. Generally, the straddle
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 following year, subject to the same limitation.
24
<PAGE>
(SAI-DPT/PART B)
PERFORMANCE INFORMATION
From time to time, the Fund may state each Portfolio's total return and each
Portfolio class' total return in advertisements and other types of literature.
Any statements of total return performance data will be accompanied by
information on the Portfolio's or the Portfolio class' average annual total rate
of return over the most recent one-, five-, and ten-year periods, as relevant.
The Fund may also advertise aggregate and average total return information of
each Portfolio and Portfolio class over additional periods of time.
Average annual total rate of return for each Portfolio and Portfolio class
is based on a hypothetical $1,000 investment that includes capital appreciation
and depreciation during the stated periods. The following formula will be used
for the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order
of $1,000, after deduction of the
maximum front-end sales charge in the
case of The REIT Fund A Class of The
Real Estate Investment Portfolio;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the
period, after deduction of the
applicable CDSC, if any, in the case of
The REIT Fund B Class and The REIT Fund
C Class of The Real Estate Investment
Portfolio.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes that all
distributions are reinvested at net asset value.
The total return for The REIT Fund A Class of The Real Estate Investment
Trust Portfolio at offer reflects the maximum front-end sales charge of 4.75%
paid on the purchase of shares. The total return for The REIT Fund A Class at
net asset value (NAV) does not reflect the payment of any front-end sales
charge. The Limited CDSC, applicable only to certain redemptions of those
shares, will not be deducted from any computation of total return. See the
Prospectus for The REIT Fund A Class for a description of the Limited CDSC and
the limited instances in which it applies. The total return for The REIT Fund B
Class and The REIT Fund C Class of The Real Estate Investment Trust Portfolio
including deferred sales charge reflects the deduction of the applicable CDSC
that would b paid if the shares were redeemed on April 30, 1997. The total
return for The REIT Fund B Class and The REIT Fund C Class excluding deferred
sales charge assumes the shares were not redeemed on April 30, 1997, and,
therefore, does not reflect the
25
<PAGE>
(SAI-DPT/PART B)
deduction of a CDSC. See the Prospectus for The REIT Fund B Class and The REIT
Fund C Class for a description of the CDSC applicable to each class.
The Fund may also present total return information for The Real Estate
Investment Trust Portfolio that does not reflect the deduction of the maximum
front-end sales charge with respect to The REIT Fund A Class or any applicable
CDSC with respect to The REIT Fund B Class and The REIT Fund C Class.
The performance, as shown below, is the average annual total return
quotations for The Defensive Equity Portfolio, The Aggressive Growth Portfolio,
The International Equity Portfolio, The Global Fixed Income Portfolio, The Labor
Select International Equity Portfolio, The Fixed Income Portfolio and The Real
Estate Investment Trust Portfolio through April 30, 1997. Securities prices
fluctuated during the period covered and the past results should not be
considered as representative of future performance.
26
<PAGE>
(SAI-DPT/PART B)
Average Annual Total Return(1)
The The
Defensive Aggressive
Equity Growth
Portfolio Portfolio
1 year ended 1 year ended
4/30/97 00.00% 4/30/97 00.00%
3 years ended 3 years ended
4/30/97 00.00% 4/30/97 00.00%
5 years ended 5 years ended
4/30/97 00.00% 4/30/97 00.00%
Period 2/3/92(2) Period 2/27/92(2)
through 4/30/97 00.00% through 4/30/97 00.00%
The
The Global
International Fixed
Equity Income
Portfolio Portfolio
1 year ended 1 year ended
4/30/97 00.00% 4/30/97 00.00%
3 years ended 3 years ended
4/30/97 00.00% 4/30/97 00.00%
5 years ended Period 11/30/92(2)
4/30/97 00.00% through 4/30/97 00.00%
Period 2/4/92(2)
through 4/30/97 00.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) Date of initial sale.
27
<PAGE>
(SAI-DPT/PART B)
Average Annual Total Return(1)
The
Labor
Select The
International Fixed
Equity Income
Portfolio Portfolio
1 year ended 1 year ended
4/30/97 00.00% 4/30/97 00.00%
Period Period
12/19/95(2) 3/12/96(2)
through through
4/30/97 00.00% 4/30/97 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) Date of initial sale.
28
<PAGE>
(SAI-DPT/PART B)
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
The Real Estate
Investment Trust
Portfolio Class (2)
1 year ended
4/30/97 00.00%
Period
12/19/95(3)
through
4/30/97 00.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) Shares of The Real Estate Investment Trust Portfolio class were made
available for sale beginning October __, 1997. Pursuant to applicable
regulation, total return shown for the class is that of the original (and
then only) class of shares offered by The Real Estate Investment Trust
Portfolio. That original class has been redesignated The REIT Fund A
Class. Like The Real Estate Investment Trust Portfolio class, the original
class, prior to its redesignation, did not carry a front-end sales charge
and was not subject to Rule 12b-1 distribution expenses.
(3) Date of initial sale of the original class (now The REIT Fund A Class).
29
<PAGE>
(SAI-DPT/PART B)
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
The REIT Fund The REIT Fund The REIT Fund
A Class A Class Institutional Class(3)
(at Offer)(2) (at NAV)
1 year ended
4/30/97 00.00% 00.00% 0.00%
Period
12/19/95(4)
through
4/30/97 00.00% 0.00% 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) The total return presented above is based upon the performance of the
original (and then only) class of shares offered by The Real Estate
Investment Trust Portfolio, which did not carry a front-end sales charge
and was not subject to Rule 12b-1 distribution expenses. That original
class has been redesignated The REIT Fund A Class. Effective __________,
1997, a front-end sales charge of 4.75% is imposed on sales of those
shares and the class is subject to annual 12b-1 distribution expenses of
up to 30% of average daily net assets of the class. These performance
numbers are calculated giving effect to the sales charge. No adjustment
has been made to reflect the effect of 12b-1 payments, but future
performance will be affected by 12b-1 payments.
(3) Shares of The REIT Fund Institutional Class were made available for sale
beginning October __, 1997. Pursuant to applicable regulation, total
return shown for the class is that of the original (and then only) class
of shares offered by The Real Estate Investment Trust Portfolio. That
original class has been redesignated The REIT Fund A Class. Like The REIT
Fund Institutional Class, the original class, prior to its redesignation,
did not carry a front-end sales charge and was not subject to Rule 12b-1
distribution expenses. The REIT Fund Institutional Class is also subject
to other expenses (at higher rate than applicable to the original class)
which may affect the performance of the class.
(4) Date of initial sale of the original class (now The REIT Fund A Class).
30
<PAGE>
(SAI-DPT/PART B)
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
The REIT Fund The REIT Fund
B Class B Class
(including CDSC)(2) (excluding CDSC)(2)
1 year ended
4/30/97 00.00% 00.00%
Period
12/19/95(3)
through
4/30/97 00.00% 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) Shares of The REIT Fund B Class were made available for sale beginning
October __, 1997. Pursuant to applicable regulation, total return shown
for the class is that of the original (and then only) class of shares
offered by The Real Estate Investment Trust Portfolio. That original class
has been redesignated The REIT Fund A Class and, prior to its
redesignation, did not carry a sales charge and was not subject to Rule
12b-1 distribution expenses. The total return presented above have been
adjusted to show total return for The REIT Fund B Class (including CDSC)
after deduction of the applicable CDSC. The REIT Fund B Class is subject
to annual 12b-1 distribution expenses of up to 1.00% of average daily net
assets of the class. No adjustment has been made to reflect the effect of
12b-1 payments, but future performance will be affected by 12b-1 payments.
The REIT Fund B Class is also subject to other expenses (at a higher rate
than applicable to the original class) which may affect the performance of
the class.
(3) Date of initial sale of the original class (now The REIT Fund A Class).
31
<PAGE>
(SAI-DPT/PART B)
Average Annual Total Return(1)
The Real Estate Investment Trust Portfolio
The REIT Fund The REIT Fund
C Class C Class
(including CDSC)(2) (excluding CDSC)(2)
1 year ended
4/30/97 00.00% 00.00%
Period
12/19/95(3)
through
4/30/97 00.00% 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) Shares of The REIT Fund C Class were available for sale beginning October
__, 1997. Pursuant to applicable regulation, total return shown for the
class is that of the original (and then only) class of shares offered by
The Real Estate Investment Trust Portfolio. That original class has been
redesignated The REIT Fund A Class and, prior to its redesignation, did
not carry a sales charge and was not subject to Rule 12b-1 distribution
expenses. The total return presented above has been adjusted to show total
return for The REIT Fund C Class (including CDSC) after deduction of the
applicable CDSC. The REIT Fund C Class is subject to annual 12b-1
distribution expenses of up to 1.00% of average daily net assets of the
class. No adjustment has been made to reflect the effect of 12b-1
payments, but future performance will be affected by 12b-1 payments. The
REIT Fund C Class is also subject to other expenses (at a higher rate than
applicable to the original class) which may affect the performance of the
class.
(3) Date of initial sale of the original class (now The REIT Fund A Class).
32
<PAGE>
(SAI-DPT/PART B)
The Fund may also quote each Portfolio's current yield, calculated as
described below, in advertisements and investor communications.
The yield computation 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 Portfolio. Yield
quotations are based on the Portfolio's net asset value on the last day of the
period and will fluctuate depending on the period covered. The yields for The
Global Fixed Income Portfolio, The Fixed Income Portfolio and The High-Yield
Bond Portfolio as of April 30, 1997 were 0.00% and 0.00% and 9.82%,
respectively. Each yield reflects the waiver and reimbursement commitment by its
investment adviser.
Investors should note that income earned and dividends paid by The Fixed
Income Portfolio, The Limited-Term Maturity Portfolio, The Global Fixed Income
Portfolio, The International Fixed Income Portfolio and The High-Yield Bond
Portfolio will also vary depending upon fluctuation in interest rates and
performance of each Portfolio. The net asset value of these five Portfolios will
fluctuate in value inversely to movements in interest rates and, therefore, will
tend to rise when interest rates fall and fall when interest rates rise.
Likewise, the net asset value for these Portfolios will vary from day to day
depending upon fluctuation in the prices of the securities held by each
Portfolio. Thus, investors should consider net asset value fluctuation as well
as yield in making an investment decision.
Each Portfolio's total return performance will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the net asset value
at the beginning of the period. The computation will not reflect the impact of
any income taxes payable by shareholders (who are subject to such tax) on the
reinvested distributions included in the calculation. Portfolio shares are sold
without a sales
33
<PAGE>
(SAI-DPT/PART B)
charge, except for The REIT Fund A Class, The REIT Fund B Class and The REIT
Fund C Class of The Real Estate Investment Trust Portfolio. Because security
prices fluctuate, past performance should not be considered as a representation
of the results which may be realized from an investment in the Portfolios in the
future.
From time to time, performance of each Portfolio in the Fund may be
compared to various industry indices. For example, the Fund may quote actual
total return performance, dividend results and other performance information of
The Defensive Equity Portfolio, that invests primarily in domestic equities, in
advertising and other types of literature and may compare that information to,
or may separately illustrate similar information reported by the Standard &
Poor's 500 Stock Index and the Dow Jones Industrial Average, and other unmanaged
indices. The Standard & Poor's 500 Stock Index and the Dow Jones Industrial
Average are industry-accepted unmanaged indices of generally-conservative
securities used for measuring general market performance. The total return
performance reported will reflect the reinvestment of all distributions on a
quarterly basis and market price fluctuations. The indices do not take into
account any management expenses or other fees. In seeking a particular
investment objective, the Portfolios that invest primarily in equities may
include common stocks considered by the investment adviser to be more aggressive
than those tracked by these indices.
From time to time, the Fund may quote actual total return and/or yield
performance for each Portfolio in advertising and other types of literature
compared to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees, offered by leading banks and thrifts as monitored by Bank
Rate Monitor, and those of generally-accepted corporate bond and government
security price indices of various durations prepared by Lehman Brothers and
Salomon Brothers, Inc. These indices are not managed for any investment goal.
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. 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. In addition, the Consumer
Price Index, the most commonly used measure of inflation, may be used in
preparing performance comparisons. The Consumer Price Index, as prepared by the
U.S. Bureau of Labor Statistics, indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return from an
investment.
Statistical and/or performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends to comparable Fund activity
and performance:
CDA Technologies, Inc. is a performance evaluation service that maintains a
statistical database of performance, as reported by a diverse universe of
independently-managed mutual funds.
34
<PAGE>
(SAI-DPT/PART B)
Ibbotson Associates, Inc. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income on the
stock market as well as other investment asset classes, and inflation. With its
permission, this information will be used primarily for comparative purposes and
to illustrate general financial planning principles.
Interactive Data Corporation is a statistical access service that maintains a
database of various industry indicators, such as historical and current
price/earnings information and individual equity and fixed-income price and
return information.
Compustat Industrial Databases, a service of Standard & Poor's Ratings Group,
may also be used in preparing performance and historical stock and bond market
exhibits. This firm maintains fundamental databases that provide financial,
statistical and market information covering more than 7,000 industrial and
non-industrial companies.
Russell Indexes is an investment analysis service that provides both current and
historical stock performance information, focusing on the business fundamentals
of those firms issuing the security.
Morgan Stanley Capital International is a research firm that maintains a
statistical database of international securities. It also compiles and maintains
a number of unmanaged indices of international securities. These indices are
designed to measure the performance of the stock markets outside of the USA.
Primary coverage of Europe, Canada, Mexico, Australia and the Far Eastern
markets, and that of international industry groups are included.
Lehman Brothers is a statistical research firm that maintains databases of U.S.
and international bond markets and corporate and government-backed securities of
various maturities. This information, as well as unmanaged indices compiled and
maintained by Lehman Brothers, will be used in preparing comparative
illustrations. In addition, the performance of multiple indices compiled and
maintained by this firm 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 Portfolios may invest and the
assumptions that were used in calculating the blended performance will be
described.
Wellesley Group Inc. is an investment management consulting firm specializing in
investment and market research for endowments and pension plans. Wellesley Group
will be maintaining, on behalf of the Fund, peer group comparison composites for
each Portfolio of the Fund. The peer group composites will be constructed by
selecting publicly-offered mutual funds that have investment objectives that are
similar to those maintained by each Portfolio in the Fund. Wellesley Group will
also be preparing performance analyses of actual Fund performance, and benchmark
index exhibits, for inclusion in client quarterly review packages.
FT-Actuaries World Indices are jointly compiled by The Financial Times, Ltd.;
Goldman, Sachs & Co.; and Wood Mackenzie & Co., Ltd. in conjunction with the
Institute of Actuaries and the Faculty of Actuaries. Indices maintained by this
group primarily focus on compiling
35
<PAGE>
(SAI-DPT/PART B)
statistical information on international financial markets and industry sectors,
stock and bond issues and certain fundamental information about the companies
issuing the securities. Statistical information on international currencies is
also maintained.
Salomon Brothers is a statistical research firm that maintains databases of
international markets and bond markets (corporate and government-issued
securities). This information, as well as unmanaged indices compiled and
maintained by Salomon, will be used in preparing comparative illustrations. In
addition, the performance of multiple indices compiled and maintained by this
firm may be combined to create a blended performance result for comparative
performances. Generally, the indices selected will be representative of the
types of securities in which the Funds may invest and the assumptions that were
used in calculating the blended performance will be described.
The Fund may also promote each Portfolio's yield and/or total return
performance and use comparative performance information computed by and
available from certain industry and general market research publications, such
as Lipper Analytical Services, Inc. In addition, the Fund may also promote the
total return performance of The Real Estate Investment Trust Portfolio II by
comparison to the original class (prior to its redesignation as The REIT Fund A
Class) of The Real Estate Investment Trust Portfolio.
The following tables are an example, for purposes of illustration only, of
cumulative total return performance through April 30, 1997 for The Defensive
Equity Portfolio, The Aggressive Growth Portfolio, The International Equity
Portfolio, The Global Fixed Income Portfolio, The Labor Select International
Equity Portfolio, The Fixed Income Portfolio, The High-Yield Bond Portfolio and
The Real Estate Investment Trust Portfolio. Cumulative total return performance
through September 30, 1997 is also shown below for The International Fixed
Income and The Emerging Markets Portfolios. For these purposes, the calculations
assume the reinvestment of any capital gains distributions and income dividends
paid during the indicated periods. Comparative information on certain indices is
also included.
36
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
<TABLE>
<CAPTION>
The The
Defensive Dow S&P Aggressive Russell
Equity Jones 500 Growth 2000-
Portfolio Industrial Index Portfolio Stock
<S> <C> <C> <C> <C> <C> <C>
3 months 3 months
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
6 months 6 months
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
9 months 9 months
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
1 year 1 year
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
3 years 3 years
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
5 years 5 years
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
Period Period
2/3/92(2) 2/27/92(2)
through through
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
</TABLE>
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) Date of initial sale.
37
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
<TABLE>
<CAPTION>
The The Salomon
International S&P Global Fixed World
Equity 500 Income Government
Portfolio EAFE Index Portfolio Bond
<S> <C> <C> <C> <C> <C> <C>
3 months 3 months
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
6 months 6 months
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
9 months 9 months
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
1 year 1 year
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
3 years 3 years
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
5 years 5 years
ended ended
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
Period Period
2/4/92(2) 11/30/92(2)
through through
4/30/97 00.00% 00.00% 00.00% 4/30/97 00.00% 00.00%
</TABLE>
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) Date of initial sale.
38
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
<TABLE>
<CAPTION>
Lehman
Brothers
The Government/ Salmon
Fixed Corporate The High- Brothers
Income Intermediate Yield Bond High-Yield
Portfolio Bond Portfolio Cash Pay Index
<S> <C> <C> <C> <C> <C>
3 months 3 months
ended ended
4/30/97 0.00% 0.00% 4/30/97 1.96% 0.00%
Period
6 months 12/2/96(3)
ended through
4/30/97 0.00% 0.00% 4/30/97 5.29% 0.00%
9 months
ended
4/30/97 0.00% 0.00%
1 year
ended
4/30/97 0.00% 0.00%
Period
3/12/96(2)
through
4/30/97 0.00% 0.00%
</TABLE>
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) Date of initial sale.
(3) Date of initial sale; total return for this short of a time period may not
be representative of longer term results.
39
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
The Real Estate Investment Trust Portfolio
The Real Estate
Investment Trust
Portfolio Class (2)
3 months
ended
4/30/97 0.00%
6 months
ended
4/30/97 0.00%
9 months
ended
4/30/97 0.00%
1 year
ended
4/30/97 0.00%
Period
12/19/95(3)
through
4/30/97 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) Shares of The Real Estate Investment Trust Portfolio class were made
available for sale beginning October __, 1997. Pursuant to applicable
regulation, total return shown for the class is that of the original (and
then only) class of shares offered by The Real Estate Investment Trust
Portfolio. That original class has been redesignated The REIT Fund A
Class. Like The Real Estate Investment Trust Portfolio class, the original
class, prior to its redesignation, did not carry a front-end sales charge
and was not subject to Rule 12b-1 distribution expenses.
(3) Date of initial sale of the original class (now The REIT Fund A Class).
40
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
The Real Estate Investment Trust Portfolio
The REIT Fund The REIT Fund
A Class Institutional Class (3)
(at Offer)(2)
3 months
ended
4/30/97 0.00% 0.00%
6 months
ended
4/30/97 0.00% 0.00%
9 months
ended
4/30/97 0.00% 0.00%
1 year
ended
4/30/97 0.00% 0.00%
Period
12/19/95(4)
through
4/30/97 0.00% 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) The total return presented above is based upon the performance of the
original (and then only) class of shares offered by The Real Estate
Investment Trust Portfolio, which did not carry a front-end sales charge
and was not subject to Rule 12b-1 distribution expenses. That original
class has been redesignated The REIT Fund A Class. Effective __________,
1997, a front-end sales charge of 4.75% is imposed on sales of those
shares and the class is subject to annual 12b-1 distribution expenses of
up to 30% of average daily net assets of the class. These performance
numbers are calculated giving effect to the sales charge. No adjustment
has been made to reflect the effect of 12b-1 payments, but future
performance will be affected by 12b-1 payments.
41
<PAGE>
(SAI-DPT/PART B)
(3) Shares of The REIT Fund Institutional Class were made available for sale
beginning October __, 1997. Pursuant to applicable regulation, total
return shown for the class is that of the original (and then only) class
of shares offered by The Real Estate Investment Trust Portfolio. That
original class has been redesignated The REIT Fund A Class. Like The REIT
Fund Institutional Class, the original class, prior to its redesignation,
did not carry a front-end sales charge and was not subject to Rule 12b-1
distribution expenses. The REIT Fund Institutional Class is also subject
to other expenses (at higher rate than applicable to the original class)
which may affect the performance of the class.
(4) Date of initial sale of the original class (now The REIT Fund A Class).
42
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
The Real Estate Investment Trust Portfolio
The REIT Fund The REIT Fund
B Class B Class
(including CDSC)(2) (excluding CDSC)(2)
3 months
ended
4/30/97 0.00% 0.00%
6 months
ended
4/30/97 0.00% 0.00%
9 months
ended
4/30/97 0.00% 0.00%
1 year
ended
4/30/97 0.00% 0.00%
Period
12/19/95(3)
through
4/30/97 0.00% 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) Shares of The REIT Fund B Class were made available for sale beginning
October __, 1997. Pursuant to applicable regulation, total return shown
for the class is that of the original (and then only) class of shares
offered by The Real Estate Investment Trust Portfolio. That original class
has been redesignated The REIT Fund A Class and, prior to its
redesignation, did not carry a sales charge and was not subject to Rule
12b-1 distribution expenses. The total return presented above have been
adjusted to show total return for The REIT Fund B Class (including CDSC)
after deduction of the applicable CDSC. The REIT Fund B Class is subject
to annual 12b-1 distribution expenses of up to 1.00% of average daily net
assets of the class. No adjustment has been made to reflect the effect of
12b-1 payments, but future performance will be affected by 12b-1 payments.
The REIT Fund B Class is also subject to
43
<PAGE>
(SAI-DPT/PART B)
other expenses (at a higher rate than applicable to the original class)
which may affect the performance of the class.
(3) Date of initial sale of the original class (now The REIT Fund A Class).
44
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
The Real Estate Investment Trust Portfolio
The REIT Fund The REIT Fund
C Class C Class
(including CDSC)(2) (excluding CDSC)(2)
3 months
ended
4/30/97 0.00% 0.00%
6 months
ended
4/30/97 0.00% 0.00%
9 months
ended
4/30/97 0.00% 0.00%
1 year
ended
4/30/97 0.00% 0.00%
Period
12/19/95(3)
through
4/30/97 0.00% 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) Shares of The REIT Fund C Class were available for sale beginning
October __, 1997. Pursuant to applicable regulation, total return shown
for the class is that of the original (and then only) class of shares
offered by The Real Estate Investment Trust Portfolio. That original class
has been redesignated The REIT Fund A Class and, prior to its
redesignation, did not carry a sales charge and was not subject to Rule
12b-1 distribution expenses. The total return presented above has been
adjusted to show total return for The REIT Fund C Class (including CDSC)
after deduction of the applicable CDSC. The REIT Fund C Class is subject
to annual 12b-1 distribution expenses of up to 1.00% of average daily net
assets of the class. No adjustment has been made to reflect the effect of
12b-1 payments, but future performance will be affected by 12b-1 payments.
The REIT Fund C Class is also subject to
45
<PAGE>
(SAI-DPT/PART B)
other expenses (at a higher rate than applicable to the original class)
which may affect the performance of the class.
(3) Date of initial sale of the original class (now The REIT Fund A Class).
46
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
The
Labor
Select
International
Equity
Portfolio EAFE
3 months
ended
4/30/97 0.00% 0.00%
6 months
ended
4/30/97 0.00% 0.00%
9 months
ended
4/30/97 0.00% 0.00%
1 year
ended
4/30/97 0.00% 0.00%
Period
12/19/95(2)
through
4/30/97 0.00% 0.00%
(1) Certain expenses of the Portfolio have been waived and paid by the
investment adviser. In the absence of such waiver and payment, performance
would have been affected negatively.
(2) Date of initial sale.
47
<PAGE>
(SAI-DPT/PART B)
Cumulative Total Return(1)
Salomon
The Brothers
International Non-U.S. World
Fixed Government
Income Bond
Portfolio Index
3 months
ended
9/30/97 0.00% 0.00%
Period
4/11/97(3)
through
9/30/97 0.00% 0.00%
Morgan Stanley
Capital
International
The Emerging Emerging
Markets Markets Free
Portfolio Equity Index
3 months
ended
9/30/97 0.00% 0.00%
Period
4/14/97(3)
through
9/30/97 0.00% 0.00%
(1) Certain expenses of the Portfolios have been waived and paid by the
respective investment adviser. In the absence of such waiver and payment,
performance would have been affected negatively.
(2) Date of initial sale; total return for this short of a time period may not
be representative of longer term results
48
<PAGE>
(SAI-DPT/PART B)
In addition, information will be provided that discusses the overriding
investment philosophies of Delaware Investment Advisers, a division of Delaware
Management Company, Inc. ("Delaware"), the investment adviser to The Defensive
Equity, The Aggressive Growth, The Defensive Equity Small/Mid-Cap, The Real
Estate Investment Trust, The Fixed Income, The Limited-Term Maturity and The
High-Yield Bond Portfolios, and Delaware International Advisers Ltd. ("Delaware
International"), an affiliate of Delaware and the investment adviser to The
International Equity, The Labor Select International Equity, The Global Fixed
Income, The International Fixed Income, The Emerging Markets and The Global
Equity Portfolios and how those philosophies impact each Portfolio in the
strategies the Fund employs in seeking Portfolio objectives. Since the
investment disciplines being employed for each Portfolio in the Fund are based
on the disciplines and strategies employed by Delaware and Delaware
International to manage institutional separate accounts, investment strategies
and disciplines of these entities may also be discussed.
The Defensive Equity Portfolio's strategy relies on the consistency,
reliability and predictability of corporate dividends. Dividends tend to rise
over time, despite market conditions, and keep pace with rising prices; they are
paid out in "current" dollars. Just as important, current dividend income can
help lessen the effects of adverse market conditions. This equity dividend
discipline, coupled with the potential for capital gains, seeks to provide
investors with a consistently higher total-rate-of-return over time. In
implementing this strategy, the investment adviser seeks to buy securities with
a yield higher than the average of the S&P 500 Index. If a security held by the
Portfolio moves out of the acceptable yield range, it typically is sold. This
strict buy/sell discipline is instrumental in implementing The Defensive Equity
Portfolio strategy.
49
<PAGE>
(SAI-DPT/PART B)
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Portfolio
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $1,000,000
investment compounded monthly for 10 years:
7% 9% 11% 13%
Rate of Rate of Rate of Rate of
Return Return Return Return
12-'85 $1,072,290 $1,093,807 $1,115,719 $1,138,032
12-'86 $1,149,806 $1,196,414 $1,244,829 $1,295,118
12-'87 $1,232,926 $1,308,645 $1,388,879 $1,473,886
12-'88 $1,322,054 $1,431,405 $1,549,598 $1,677,330
12-'89 $1,417,626 $1,565,681 $1,728,916 $1,908,856
12-'90 $1,520,106 $1,712,553 $1,928,984 $2,172,341
12-'91 $1,629,994 $1,873,202 $2,152,204 $2,472,194
12-'92 $1,747,827 $2,048,921 $2,401,255 $2,813,438
12-'93 $1,874,177 $2,241,124 $2,679,125 $3,201,783
12-'94 $2,009,661 $2,451,357 $2,989,150 $3,643,733
Results of various assumed fixed rates of return on a $1,000,000 investment
compounded quarterly for 10 years:
8% 10% 12% 14%
Rate of Rate of Rate of Rate of
Return Return Return Return
12-'85 $1,082,432 $1,103,813 $1,125,509 $1,147,523
12-'86 $1,171,659 $1,218,403 $1,266,770 $1,316,809
12-'87 $1,268,242 $1,344,889 $1,425,761 $1,511,069
12-'88 $1,372,786 $1,484,506 $1,604,706 $1,733,986
12-'89 $1,485,947 $1,638,617 $1,806,111 $1,989,789
12-'90 $1,608,437 $1,808,726 $2,032,794 $2,283,328
12-'91 $1,741,024 $1,996,495 $2,287,927 $2,620,172
12-'92 $1,884,540 $2,203,757 $2,575,083 $3,006,707
12-'93 $2,039,887 $2,432,535 $2,898,278 $3,450,266
12-'94 $2,208,039 $2,685,064 $3,262,038 $3,959,259
These figures are calculated assuming a fixed constant investment return
and assume no fluctuation in the value of principal. These figures, which do not
reflect payment of applicable
50
<PAGE>
(SAI-DPT/PART B)
taxes, are not intended to be a projection of future results and do not reflect
actual performance results of any of the Portfolios.
TRADING PRACTICES AND BROKERAGE
The Fund (and, in the case of The International Equity, The Labor Select
International Equity, The Global Fixed Income, The International Fixed Income,
The Emerging Markets and The Global Equity Portfolios, their investment adviser)
selects brokers or dealers to execute transactions for the purchase or sale of
portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have brokers
or dealers execute transactions at best price and execution. Best price and
execution refers to many factors, including the price paid or received for a
security, the commission charged, the promptness and reliability of execution,
the confidentiality and placement accorded the order and other factors affecting
the overall benefit obtained by the account on the transaction. A number of
trades are made on a net basis where securities either are purchased directly
from the dealer or are sold to the dealer. In these instances, there is no
direct commission charged but there is a spread (the difference between the buy
and sell price) which is the equivalent of a commission. When a commission is
paid, the Fund pays reasonably competitive brokerage commission rates based upon
the professional knowledge of its trading department (and, in the case of The
International Equity, The Labor Select International Equity, The Global Fixed
Income, The International Fixed Income, The Emerging Markets and The Global
Equity Portfolios, their investment adviser) 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.
During the fiscal years ended October 31, 1994, 1995 and 1996, the
aggregate dollar amounts of brokerage commissions paid by the Portfolios listed
below amounted to the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
The Defensive Equity Portfolio $117,326 $108,104 $59,381
The Aggressive Growth Portfolio 46,384 26,361 19,391
The International Equity Portfolio 398,781 280,594 94,890
The Global Fixed Income Portfolio --- 1,545 12,391
The Labor Select International Equity Portfolio 78,514 N/A N/A
The Real Estate Investment Trust Portfolio 122,865 N/A N/A
The Fixed Income Portfolio --- N/A N/A
</TABLE>
The investment advisers may allocate out of all commission business
generated by all of the funds and accounts under management by them, 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
51
<PAGE>
(SAI-DPT/PART B)
software and hardware used in security analyses; and providing portfolio
performance evaluation and technical market analyses. Such services are used by
the investment advisers in connection with their investment decision-making
process with respect to one or more funds and accounts they manage, and may not
be used, or used exclusively, with respect to the fund or account generating the
brokerage.
During the fiscal year ended October 31, 1996, portfolio transactions of
the following Portfolios in the amounts listed below, resulting in brokerage
commissions in the amounts listed below were directed to brokers for brokerage
and research services provided:
<TABLE>
<CAPTION>
Portfolio Brokerage
Transactions Commissions
Amounts Amounts
<S> <C> <C>
The Defensive Equity Portfolio $23,219,760 $25,793
The Aggressive Growth Portfolio 11,283,920 26,434
The International Equity Portfolio 21,783,280 75,791
The Labor Select International Equity Portfolio 773,162 4,289
The Real Estate Investment Trust Portfolio 29,418,630 70,854
</TABLE>
As provided in the Securities Exchange Act of 1934 and each Portfolio's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the investment advisers which constitute in some part brokerage and research
services used by the investment advisers in connection with their investment
decision-making process and constitute in some part services used by them in
connection with administrative or other functions not related to their
investment decision-making process. In such cases, the investment advisers will
make a good faith allocation of brokerage and research services and will pay out
of their own resources for services used by them in connection with
administrative or other functions not related to their investment
decision-making process. In addition, so long as no fund is disadvantaged,
portfolio transactions which generate commissions or their equivalent are
allocated to broker/dealers who provide daily portfolio pricing services to the
Fund and to other funds in the Delaware Group. Subject to best price and
execution, commissions allocated to brokers providing such pricing services may
or may not be generated by the funds receiving the pricing service.
Combined orders for two or more accounts or funds engaged in the purchase
or sale of the same security may be placed if the judgment is made that joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled
52
<PAGE>
(SAI-DPT/PART B)
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
investment advisers and the Fund's Board of Directors that the advantages of
combined orders outweigh the possible disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution,
orders may be placed with broker/dealers that have agreed to defray certain
Portfolio expenses, such as custodian fees.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish each
Portfolio's objective in relation to anticipated movements in the general level
of interest rates. A Portfolio is free to dispose of portfolio securities at any
time, subject to complying with the Code and the 1940 Act, when changes in
circumstances or conditions make such a move desirable in light of the
investment objective. A Portfolio will not attempt to achieve or be limited to a
predetermined rate of portfolio turnover. Such a turnover always will be
incidental to transactions undertaken with a view to achieving a Portfolio's
investment objective.
The degree of portfolio activity may affect brokerage costs of a Portfolio
and taxes payable by a Portfolio's shareholders. A turnover rate of 100% would
occur, for example, if all the investments in a Portfolio's securities at the
beginning of the year were replaced by the end of the year. In investing for
capital appreciation, a relevant Portfolio may hold securities for any period of
time. Portfolio turnover will also be increased by The Aggressive Growth
Portfolio, either of The Real Estate Investment Trust Portfolios, The
International Equity Portfolio, The Emerging Markets Portfolio and The Global
Equity Portfolio if the Portfolio writes a large number of call options which
are subsequently exercised. To the extent a Portfolio realizes gains on
securities held for less than six months, such gains are taxable to the
shareholder subject to tax or to a Portfolio at ordinary income tax rates. The
turnover rate also may be affected by cash requirements from redemptions and
repurchases of Portfolio shares. Total brokerage costs generally increase with
higher portfolio turnover rates.
Under normal circumstances: (1) the annual portfolio turnover rate of The
International Equity Portfolio is not expected to exceed 50%; (2) the annual
portfolio turnover rate of The Global Fixed Income Portfolio, The International
Fixed Income Portfolio and The Limited-Term Maturity Portfolio is not expected
to exceed 200%; (3) the annual portfolio turnover rate of The Defensive Equity
Portfolio, The Aggressive Growth Portfolio, The Defensive Equity Small/Mid-Cap
Portfolio, The Labor Select International Equity Portfolio, The Real Estate
Investment Trust Portfolios, The Emerging Markets Portfolio, The Global Equity
Portfolio and The High-Yield Bond Portfolio is not expected to exceed 100%; and
(4) the annual portfolio turnover rate of The Fixed Income Portfolio is not
expected to exceed 250%. The portfolio
53
<PAGE>
(SAI-DPT/PART B)
turnover rate of a Portfolio is calculated by dividing the lesser of purchases
or sales of securities for the particular fiscal year by the monthly average of
the value of the securities owned by the Portfolio during the particular fiscal
year, exclusive of securities whose maturities at the time of acquisition are
one year or less.
The portfolio turnover rates for the past two fiscal years were as
follows:
<TABLE>
<CAPTION>
October 31, 1996 October 31, 1995
---------------- ----------------
<S> <C> <C>
The Defensive Equity Portfolio 74% 88%
The Aggressive Growth Portfolio 95% 64%
The International Equity Portfolio 8% 20%
The Global Fixed Income Portfolio 63% 77%
The Labor Select International Equity Portfolio 7%* N/A
The Real Estate Investment Trust Portfolio 109%* N/A
The Fixed Income Portfolio 232%* N/A
</TABLE>
*Annualized
PURCHASING SHARES
The following supplements the disclosure provided in the Fund's
Prospectuses.
Delaware Distributors, L.P. serves as the national distributor for each
Portfolio's shares. See the related Prospectus for information on how to invest.
The Fund reserves the right to suspend sales of Portfolio shares, and reject any
order for the purchase of Portfolio shares if in the opinion of management such
rejection is in the Portfolio's best interest.
Certificates representing shares purchased are not ordinarily issued.
However, such purchases are confirmed to the investor and credited to the
shareholder's account on the books maintained on behalf of the Fund. The
investor will have the same rights of ownership with respect to such shares as
if certificates had been issued. An investor may receive a certificate
representing shares purchased by sending a letter to the Fund requesting the
certificate. No charge is assessed by the Fund for any certificate issued.
Investors who hold certificates representing any of their shares may only redeem
these shares by written request. The investor's certificate(s) must accompany
such request.
Purchasing Shares (The Real Estate Investment Trust Portfolio class of The Real
Estate Investment Trust Portfolio and all other Portfolios)
Shares of each Portfolio are sold on a continuous basis directly to
institutions and high net-worth individuals at the net asset value next
determined after the receipt of a purchase order and a Federal Funds wire as
described more fully in the related Prospectus. In addition, for purchases of
shares in The Emerging Markets Portfolio, a purchase reimbursement fee of 0.75%
of the dollar amount invested is charged to investors and paid to the Portfolio
to help defray
54
<PAGE>
(SAI-DPT/PART B)
expenses of investing purchase proceeds. See "DETERMINING OFFERING PRICE AND NET
ASSET VALUE." The minimum for initial investments is $1,000,000 for each
Portfolio. There are no minimums for subsequent investments. See the related
Prospectus for special purchase procedures and requirements that may be
applicable to prospective investors in The International Equity Portfolio and
the Global Equity Portfolio. At such time as the Fund receives appropriate
regulatory approvals to do so in the future, under certain circumstances, the
Fund may, at its sole discretion, allow eligible investors who have an existing
investment counseling relationship with Delaware Investment Advisers or Delaware
International to make investments in the Portfolios by a contribution of
securities in-kind to such Portfolios.
Purchasing Shares (The REIT Fund A, B, C and Institutional Classes of The Real
Estate Investment Trust Portfolio)
The minimum initial purchase is generally $1,000 for The REIT Fund A Class
("Class A Shares"), The REIT Fund B Class ("Class B Shares") and The REIT Fund C
Class ("Class C Shares"). Subsequent purchases must generally be at least $100.
The initial and subsequent investment minimums for Class A Shares will be waived
for purchases by officers, directors and employees of any Delaware Group fund,
the Manager or any of the Manager's affiliates if the purchases are made
pursuant to a payroll deduction program. Shares purchased pursuant to the
Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act and shares
purchased in connection with an Automatic Investing Plan are subject to a
minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Accounts opened under a Delaware Group Asset Planner Service are subject to a
minimum initial investment of $2,000 per Asset Planner strategy selected. There
are no minimum purchase requirements for The REIT Fund Institutional Class
("Institutional Class Shares").
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that does not exceed $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. The Fund will reject any purchase order for more
than $250,000 of Class B Shares and $1,000,000 or more of Class C Shares. An
investor may exceed these limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind, however, that
reduced front-end sales charges apply to investments of $100,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
The NASD has adopted Conduct Rules, as amended, relating to investment
company sales charges. The Fund and the Distributor intend to operate in
compliance with these rules.
Class A Shares are purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses for the life of the investment.
55
<PAGE>
(SAI-DPT/PART B)
Class B Shares are purchased at net asset value and are subject to a CDSC
of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against the Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares in the related Prospectus.
Class C Shares are purchased at net asset value and are subject to a CDSC
of 1% if shares are redeemed within 12 months following purchase. Class C Shares
are also subject to annual 12b-1 Plan expenses for the life of the investment
which are equal to those to which Class B Shares are subject.
Institutional Class Shares are purchased at net asset value per share
without the imposition of a front-end or contingent deferred sales charge or
12b-1 Plan expenses.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
Shares represent a proportionate interest in the Portfolio's assets and will
receive a proportionate interest in the Portfolio's income, before application,
as to the Class A, Class B and Class C Shares, of any expenses under the Fund's
12b-1 Plans.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable for their needs given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is more
advantageous to purchase Class A Shares and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of .30% of average daily net
assets of Class A Shares or to purchase either Class B or Class C Shares and
have the entire initial purchase amount invested in the Portfolio with the
investment thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B
Shares are subject to a CDSC if the shares are redeemed within six years of
purchase, and Class C Shares are subject to a CDSC if the shares are redeemed
within 12 months of purchase. Class B and Class C Shares are each subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
the respective Class. Class B Shares will automatically convert to Class A
Shares at the end of approximately eight years after purchase and, thereafter,
be subject to annual 12b-1 Plan expenses of up to a maximum of .30% of average
daily net assets of such shares. Unlike Class B Shares, Class C Shares do not
convert into another class.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases
56
<PAGE>
(SAI-DPT/PART B)
over a 13-month period under a Letter of Intention signed by the purchaser. See
Special Purchase Features - Class A Shares, below, for more information on ways
in which investors can avail themselves of reduced front-end sales charges and
other purchase features.
Class A Shares
Front-End Sales Charge as % of
<TABLE>
<CAPTION>
Dealer's
Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
<S> <C> <C> <C> <C>
Less than $100,000 4.75% 4.98% 4.00%
$100,000 but under $250,000 3.75 3.90 3.00
$250,000 but under $500,000 2.50 2.55 2.00
$500,000 but under $1,000,000* 2.00 2.07 1.60
</TABLE>
* There is no front-end sales charge on purchases of $1 million or more
of Class A Shares but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain shares that were purchased at net asset
value and triggered the payment of a dealer's commission.
** Based upon the net asset value per share of Class A Shares as of the
end of the Fund's most recent fiscal year.
***Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current purchases.
The reduced front-end sales charge will be granted upon confirmation of the
shareholder's holdings by the Fund. Such reduced front-end sales charges are
not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end
sales charge shown above. Dealers who receive 90% or more of the sales charge
may be deemed to be underwriters under the 1933 Act.
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an
57
<PAGE>
(SAI-DPT/PART B)
additional commission of up to 0.15% of the offering price in connection with
sales of Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws.
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are effected in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds, as to
which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the related Prospectus) may be aggregated with those of the Class A
Shares of the Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for payment
of the dealer's commission, unless a dealer's commission or similar payment has
not been previously paid on the assets being exchanged. The schedule and program
for payment of the dealer's commission are subject to change or termination at
any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. See
58
<PAGE>
(SAI-DPT/PART B)
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
under Redemption and Exchange in the related Prospectus for a list of the
instances in which the CDSC is waived.
The following table sets forth the rates of the CDSC for Class B Shares
of the Fund:
Contingent Deferred Sales Charge
(as a Percentage of Dollar
Year After Purchase Made Amount Subject to Charge)
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase, and thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the Fund.
See Automatic Conversion of Class B Shares under Classes of Shares in the
related Prospectus. Such conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes in the related Prospectus.
Plans Under Rule 12b-1
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
separate plan for each of Class A Shares, the Class B Shares and the Class C
Shares of the Fund (the "Plans"). Each Plan permits the Fund to pay for certain
distribution, promotional and related expenses involved in the marketing of only
the Class to which the Plan applies.
The Plans permit the Fund, pursuant to the Distribution Agreement, to pay
out of the assets of Class A Shares, Class B Shares and Class C 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 securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Fund may make payments out of the assets of Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by the Fund under the Plans, and the
Fund's Distribution Agreement, is on an annual basis up to 0.30% of Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for
59
<PAGE>
(SAI-DPT/PART B)
providing personal service and/or maintaining shareholder accounts) of each of
Class B Shares' and Class C Shares' average daily net assets for the year. The
Fund's Board of Directors may reduce these amounts at any time.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid on behalf of Class A, Class
B and Class C Shares would be borne by such persons without any reimbursement
from the Fund Classes. Subject to seeking best price and execution, the Classes
may, from time to time, buy or sell portfolio securities from or to firms which
receive payments under the Plans.
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 Plans and the Distribution Agreement, as amended, have been approved
by the Board of Directors of the Fund, including a majority of the directors 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 Plans by vote cast in
person at a meeting duly called for the purpose of voting on the Plans and such
Agreement. Continuation of the Plans and the Distribution Agreement, as amended,
must be approved annually by the Board of Directors in the same manner, as
specified above.
Each year, the directors must determine whether continuation of the Plans
is in the best interest of shareholders of, respectively, the Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable likelihood of
the Plan relating to a Class providing a benefit to that Class. The Plans and
the Distribution Agreement, as amended, may be terminated at any time without
penalty by a majority of those directors who are not "interested persons" or by
a majority vote of the outstanding voting securities of the relevant Class. Any
amendment materially increasing the maximum percentage payable under the Plans
must likewise be approved by a majority vote of the outstanding voting
securities of the relevant Class, as well as by a majority vote of those
directors who are not "interested persons." With respect to the Class A Share
Plan, any material increase in the maximum percentage payable thereunder must
also be approved by a majority of the outstanding voting securities of the Class
B Shares. Also, any other material amendment to the Plans must be approved by a
majority vote of the directors including a majority of the noninterested
directors of the Fund having no interest in the Plans. In addition, in order for
the Plans to remain effective, the selection and nomination of directors who are
not "interested persons" of the Fund must be effected by the directors who
themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plans. Persons authorized to make payments under the
Plans must provide written reports at least quarterly to the Board of Directors
for their review.
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Class A, B and C Shares exceed
certain limits as set by the Distributor, may receive from the Distributor an
additional payment of up to 0.25% of the dollar amount of such sales. The
Distributor may also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In some instances,
these incentives or payments may be
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offered only to certain dealers who maintain, have sold or may sell certain
amounts of shares. The Distributor may also pay a portion of the expense of
preapproved dealer advertisements promoting the sale of Delaware Group fund
shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, trustees and employees of the Fund, any
other fund in the Delaware Group, the Manager or any of the Manager's affiliates
that may in the future be created, legal counsel to the funds and registered
representatives and employees of broker/dealers who have entered into Dealer's
Agreements with the Distributor may purchase Class A Shares of the Portfolio and
any of the funds in the Delaware Group, including any fund that may be created,
at net asset value per share. Family members of such persons at their direction,
and any employee benefit plan established by any of the foregoing funds,
corporations, counsel or broker/dealers may also purchase Class A Shares at net
asset value. Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at net asset value
within 12 months after the registered representative changes employment, if the
purchase is funded by proceeds from an investment where a front-end sales
charge, contingent deferred sales charge or other sales charge has been
assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. Officers, directors and key employees of institutional clients of the
Manager, or any of its affiliates, may purchase Class A Shares at net asset
value. Moreover, purchases may be effected at net asset value for the benefit of
the clients of brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Distributor providing specifically for the
purchase of Class A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Such purchasers are required to
sign a letter stating that the purchase is for investment only and that the
securities may not be resold except to the issuer. Such purchasers may also be
required to sign or deliver such other documents as the Fund may reasonably
require to establish eligibility for purchase at net asset value. The Fund must
be notified in advance that the trade qualifies for purchase at net asset value.
The Fund must be notified in advance that the trade qualifies for
purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to the
Class A Shares are also applicable to the aggregate amount of purchases made by
any such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or the Fund, which provides for
the
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holding in escrow by the Transfer Agent of 5% of the total amount of Class A
Shares intended to be purchased until such purchase is completed within the
13-month period. A Letter of Intention may be dated to include shares purchased
up to 90 days prior to the date the Letter is signed. The 13-month period begins
on the date of the earliest purchase. If the intended investment is not
completed, except as noted below, the purchaser will be asked to pay an amount
equal to the difference between the front-end sales charge on the Class A Shares
purchased at the reduced rate and the front-end sales charge otherwise
applicable to the total shares purchased. If such payment is not made within 20
days following the expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
of the Fund and of any class of any of the other mutual funds in the Delaware
Group (except shares of any Delaware Group fund which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC) previously purchased and still held as of the date of their Letter of
Intention toward the completion of such Letter.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Portfolio, as well as shares of any other class of any of the
other Delaware Group funds (except shares of any Delaware Group fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Portfolio,
as well as shares of any other class of any of the other Delaware Group funds
which offer such classes (except shares of any Delaware Group fund which do not
carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from shares from a Delaware Group fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or shares of any other
of the classes described in the previous sentence with a value of $40,000 and
subsequently purchases $60,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $60,000 purchase would be 3.75%. For the
purpose of this calculation, the shares presently held shall be valued at the
public offering price that
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(SAI-DPT/PART B)
would have been in effect were the shares purchased simultaneously with the
current purchase. Investors should refer to the table of sales charges for Class
A Shares to determine the applicability of the Right of Accumulation to their
particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of the Portfolio who redeem such shares have
one year from the date of redemption to reinvest all or part of their redemption
proceeds in Class A Shares of the Portfolio or in Class A Shares of any of the
other funds in the Delaware Group, subject to applicable eligibility and minimum
purchase requirements, in states where shares of such other funds may be sold,
at net asset value without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares where the redemption of the shares
triggered the payment of a Limited CDSC. Persons investing redemption proceeds
from direct investments in mutual funds in the Delaware Group offered without a
front-end sales charge will be required to pay the applicable sales charge when
purchasing Class A Shares. The reinvestment privilege does not extend to a
redemption of either Class B Shares or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer Agent,
which also serves as the Fund's shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the related Prospectus) in connection with the
features described above
Institutional Class Shares
The Institutional Class Shares are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans; (b) tax-exempt employee benefit
plans of the Manager, the Sub-Adviser or their affiliates and securities dealer
firms with a selling agreement with the Distributor; (c) institutional advisory
accounts of the Manager, the Sub-Adviser or their affiliates and those having
client relationships with the Manager, the Sub-Adviser, or their affiliates and
their corporate sponsors, as well as subsidiaries and related employee benefit
plans and rollover individual retirement accounts from such institutional
advisory accounts; (d) a bank, trust company and similar financial institution
investing for its own account or for the account of its trust customers for whom
such financial institution is exercising investment discretion in purchasing
Institutional Class Shares, except where the investment is part of a program
that requires payment to the financial institution of a Rule 12b-1 Plan fee; and
(e) registered investment advisers investing on
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behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Institutional Class Shares are available for purchase at net asset value,
without the imposition of a front-end or contingent deferred sales charge and
are not subject to Rule 12b-1 expenses.
Investment Plans
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Class (based on the net asset value in effect on the payable date) and will be
credited to the shareholder's account on that date. A confirmation of each
dividend payment from net investment income will be mailed to shareholders
quarterly. A confirmation of any distributions from realized securities profits
will be mailed to shareholders in the first quarter of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Fund. Such
purchases, which must meet the minimum subsequent purchase requirements stated
in the related Prospectus and this Statement of Additional Information, are made
for Class A Shares at the public offering price and for Class B Shares and Class
C Shares at the net asset value, at the end of the day of receipt. A
reinvestment plan may be terminated at any time. This plan does not assure a
profit nor protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements of each fund and the limitations set forth below, holders of Class
A, Class B and Class C Shares may automatically reinvest their dividends and/or
distributions in any of the mutual funds in the Delaware Group, including the
Fund, in states where their shares may be sold. Such investments will be at net
asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account, will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares in the related Prospectus.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Fund,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends
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(SAI-DPT/PART B)
from Class B Shares may only be directed to other Class B Shares and dividends
from Class C Shares may only be directed to other Class C Shares. See Appendix
B-Classes Offered in the related Prospectus for the funds in the Delaware Group
that are eligible for investment by holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
the Fund may liquidate sufficient
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(SAI-DPT/PART B)
shares from a shareholder's account to reimburse the government or the private
source. In the event there are insufficient shares in the shareholder's account,
the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund accounts. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact the Fund for proper
instructions.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Classes
through regular liquidations of shares in their accounts in other mutual funds
in the Delaware Group. Shareholders of the Classes may elect to invest in one or
more of the other mutual funds in the Delaware Group through the Wealth Builder
Option. See Wealth Builder Option and Redemption and Exchange in the related
Prospectus.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the related
Prospectus. The investment will be made on the 20th day of each month (or, if
the fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation at any time by written
notice to their Fund.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans. This option also is not available to shareholders
of the Institutional Classes.
Retirement Plans for the Fund Classes
An investment in a Portfolio may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and
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(SAI-DPT/PART B)
403(b)(7) Deferred Compensation Plans. The CDSC may be waived on certain
redemptions of Class B Shares and Class C Shares. See Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares under Redemption and Exchange
in the related Prospectus for a list of the instances in which the CDSC is
waived.
Purchases of Class B Shares are subject to a maximum purchase limitation
of $250,000 for retirement plans. Purchases of Class C Shares must be in an
amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors do
not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25 regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such plans.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase Institutional Class Shares. See
Institutional Class Shares above. For additional information on any of the plans
and Delaware's retirement services, call the Shareholder Service Center
telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals, partnerships
and corporations. These plans can be maintained as Section 401(k), profit
sharing or money purchase pension plans. Contributions may be invested only in
Class A and Class C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has
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no compensation for the year or, for years prior to 1997, elects to be treated
as having no compensation for the year. Investments in each of the Classes are
permissible.
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers adjusted
gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 deduction is still available if the taxpayer's adjusted
gross income is below $25,000 ($40,000 for taxpayers filing joint returns). A
partial deduction is allowed for married couples with incomes between $40,000
and $50,000, and for single individuals with incomes between $25,000 and
$35,000. No deductions are available for contributions to IRAs by taxpayers
whose adjusted gross income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-sponsored retirement
plan. Taxpayers who are not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares, and
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(SAI-DPT/PART B)
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares under
Redemption and Exchange in the related Prospectus concerning the applicability
of a CDSC upon redemption.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
New SAR/SEP plans may not be established after December 31, 1996. In
addition, employers must have 25 or fewer employees to maintain an existing
SEP/IRA that permits salary deferral contributions. SAR/SEP plans may only
invest in Class A Shares and Class C Shares.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified plans
based on salary deferral contributions. Plan documents are available to enable
employers to establish a plan. An employer may also elect to make profit sharing
contributions and/or matching contributions with investments in only Class A
Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares.
Deferred Compensation Plan for Public Schools and Non-Profit
Organizations ("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement.
Deferred Compensation Plan for State and Local Government Employees
("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Classes. Although investors may
use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information.
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(SAI-DPT/PART B)
DETERMINING OFFERING PRICE AND NET ASSET VALUE
(The Real Estate Investment Trust Portfolio Class of The Real Estate Investment
Trust Portfolio and all other Portfolios)
Orders for purchases of shares of a Portfolio are effected at the net
asset value of that Portfolio next calculated after receipt of the order by the
Fund and Federal Funds wire by the Portfolio's Custodian Bank, plus in the case
of The Emerging Markets Portfolio, a purchase reimbursement fee equal to 0.75%
of the dollar amount invested.
Net asset value is computed at the close of regular trading on the New
York Stock Exchange, generally 4 p.m., Eastern time, on days when the New York
Stock Exchange is open and an order to purchase or sell shares of a Portfolio
has been received or is on hand, having been received since the last previous
computation of net asset value. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year except for New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. When the New York Stock Exchange is closed, the Fund
will generally be closed, pricing calculations will not be made and purchase and
redemption orders will not be processed.
(Class A, B and C Shares and Institutional Class Shares of The Real Estate
Investment Trust Portfolio)
Orders for purchases of Class A Shares are effected at the offering price
next calculated after receipt of the order by the Fund or its agent. Orders for
purchases of Class B Shares, Class C Shares and Institutional Class Shares are
effected at the net asset value per share next calculated by the Fund after
receipt of the order by the Fund or its agent. Selling dealers have the
responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value per
share plus any applicable front-end sales charges. Offering price and net asset
value are computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, the Fund will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed.
Each Class will bear, pro-rata, all of the common expenses of the
Portfolio. The net asset values of all outstanding shares of each Class will be
computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Portfolio represented by the value of shares
of that Class. All income earned and expenses incurred by the Portfolio will be
borne on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in the Portfolio represented by the value of shares of such
Classes, except that the Class A, Class B and Class C Shares alone will bear the
12b-1 Plan expenses payable under their respective Plans. Due to the specific
distribution expenses and other costs that would be allocable to each Class, the
dividends paid to each Class of the Fund may vary. However, the net asset value
per share of each Class is expected to be equivalent.
* * *
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(SAI-DPT/PART B)
The net asset value per share of each Portfolio is determined by dividing
the total market value of the Portfolio's investments and other assets, less any
liabilities, by the total outstanding shares of the Portfolio. Securities listed
on a U.S. securities exchange for which market quotations are available are
valued at the last quoted sale price on the day the valuation is made. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Securities listed on a foreign exchange are valued at the
last quoted sale price available before the time when net assets are valued.
Unlisted securities and listed securities not traded on the valuation date for
which market quotations are readily available are valued at a price that is
considered to best represent fair value within a range not in excess of the
current ask prices nor less than the current bid prices. Domestic
over-the-counter equities, domestic equity securities that are not traded and
U.S. government securities (and those of its agencies and instrumentalities) are
priced at the mean of the bid and ask price.
Bonds and other fixed-income securities are valued according to the
broadest and most representative market, which will ordinarily be the
over-the-counter market. Net asset value includes interest on fixed-income
securities, which is accrued daily. In addition, bonds and other fixed-income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed to reflect the fair market value of such
securities. The prices provided by a pricing service are determined without
regard to bid or last sale prices but take into account institutional size
trading in similar groups of securities and any developments related to the
specific securities. Securities not priced in this manner are valued at the most
recent quoted mean price or, when stock exchange valuations are used, at the
latest quoted sale price on the day of valuation. If there is no such reported
sale, the latest quoted mean price will be used. Securities with remaining
maturities of 60 days or less are valued at amortized cost, if it approximates
market value. In the event that amortized cost does not approximate market
value, market prices as determined above will be used.
Exchange-traded options are valued at the last reported sales price or,
if no sales are reported, at the mean between the last reported bid and ask
prices. Non-exchange traded options are valued at fair value using a
mathematical model. Futures contracts are valued at their daily quoted
settlement price. The value of other assets and securities for which no
quotations are readily available (including restricted securities) are
determined in good faith at fair value using methods determined by the Fund's
Board of Directors.
The securities in which The International Equity Portfolio, The Labor
Select International Equity Portfolio, The Global Fixed Income Portfolio, The
International Fixed Income Portfolio, The Emerging Markets Portfolio and The
Global Equity Portfolio (as well as The Real Estate Investment Trust Portfolios
and The High-Yield Bond Portfolio, to the limited extent described in the
Prospectus) may invest from time to time may be listed primarily on foreign
exchanges which trade on days when the New York Stock Exchange is closed (such
as Saturday). As a result, the net asset value of those Portfolios may be
significantly affected by such trading on days when shareholders have no access
to the Portfolios.
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<PAGE>
(SAI-DPT/PART B)
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the mean between the bid and ask prices of such currencies
against the U.S. dollar as provided by an independent pricing service or any
major bank, including the Custodian Banks. Forward foreign currency contracts
are valued at the mean price of the contract. Interpolated values will be
derived when the settlement date of the contract is on an interim period for
which quotations are not available.
REDEMPTION AND REPURCHASE
The following supplements the disclosure provided in the Fund's
Prospectuses.
(The Real Estate Investment Trust Portfolio Class of The Real Estate Investment
Trust Portfolio and all other Portfolios)
Each Portfolio may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Commission, (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for a Portfolio to dispose of securities owned by it, or fairly to determine the
value of its assets, and (iii) for such other periods as the Commission may
permit.
No charge is made by any Portfolio for redemptions, except that
shareholders that redeem shares of The Emerging Markets Portfolio are assessed
by the Portfolio a 0.75% redemption reimbursement fee. Payment for shares
redeemed or repurchased may be made either in cash or in-kind, or partly in cash
and partly in-kind. Any portfolio securities paid or distributed in-kind would
be valued as described in "DETERMINING OFFERING PRICE AND NET ASSET VALUE."
Subsequent sales by an investor receiving a distribution in-kind could result in
the payment of brokerage commissions. Payment for shares redeemed ordinarily
will be made within three business days, but in no case later than seven days,
after receipt of a redemption request in good order. See "REDEMPTION OF SHARES"
in the related Prospectus for special redemption procedures and requirements
that may be applicable to shareholders in The International Equity Portfolio,
The Labor Select International Equity Portfolio, The Global Fixed Income
Portfolio, The International Fixed Income Portfolio, The Emerging Markets
Portfolio and The Global Equity Portfolio. Eligible investors who have an
existing investment counseling relationship with Delaware Investment Advisers or
Delaware International will not be subject to the Fund's in-kind redemption
requirements until such time as the Fund receives appropriate regulatory
approvals to permit such redemptions for the account of such investors.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which the Fund is obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Portfolio during any
90-day period for any one shareholder.
The value of a Portfolio's investments is subject to changing market
prices. Redemption proceeds may be more or less than the shareholder's cost
depending upon the market value of the Portfolio's securities. Thus, a
shareholder redeeming shares of a Portfolio may, if such shareholder is subject
to
72
<PAGE>
(SAI-DPT/PART B)
federal income tax, sustain either a gain or loss, depending upon the price paid
and the price received for such shares.
Small Accounts
Due to the relatively higher cost of maintaining small accounts, the Fund
reserves the right to redeem Portfolio shares in any of its accounts at the
then-current net asset value if as a result of redemption or transfer a
shareholder's investment in a Portfolio has a value of less than $500,000.
However, before the Fund redeems such shares and sends the proceeds to the
shareholder, the shareholder will be notified in writing that the value of the
shares in the account is less than $500,000 and will be allowed 90 days from
that date of notice to make an additional investment to meet the required
minimum. Any redemption in an inactive account established with a minimum
investment may trigger mandatory redemption.
* * *
The Fund has available certain redemption privileges, as described below.
They are unavailable to shareholders of The International Equity Portfolio, The
Labor Select International Equity Portfolio, The Global Fixed Income Portfolio,
The International Fixed Income Portfolio, The Emerging Markets Portfolio and The
Global Equity Portfolio whose redemptions trigger the special in-kind redemption
procedures. See the related Prospectus. The Fund reserves the right to suspend
or terminate these expedited payment procedures at any time in the future.
Expedited Telephone Redemptions
Shareholders wishing to redeem shares for which certificates have not
been issued may call the Fund at (1-800-231-8002) prior to 4 p.m., Eastern time,
and have the proceeds mailed to them at the record address. Checks payable to
the shareholder(s) of record will normally be mailed three business days, but no
later than seven days, after receipt of the redemption request.
In addition, redemption proceeds can be transferred to your predesignated
bank account by wire or by check by calling the Fund, as described above. The
Telephone Redemption Option on the Account Registration Form must have been
elected by the shareholder and filed with the Fund before the request is
received. Payment will be made by wire or check to the bank account designated
on the authorization form as follows:
1. Payment By Wire: Request that Federal Funds be wired to the bank
account designated on the Account Registration Form. Redemption proceeds will
normally be wired on the next business day following receipt of the redemption
request. There is no charge for this service. If the proceeds are wired to the
shareholder's account at a bank which is not a member of the Federal Reserve
System, there could be a delay in the crediting of the funds to the
shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the Account Registration Form. Redemption proceeds will normally
be mailed three business days, but no later than seven days, from the date of
the telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of
73
<PAGE>
(SAI-DPT/PART B)
the check after the bank receives it. If expedited payment under these
procedures could adversely affect a Portfolio, the Fund may take up to seven
days to pay the shareholder.
To reduce the risk of attempted fraudulent use of the telephone
redemption procedure, payment will be made only to the bank account designated
on the Account Registration Form. If a shareholder wishes to change the bank
account designated for such redemption, a written request in accordance with the
instructions set forth in the Prospectus will be required.
Exchange Privilege
Shares of each Portfolio of the Fund may be exchanged for shares of any
other Portfolio or for the institutional classes of the other funds in the
Delaware Group. Exchange requests should be sent to Delaware Pooled Trust, Inc.,
One Commerce Square, 2005 Market Street, Philadelphia, PA 19103 Attn: Client
Services.
Any such exchange will be calculated on the basis of the respective net
asset values of the shares involved and will be subject to the minimum
investment requirements noted above. There is no sales commission or charge of
any kind, except for exchanges involving shares of The Emerging Markets
Portfolio. See "EXCHANGE PRIVILEGE" under "SHAREHOLDER SERVICES" in the related
Prospectus. The shares of a Portfolio into which an exchange is made, if
necessary, must be registered in the state in which the investor is domiciled.
Before making an exchange, a shareholder should consider the investment
objectives of the Portfolio to be purchased.
Exchange requests may be made either by mail, FAX message or by
telephone. Telephone exchanges will be accepted only if the certificates for the
shares to be exchanged are held by the Fund for the account of the shareholder
and the registration of the two accounts will be identical. Requests for
exchanges received prior to 4 p.m., Eastern time, for the Portfolios will be
processed as of the close of business on the same day. Requests received after
this time will be processed on the next business day. Exchanges may also be
subject to limitations as to amounts or frequency, and to other restrictions
established by the Board of Directors to assure that such exchanges do not
disadvantage a Portfolio and its shareholders. Exchanges into and out of The
International Equity Portfolio, The Labor Select International Equity Portfolio,
The Global Fixed Income Portfolio, The International Fixed Income Portfolio, The
Emerging Markets Portfolio and The Global Equity Portfolio shall be subject to
the special purchase and redemption procedures identified in sections of the
related Prospectus entitled "PURCHASE OF SHARES" and "REDEMPTION OF SHARES."
For federal income tax purposes, an exchange between Portfolios is a
taxable event for shareholders subject to federal income tax, and, accordingly,
a gain or loss may be realized. The Fund reserves the right to suspend or
terminate or amend the terms of the exchange privilege upon 60 days' written
notice to client shareholders.
(Class A, B and C Shares and Institutional Class Shares of The Real
Estate Investment Trust Portfolio)
Any shareholder may require the Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund, at 1818 Market Street,
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<PAGE>
(SAI-DPT/PART B)
Philadelphia, PA 19103. In addition, certain expedited redemption methods
described below are available when stock certificates have not been issued.
Certificates are issued for the Class A Shares and Institutional Class Shares
only if a shareholder specifically requests them. Certificates are not issued
for Class B Shares or Class C Shares. If stock certificates have been issued for
shares being redeemed, they must accompany the written request. For redemptions
of $50,000 or less paid to the shareholder at the address of record, the request
must be signed by all owners of the shares or the investment dealer of record,
but a signature guarantee is not required. When the redemption is for more than
$50,000, or if payment is made to someone else or to another address, signatures
of all record owners are required and a signature guarantee is required. Each
signature guarantee must be supplied by an eligible guarantor institution. The
Fund reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may request further
documentation from corporations, retirement plans, executors, administrators,
trustees or guardians.
In addition to redemption of Portfolio shares, the Distributor, acting as
agent of the Fund, offers to repurchase Portfolio shares from broker/dealers
acting on behalf of shareholders. The redemption or repurchase price, which may
be more or less than the shareholder's cost, is the net asset value per share
next determined after receipt of the request in good order by the Fund or its
agent, subject to any applicable CDSC or Limited CDSC. This is computed and
effective at the time the offering price and net asset value are determined. See
Determining Offering Price and Net Asset Value. The Fund and the Distributor end
their business days at 5 p.m., Eastern time. This offer is discretionary and may
be completely withdrawn without further notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to any applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the related Prospectus. Redemptions of Class B Shares
are subject to the following CDSC: (i) 4% if shares are redeemed within two
years of purchase; (ii) 3% if shares are redeemed during the third or fourth
year following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge under Classes of Shares in the related Prospectus. Except for the
applicable CDSC or Limited CDSC, and with respect to the expedited payment by
wire described below, for which there is currently a $7.50 bank wiring cost,
neither the Fund nor its Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
75
<PAGE>
(SAI-DPT/PART B)
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
The Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already been
settled. The Fund will honor the redemption requests as to shares for which a
check was tendered as payment, but the Fund will not mail or wire the proceeds
until it is reasonably satisfied that the check has cleared. This potential
delay can be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Fund 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 the 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.
Payment for shares redeemed or repurchased may be made either in cash or
kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, the Fund has
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Fund is obligated to redeem shares solely in cash up to the lesser of $250,000
or 1% of the net asset value of the Fund during any 90-day period for any one
shareholder.
The value of the Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Small Accounts
Before the Fund involuntarily redeems shares from an account that, under
the circumstances listed in the related Prospectus, has remained below the
minimum amounts required by the Fund's Prospectus and sends the proceeds to the
shareholder, the shareholder will be notified in writing that the value of the
shares in the account is less than $1,000 and will be allowed 60 days from that
date of notice to make an additional investment to meet the required minimum of
$1,000. See The Conditions of Your Purchase under How to Buy Shares in the
related Prospectus. Any redemption in an inactive account
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(SAI-DPT/PART B)
established with a minimum investment may trigger mandatory redemption. No CDSC
or Limited CDSC will apply to the redemptions described in this paragraph.
* * *
The Fund has made available certain redemption privileges, as described
below. The Fund reserves the right to suspend or terminate these expedited
payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Classes or their investment dealers of record wishing
to redeem any amount of shares of $50,000 or less for which certificates have
not been issued may call the Shareholder Service Center at 800-523-1918 prior to
the time the offering price and net asset value are determined, as noted above,
and have the proceeds mailed to them at the address of record. Checks payable to
the shareholder(s) of record will normally be mailed the next business day, but
no later than seven days, after the receipt of the redemption request. This
option is only available to individual, joint and individual fiduciary-type
accounts.
In addition, redemption proceeds of $1,000 or more can be transferred to
your predesignated bank account by wire or by check by calling the phone number
listed above. An authorization form must have been completed by the shareholder
and filed with the Fund before the request is received. Payment will be made by
wire or check to the bank account designated on the authorization form as
follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption. If the proceeds are wired to the shareholder's account at
a bank which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Fund and a
signature guarantee may be required. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness.
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<PAGE>
(SAI-DPT/PART B)
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
If expedited payment under these procedures could adversely affect the
Fund, the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by Fund
shareholders are generally tape recorded. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who own
or purchase $5,000 or more of shares at the offering price or net asset value,
as applicable for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the Fund does not recommend any specific
amount of withdrawal. This $5,000 minimum does not apply for the Fund's
prototype retirement plans. Shares purchased with the initial investment and
through reinvestment of cash dividends and realized securities profits
distributions will be credited to the shareholder's account and sufficient full
and fractional shares will be redeemed at the net asset value calculated on the
third business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected by
the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Group funds which do not carry a
sales charge.
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(SAI-DPT/PART B)
Redemptions of Class A Shares pursuant to a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the purchase was made at net asset value and a
dealer's commission has been paid on that purchase. Redemptions of Class B
Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be subject
to a CDSC, unless the annual amount selected to be withdrawn is less than 12% of
the account balance on the date that the Systematic Withdrawal Plan was
established. See Waiver of Contingent Deferred Sales Charge - Class B And Class
C Shares and Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
under Redemption and Exchange in the related Prospectus. Shareholders should
consult their financial adviser to determine whether a Systematic Withdrawal
Plan would be suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
Class Shares.
* * *
Neither the Fund, the Portfolios nor the Fund's transfer agent, Delaware
Service Company, Inc., is responsible for any losses incurred in acting upon
written or telephone instructions for redemption or exchange of Portfolio shares
which are reasonably believed to be genuine. With respect to such telephone
transactions, the Fund will ensure that reasonable procedures are used to
confirm that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as if it does not, the Fund
or Delaware Service Company, Inc. may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Each Portfolio has qualified or intends to qualify, and each that has
qualified intends to continue to qualify, as a regulated investment company
under Subchapter M of the Code. As such, the Fund will not be subject to federal
income tax on net investment income and net realized capital gains which are
distributed to shareholders.
The Fund's policy is to distribute substantially all of each Portfolio's
net investment income and any net realized capital gains in the amount and at
the times that will avoid any federal income or excise taxes. Unless a
shareholder elects to receive dividends and capital gains distributions in cash,
all dividends and capital gains distributions shall be automatically reinvested
in the Portfolios of the Fund. The amounts of any dividend or capital gains
distributions cannot be predicted.
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(SAI-DPT/PART B)
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. Of the dividends paid by The Defensive Equity Portfolio, The
Aggressive Growth Portfolio and The Real Estate Investment Trust Portfolio for
the fiscal year ended October 31, 1996, 55%, 5% and 44%, respectively, were
eligible for the dividends-received deduction for corporations.
Undistributed net investment income is included in the Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore on
the "ex-dividend" date, the net asset value per share excludes the dividend
(i.e., is reduced by the per share amount of the dividend). Dividends paid
shortly after the purchase of shares by an investor, although in effect a return
of capital, are taxable to shareholders who are subject to tax.
Each Portfolio of the Fund is treated as a separate entity (and hence as
a separate "regulated investment company") for federal tax purposes. Any net
capital gains recognized by a Portfolio are distributed to its investors without
need to offset (for federal income tax purposes) such gains against any net
capital losses of another Portfolio.
Each year, the Fund will mail to you information on the amount and tax
status of each Portfolio's dividends and distributions. Shareholders should
consult their own tax advisers regarding specific questions as to federal, state
or local taxes.
Each class of shares of The Real Estate Investment Trust Portfolio will
share proportionately in the investment income and expenses of the Portfolio,
except that Class A Shares, Class B Shares and Class C Shares alone will incur
distribution fees under their respective 12b-1 plans.
TAXES
The following supplements the tax disclosure provided in the Fund's
Prospectuses.
Futures Contracts and Stock Options
(The Aggressive Growth Portfolio, The Real Estate Investment Trust Portfolios,
The Emerging Markets Portfolio and The Global Equity Portfolio)
The Aggressive Growth Portfolio's, The Real Estate Investment Trust
Portfolios', The Emerging Markets Portfolio's and The Global Equity Portfolio's
transactions in options and futures contracts will be subject to special tax
rules that may affect the amount, timing and character of distributions to
shareholders. For example, certain positions held by a Portfolio on the last
business day of each taxable year will be marked to market (i.e., treated as if
closed out) on such day, and any gain or loss associated with such positions
will be treated as 60% long-term and 40% short-term capital gain or loss.
Certain positions held by a Portfolio that substantially diminish its risk of
loss with respect to other positions in a Portfolio will constitute "straddles,"
which are subject to special tax rules that may
80
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(SAI-DPT/PART B)
cause deferral of the Portfolio's losses, adjustments in the holding periods of
Portfolio securities and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles which could alter the effects of these
rules. The Portfolios will limit their activities in options and futures
contracts to the extent necessary to meet the requirements of Subchapter M of
the Code.
Forward Currency Contracts
(The International Equity Portfolio, The Labor Select International Equity
Portfolio, The Real Estate Investment Trust Portfolios, The Global Fixed Income
Portfolio, The Emerging Markets Portfolio, The International Fixed Income
Portfolio and The Global Equity Portfolio)
The International Equity Portfolio, The Labor Select International Equity
Portfolio, The Real Estate Investment Trust Portfolios, The Global Fixed Income
Portfolio, The International Fixed Income Portfolio, The Emerging Markets
Portfolio and The Global Equity Portfolio will be required for federal income
tax purposes to recognize any gains and losses on forward currency contracts as
of the end of each taxable year as well as those actually realized during the
year. In most cases, any such gain or loss recognized with respect to a forward
currency contract is considered to be ordinary income or loss. Furthermore,
forward currency futures contracts which are intended to hedge against a change
in the value of securities held by these Portfolios may affect the holding
period of such securities and, consequently, the nature of the gain or loss on
such securities upon disposition.
Special tax considerations also apply with respect to foreign investments
of these Portfolios. For example, certain foreign exchange gains and losses
(including exchange gains and losses on forward currency contracts) realized by
the Portfolio will be treated as ordinary income or losses.
State and Local Taxes
Shares of the Fund are exempt from Pennsylvania county personal property
tax.
INVESTMENT MANAGEMENT AGREEMENTS
Delaware Investment Advisers, a division of Delaware Management Company,
Inc. ("Delaware"), One Commerce Square, Philadelphia, PA 19103, furnishes
investment management services to The Defensive Equity, The Aggressive Growth,
The Fixed Income, The Limited-Term Maturity, The Defensive Equity Small/Mid-Cap,
The Real Estate Investment Trust and The High-Yield Bond Portfolios, subject to
the supervision and direction of the Fund's Board of Directors. Delaware
International Advisers Ltd. ("Delaware International"), Veritas House, 125
Finsbury Pavement, London, England EC2A 1NQ, furnishes similar services to The
International Equity, The Labor Select International Equity, The Global Fixed
Income, The International Fixed Income, The Emerging Markets and The Global
Equity Portfolios, subject to the supervision and direction of the Fund's Board
of Directors. Lincoln Investment Management, Inc. ("Lincoln") serves as
sub-adviser to Delaware with respect to The Real Estate Investment Trust
Portfolio. Lincoln's address is 200 E. Berry Street, Fort Wayne, Indiana 46802.
Delaware and its predecessors have been managing the funds in the
Delaware Group since 1938. On October 31, 1996, Delaware and its affiliates
within the Delaware Group, including Delaware
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(SAI-DPT/PART B)
International, were managing in the aggregate more than $30 billion in assets in
various institutional or separately managed (approximately $19,214,690,000) and
investment company (approximately $11,539,873,000) accounts.
Lincoln (formerly Lincoln National Investment Management Company) was
incorporated in 1930. As of October 31, 1996, Lincoln had over $39 billion in
assets under management.
The Investment Management Agreements for The Defensive Equity, The
Aggressive Growth, The Fixed Income, The Limited-Term Maturity, The
International Equity, The Global Fixed Income and The International Fixed Income
Portfolios are each dated April 3, 1995 and were approved by shareholders on
March 29, 1995. The Investment Management Agreements for The Defensive Equity
Small/Mid-Cap, The Labor Select International Equity, The Real Estate Investment
Trust and The High-Yield Bond Portfolios are each dated November 29, 1995 and
were approved by the initial shareholders on November 30, 1995. The Sub-Advisory
Agreement for The Real Estate Investment Trust Portfolio is dated November 29,
1995 and was approved by the initial shareholder on November 30, 1995. The
Investment Management Agreement for The Emerging Markets Portfolio is dated
April 14, 1997 and was approved by the initial shareholder on that date. The
Investment Management Agreement for The Global Equity Portfolio is dated
_______________, 1997 and was approved by the initial shareholder on
_______________, 1997.
Each such Agreement has an initial term of two years and may be renewed
after its initial term only so long as such renewal and continuance are
specifically approved at least annually by the Board of Directors or by vote of
a majority of the outstanding voting securities of the Portfolio, and only if
the terms of the renewal thereof have been approved by the vote of a majority of
the directors of the Fund who are not parties thereto or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. Each Agreement is terminable without penalty on 60 days' notice
by the directors of the Fund or by the investment adviser. Each Agreement will
terminate automatically in the event of its assignment.
As compensation for the services to be rendered under their advisory
agreements, Delaware or, as relevant, Delaware International is entitled to an
advisory fee calculated by applying a quarterly rate, based on the following
annual percentage rates, to the Portfolio's average daily net assets for the
quarter:
Portfolio Rate
The Defensive Equity Portfolio 0.55%
The Aggressive Growth Portfolio 0.80%
The International Equity Portfolio 0.75%
The Defensive Equity Small/Mid-Cap Portfolio 0.65%
The Labor Select International Equity Portfolio 0.75%
The Real Estate Investment Trust Portfolio 0.75%*
The Real Estate Investment Trust Portfolio II 0.75%*
The Fixed Income Portfolio 0.40%
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(SAI-DPT/PART B)
The Limited-Term Maturity Portfolio 0.30%
The Global Fixed Income Portfolio 0.50%
The International Fixed Income Portfolio 0.50%
The High-Yield Bond Portfolio 0.45%
The Emerging Markets Portfolio 1.20%
The Global Equity Portfolio 0.00%
* Delaware has entered into a sub-advisory agreement with Lincoln with
respect to The Real Estate Investment Trust Portfolios. As compensation
for its services as sub-adviser to Delaware, Lincoln is entitled to
receive a sub-advisory fee equal to 30% of the investment management fee
under Delaware's Investment Management Agreement with the Fund on behalf
of the Portfolio.
Out of the investment advisory fees to which they are otherwise entitled,
Delaware and Delaware International pay their proportionate share of the fees
paid to unaffiliated directors by the Fund, except that Delaware International
will make no such payments out of the fees it receives from managing The
International Fixed Income, The Emerging Markets, The Labor Select International
Equity and The Global Equity Portfolios and Delaware will make no such payments
out of the fees it receives from managing The Defensive Equity Small/Mid-Cap,
The Real Estate Investment Trust and The High-Yield Bond Portfolios.
With respect to The Defensive Equity, The Aggressive Growth, The Fixed
Income and The Limited-Term Maturity Portfolios, Delaware had elected
voluntarily to waive that portion, if any, of the annual investment advisory
fees payable by a particular Portfolio and to reimburse a Portfolio for its
expenses to the extent necessary to ensure that the expenses of that Portfolio
(exclusive of taxes, interest, brokerage commissions and extraordinary expenses)
did not exceed, on an annualized basis, respectively, 0.68%, 0.93%, 0.53% and
0.43%, as a percentage of average net assets during the period from the
commencement of the public offering for the Portfolio through October 31, 1992.
These waivers have been extended through October 31, 1997. With respect to The
Defensive Equity Small/Mid-Cap Portfolio, The Real Estate Investment Trust
Portfolio class of The Real Estate Investment Trust Portfolio, The Real Estate
Investment Trust Portfolio II and The High-Yield Bond Portfolio, Delaware has
elected voluntarily to waive that portion, if any, of the annual Investment
Advisory Fee payable by such Portfolios and to reimburse each Portfolio for its
expenses to the extent necessary to ensure that the expenses of each Portfolio
(exclusive of taxes, interest, brokerage commissions and extraordinary expenses)
do not exceed, as a percentage of average net assets, on an annualized basis,
0.79%, 0.89%, 0.89% and 0.59%, respectively, during the period from the
commencement of the public offering of such Portfolios through October 31, 1997.
With respect to The REIT Fund A Class, The REIT Fund B Class, The REIT Fund C
Class and The REIT Fund Institutional Class of The Real Estate Investment Trust
Portfolio, Delaware has elected voluntarily to waive that portion, if any, of
the annual Investment Advisory Fee payable by such classes and to reimburse each
class for its expenses to the extent necessary to ensure that the expenses of
each class (exclusive of taxes, interest, brokerage commissions, extraordinary
expenses and 12b-1 fees) do not exceed, as a
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(SAI-DPT/PART B)
percentage of average net assets, on an annualized basis, [ ]% during the period
from the commencement of the public offering of such Portfolios through October
31, 1997. Other Operating Expenses for The Defensive Equity Small/Mid-Cap, The
Real Estate Investment Trust Portfolios and The High-Yield Bond Portfolios are
estimated.
Delaware International voluntarily elected to waive that portion, if any,
of its annual investment advisory fees and to reimburse The International Equity
and The International Fixed Income Portfolio for their respective expenses to
the extent necessary to ensure that the expenses of that Portfolio (exclusive of
taxes, interest, brokerage commissions and extraordinary expenses) did not
exceed, on an annualized basis, respectively, 0.96% and 0.62% as a percentage of
average net assets. For The International Equity Portfolio, the waiver and
reimbursement commitment applied to the period from the commencement of the
public offering for the Portfolio through October 31, 1992. Such waiver has been
extended through October 31, 1997. For The International Fixed Income Portfolios
the waiver and reimbursement commitment applied to the period from the
commencement of the public offering for the Portfolio through April 30, 1994.
Such waiver for The International Fixed Income Portfolio has been modified to
provide that such expenses of the Portfolio do not exceed, on an annual basis,
0.60% through October 31, 1997. Delaware International voluntarily elected to
waive that portion, if any, of its annual investment advisory fees and to
reimburse The Global Fixed Income Portfolio for its expenses to the extent
necessary to ensure that the expenses of that Portfolio (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses) did not exceed, on
an annualized basis, 0.62% from the commencement of the public offering of the
Portfolio through October 31, 1993. Such waiver had been extended through
October 31, 1994, but modified, effective November 1, 1994 through October 31,
1997 to provide that such expenses of the Portfolio do not exceed, on an
annualized basis, 0.60%. Delaware International has elected voluntarily to waive
that portion, if any, of the annual Investment Advisory Fee payable by The Labor
Select International Equity Portfolio and to reimburse the Portfolio for its
expenses to the extent necessary to ensure that the expenses of that Portfolio
(exclusive of taxes, interest, brokerage commissions and extraordinary expenses)
do not exceed, on an annualized basis, 0.96% of such Portfolio's average net
assets during the period from the commencement of the public offering of the
Portfolio through October 31, 1996. Such waiver has been extended through
October 31, 1997. Delaware International voluntarily elected to waive that
portion, if any, of its annual investment advisory fees and to pay The Emerging
Markets Portfolio's expenses to the extent necessary to ensure that the expenses
of that Portfolio (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses) do not exceed, on an annualized basis, 1.55% as a
percentage of average net assets from the commencement of the public offering
through October 31, 1997. Delaware International voluntarily elected to waive
that portion, if any, of its annual investment advisory fees and to pay The
Global Equity Portfolio's expenses to the extent necessary to ensure that the
expenses of that Portfolio (exclusive of taxes, interest, brokerage commissions
and extraordinary expenses) do not exceed, on an annualized basis, 0.00% as a
percentage of average net assets from the commencement of the public offering
through October 31, 1997. Amounts will be prorated over each Portfolio's initial
fiscal period from commencement of operations, if less than a complete fiscal
year.
84
<PAGE>
(SAI-DPT/PART B)
Investment management fees incurred for the last three fiscal years with
respect to each Portfolio follows:
<TABLE>
<CAPTION>
Portfolio October 31, 1996 October 31, 1995 October 31, 1994
- --------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
The Defensive Equity Portfolio $343,114 earned $255,586 earned $121,537 earned
$328,126 paid $237,776 paid $88,345 paid
$14,988 waived $17,810 waived $33,192 waived
The Aggressive Growth Portfolio $214,315 earned $202,809 earned $171,517 earned
$185,753 paid $163,397 paid $118,977 paid
$28,562 waived $39,412 waived $52,540 waived
The International Equity Portfolio $1,632,036 paid $792,936 paid $390,070 earned
$374,822 paid
$15,248 waived
The Global Fixed Income Portfolio $762,870 earned $349,107 earned $175,663 earned
$661,220 paid $293,883 paid $124,905 paid
$101,650 waived $55,224 waived $50,758 waived
The Labor Select International $100,144 earned N/A N/A
Equity Portfolio $50,055 paid
$50,089 waived
The Real Estate Investment $153,313 earned N/A N/A
Trust Portfolio $127,250 paid
$26,063 waived
The Fixed Income Portfolio $19,389 earned N/A N/A
$-0- paid
$19,389 waived
</TABLE>
On October 31, 1996, the total net assets of the Fund were $707,861,340,
broken down as follows:
The Defensive Equity Portfolio $67,178,884
The Aggressive Growth Portfolio $28,525,544
The International Equity Portfolio $299,949,843
The Global Fixed Income Portfolio $252,068,251
The Labor Select International Equity Portfolio $23,153,615
The Real Estate Investment Trust Portfolio $26,467,638
The Fixed Income Portfolio $10,517,565
85
<PAGE>
(SAI-DPT/PART B)
Delaware is an indirect, wholly owned subsidiary of Delaware Management
Holdings, Inc. ("DMH").
Except for the expenses borne by the investment advisers under their
respective Investment Management Agreements and the distributor under the
Distribution Agreements, each Portfolio is responsible for all of its own
expenses. Among others, these include each Portfolio's proportionate share of
rent and certain other administrative expenses; the investment management fees;
transfer and dividend disbursing agent fees and costs; custodian expenses;
federal and state securities registration fees; proxy costs; and the costs of
preparing prospectuses and reports sent to shareholders. The ratios of expenses
to average daily net assets for the fiscal year ended October 31, 1996 were as
follows:
The Defensive Equity Portfolio 0.67%*
The Aggressive Growth Portfolio 0.90%*
The International Equity Portfolio 0.89%
The Global Fixed Income Portfolio 0.60%*
The Labor Select International Equity Portfolio 0.92%*/**
The Real Estate Investment Trust Portfolio 0.89%*/**
*Reflects the voluntary waiver of fees by the respective investment manager.
**Annualized.
The ratio of expenses to average daily net assets for The Fixed Income
Portfolio is expected to equal 0.53% on an annual basis.
Distribution and Service
Delaware Distributors, L.P. (which formerly conducted business as Delaware
Distributors, Inc.), located at 1818 Market Street, Philadelphia, PA 19103,
serves as the national distributor for The Defensive Equity, The Aggressive
Growth, The Fixed Income, The Limited-Term Maturity, The International Equity,
The Global Fixed Income and The International Fixed Income Portfolios under
separate Distribution Agreements dated April 3, 1995. Delaware Distributors,
L.P. is the national distributor for The Real Estate Investment Trust Portfolio
and The Defensive Equity Small/Mid-Cap, The Labor Select International Equity
and The High-Yield Bond Portfolios under separate Distribution Agreements dated
November 29, 1995. It is the national distributor for The Emerging Markets
Portfolio under a Distribution Agreement dated April 14, 1997. It is the
national distributor for The Global Equity Portfolio under a Distribution
Agreement dated _______________, 1997. It is the national distributor for The
Real Estate Investment Trust Portfolio II under a Distribution Agreement dated
_______________, 1997. Delaware Distributors, L.P. is an affiliate of the
investment advisers and bears all of the costs of promotion and distribution.
Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the
national distributor of the Fund's shares. On that date, Delaware Distributors,
L.P., a newly formed limited partnership, succeeded to the business of DDI. All
officers and employees of DDI became officers and employees of Delaware
Distributors, L.P. DDI is the corporate general partner of Delaware
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(SAI-DPT/PART B)
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly owned subsidiaries of DMH.
Delaware Service Company, Inc., an affiliate of Delaware, is the Fund's
shareholder servicing, dividend disbursing and transfer agent for each Portfolio
pursuant to an Amended and Restated Shareholders Services Agreement dated
_______________,1997. Delaware Service Company, Inc. also provides accounting
services to the Fund pursuant to the terms of a separate Fund Accounting
Agreement. Delaware Service Company, Inc.'s principal business address is 1818
Market Street, Philadelphia, PA 19103. It is also an indirect, wholly owned
subsidiary of DMH.
87
<PAGE>
(SAI-DPT/PART B)
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of
its Board of Directors. As of _______________, 1997, no one account held 25% or
more of the outstanding shares of any of the Fund's Portfolios. As of
_______________, 1997, the directors and officers, as a group, owned less than
1% of the outstanding shares of The Real Estate Investment Trust Portfolio; they
did not hold shares of any of the other Portfolios.
As of _______________, 1997, management believes the following accounts
held 5% or more of the outstanding shares of a Portfolio:
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Defensive
Equity Portfolio Northern Trust
TRST PHH Group
P.O. Box 92956
Chicago, IL 60675 568,844 12.50%
Strafe & Co.
For Consolidated Products
Profit Sharing Plan
P.O. Box 160
Westerville, OH 43086 476,138 10.46%
The Northern Trust Company
TRST Children's Memorial
Pension Trust
22-45691 / 2-255243
P.O. Box 92956
Chicago, IL 60675 340,561 7.05%
Commerce Bank of Kansas City
Trust Burns & McDonnell
Employee Stock Ownership Plan
P.O. Box 419248
Kansas City, MO 64141 334,958 7.36%
Metz Baking Company
Master Pension Trust
1014 Nebraska Street
Sioux City, IA 51105 299,801 6.59%
</TABLE>
88
<PAGE>
(SAI-DPT/PART B)
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Defensive
Equity Portfolio Cherrytrust & Co.
FBO Colorado Open Shop
Employers Pension Trust
C/O The Bank of Cherry Creek NA
3033 E. First Ave
Denver, CO 80206 289,509 6.36%
Patterson & Company
c/o CoreStates Bank
P.O. Box 7829
Philadelphia, PA 19101 275,989 6.06%
Mac & Co.
A/C LNFF5033902
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230 251,100 5.51%
The Aggressive
Growth Portfolio St. Elizabeth Hospital Medical Center
1044 Belmont Ave.
Youngstown, OH 44504 394,130 36.37%
The Hillman Foundation, Inc.
2000 Grant Building
Pittsburgh, PA 15219 342,202 31.58%
Crestar Bank
Cust the College of William and Mary
P.O. Box 8795
Blow Memorial Hall
Williamsburg, VA 23187 134,202 12.38%
The City of Groton
295 Meridian Street
Groton, CT 06340 61,900 5.71%
</TABLE>
89
<PAGE>
(SAI-DPT/PART B)
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The International
Equity Portfolio The Salvation Army
Eastern Territory
440 West Nyack Road
West Nyack, NY 10994 2,701,874 10.71%
Father Flanagan's Foundation Fund
14100 Crawford St.
Boys Town, NE 68010 2,169,664 8.60%
The Salvation Army
Central Territory
10 West Algonquin Road
Des Plaines, IL 60016 2,081,588 8.25%
Mac & Co.
A/C LCPF0763222
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230 1,497,760 5.93%
National City Trust Company
Cust. University of Kentucky
101 S. Fifth St.
Louisville, KY 40202-3103 1,496,066 5.93%
The Salvation Army
A Georgia Corporation
1424 Northeast Expressway
Atlanta, GA 30329 1,269,064 5.03%
The Fixed Income
Portfolio Northumberland City
Employees Retirement Fund
Cust. Northern Central Bank
c/o Keystone Financial
Trust Operation
P.O. Box 2450
Altoona, PA 16603 600,624 28.28%
Patterson & Co.
c/o CoreStates Bank
P.O. Box 7829
Philadelphia, PA 19101 398,008 18.73%
</TABLE>
90
<PAGE>
(SAI-DPT/PART B)
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Fixed Income Delaware Management Company
Portfolio Attn. Joe Hastings
1818 Market Street
Philadelphia, PA 19103 323,734 15.24%
The City of Groton
295 Meridian Street
Groton, CT 06340 313,581 14.90%
Crestar Bank
Cust The College of William and Mary
Room 224 Private Funds Office
Blow Memorial Hall
P.O. Box 8795
Williamsburg, VA 23187 170,377 8.02%
Philadelphia Association of Zeta Psi
Fraternity U/T/A E W Weil
613 Kirsch Avenue
Wayne, PA 19087 139,659 6.57%
The Global Fixed
Income Portfolio Bost & Co.
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230 3,707,174 12.18%
Saxon & Co.
FBO Western Pennsylvania Teamsters
& Employers Pension Fund
P.O. Box 7780-1888
Philadelphia, PA 19183 3,312,749 10.88%
St. Louis University
3500 Lindell Blvd.
St. Louis, MO 63103 3,293,630 10.81%
Washington Suburban Sanitary Commission
Employees Retirement Plan
14501 Sweitzer Ln.
Laurel, MD 20707 2,952,728 9.69%
Optima Health Inc.
Master Custody
C/O Chase Manhattan Bank
770 Broadway
New York, NY 10003 1,729,725 5.68%
</TABLE>
91
<PAGE>
(SAI-DPT/PART B)
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Global Fixed
Income Portfolio Mary Hitchock Memorial Hospital
One Medical Center Drive
Lebanon, NH 03756 1,718,262 5.64%
Amherst H. Wilder Foundation
919 Lafond Ave.
St. Paul, MN 55104 1,610,379 5.28%
The Labor Select
International Equity
Portfolio Operating Engineers
LCL 101 Pension
301 E. Armour Blvd. Suite 203
Kansas City, MO 64111 1,064,349 33.46%
Operating Engineers Pension Trust Fund
8401 Corporate Drive Suite 200
Landover, MD 20785 415,609 13.06%
First of America Trust Company
Cust Plumbers and Steamfitters
Local 137 Pension Trust
International Portfolio
P.O. Box 4042
Kalamazoo, MI 49002 368,046 11.57%
Carpenters 626 Pension Fund
P.O. Box 740
Davis Road and Oakwood Lane
Valley Forge, PA 19482 225,666 7.09%
Keystone District Council of Carpenters
Pension Fund
524 S. 22nd Street
Harrisburg, PA 17104 214,362 6.73%
Bot Hudson County Carpenters Pension Fund
c/o I.E. Shaffer & Co.
P.O. Box 1025
West Trenton, NJ 08628 211,666 6.65%
Architectural & Ornamental
Ironworkers Local 63
2525 West Lexington
Broadview, IL 60153 163,995 5.15%
</TABLE>
92
<PAGE>
(SAI-DPT/PART B)
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The Real Estate
Investment Trust
Portfolio The Lincoln National Life Insurance Company
Separate Account No. 5
1300 S. Clinton Street
Fort Wayne, IN 46802 1,573,224 43.81%
The Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, IN 46802 1,136,308 23.91%
American States Insurance Company
500 N. Meridian St.
Indianapolis, IN 46204 568,155 15.82%
The High-Yield
Bond Portfolio Schwartz 1996 Charitable Remainder Unitrust
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062 308,625 36.81%
Chicago Trust Co.
FBO Lincoln National Corp.
Employees Retirement Plan
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201 307,849 36.72%
Trust Seven Hundred Thirty
U/A/D 4/2/94
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062 110,912 13.23%
Trust Four Hundred Thirty
U/A/D 4/2/94
c/o TCS Group, L.L.C.
1200 Shermer Road Suite 212
Northbrook, IL 60062 110,912 13.23%
The Emerging
Markets Portfolio Chicago Trust Company
FBO Lincoln National Corp
Employees Retirement Trust
1000 N. Water Street, TR14
Milwaukee, WI 53202 538,808 99.99%
</TABLE>
93
<PAGE>
(SAI-DPT/PART B)
<TABLE>
<CAPTION>
Portfolio Name and Address of Account Share Amount Percentage
- --------- --------------------------- ------------ ----------
<S> <C> <C> <C>
The International
Fixed Income
Portfolio Adventist Health System Sunbelt
Healthcare Corp.- Core
111 N. Orlando Ave.
Winter Park, FL 32789 1,182,585 88.70%
Adventist Health System Sunbelt
Healthcare Corp.- Malpractice
111 N. Orlando Ave.
Winter Park, FL 32789 150,648 11.29%
</TABLE>
DMH Corp., Delaware Voyageur Holdings, Inc., Delaware Management Company,
Inc., Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company, Delaware International
Holdings Ltd., Founders Holdings, Inc., Delaware International Advisers Ltd.,
Delaware Capital Management, Inc. and Delaware Investment & Retirement Services,
Inc. are direct or indirect, wholly owned subsidiaries of DMH. On April 3, 1995,
a merger between DMH and a wholly owned subsidiary of Lincoln National
Corporation ("Lincoln National") was completed. In connection with the merger,
new Investment Management Agreements between the Fund on behalf of The Defensive
Equity Portfolio, The Aggressive Growth Portfolio, The Fixed Income Portfolio
and The Limited-Term Maturity Portfolio and Delaware, and new Investment
Management Agreements between the Fund on behalf of The International Equity
Portfolio, The Global Fixed Income Portfolio and The International Fixed Income
Portfolio and Delaware International were executed following shareholder
approval. DMH, Delaware 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.
Certain officers and directors of the Fund hold identical positions in
each of the other funds in the Delaware Group. Directors and principal officers
of the Fund are noted below along with their ages and their business experience
for the past five years. Unless otherwise noted, the address of each officer and
director is One Commerce Square, Philadelphia, PA 19103.
94
<PAGE>
(SAI-DPT/PART B)
*Wayne A. Stork (60)
Chairman, President, Chief Executive Officer, Director and/or Trustee of
the Fund, each of the other 32 investment companies in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp., Delaware International Holdings
Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Distributors, Inc. and Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware International
Advisers Ltd.
Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
Richard G. Unruh, Jr. (57)
Executive Vice President of the Fund and each of the other 32 investment
companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of the
Fund, each of the other 32 investment companies in the Delaware Group and
Delaware Management Company, Inc.
Executive Vice President/Chief Investment Officer, Fixed Income and
Director of Founders Holdings, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Holdings, Inc.
Senior Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation.
Director of HYPPCO Finance Company Ltd.
Before returning to the Delaware Group in 1993, Mr. Suckow was Executive
Vice President and Director of Fixed Income for Oppenheimer Management
Corporation, New York, NY from 1985 to 1992. Prior to that, Mr. Suckow was a
fixed-income portfolio manager for the Delaware Group.
- ----------------------
*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
95
<PAGE>
(SAI-DPT/PART B)
Walter P. Babich (70)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from
1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (58)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also a
lecturer in English at the University. In addition, Mr. Knerr was Chairman of
The Publishing Group, Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (56)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1992, she was Adjunct
Professor of Columbia Business School.
W. Thacher Longstreth (76)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Thomas F. Madison (61)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996. From February to September 1994, Mr. Madison served
as Vice Chairman--Office of the CEO of The Minnesota Mutual Life Insurance
Company and from 1988 to 1993, he was President of U.S. WEST
Communications--Markets.
96
<PAGE>
(SAI-DPT/PART B)
* Jeffrey J. Nick (44)
Director and/or Trustee of the Fund and 32 other investment companies in
the Delaware Group.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. From 1992 to 1996, Mr. Nick was Managing Director of
Lincoln National UK plc and from 1989 to 1992, he was Senior Vice President
responsible for corporate planning and development for Lincoln National
Corporation.
Charles E. Peck (71)
Director and/or Trustee of the Fund and each of the other 32 investment
companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of
The Ryland Group, Inc., Columbia, MD.
David K. Downes (57)
Executive Vice President/Chief Operating Officer/Chief Financial Officer
of the Fund, each of the other 32 investment companies in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware Capital Management, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of Delaware Management Company, Inc., DMH Corp., Delaware
Distributors, Inc. and Founders Holdings, Inc., Delaware International Holdings
Ltd.
Chairman and Director of Delaware Management Trust Company.
Chairman and Director of Delaware Investment & Retirement Services, Inc.
President/Chief Executive Officer/Chief Financial Officer and Director of
Delaware Service Company, Inc.
Senior Vice President/Chief Administrative Officer/ Chief Financial
Officer of Delaware Distributors, L.P. Director of Delaware International
Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer of Equitable
Capital Management Corporation, New York, from December 1985 through August
1992, Executive Vice President from December 1985 through March 1992, and Vice
Chairman from March 1992 through August 1992.
- ----------------------
*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
97
<PAGE>
(SAI-DPT/PART B)
George M. Chamberlain, Jr. (50)
Senior Vice President and Secretary of the Fund, each of the other 32
investment companies in the Delaware Group, Delaware Management Holdings, Inc.
and Delaware Distributors, L.P.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware Service Company,
Inc., Founders Holdings, Inc., Delaware Investment & Retirement Services, Inc.
and Delaware Capital Management, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
George E. Deming (55)
Vice President/Senior Portfolio Manager of The Defensive Equity Portfolio.
Vice President/Senior Portfolio Manager of Delaware Investment Advisers.
Before joining the Delaware Group in 1978, Mr. Deming was responsible for
portfolio management and institutional sales at White Weld & Co., Inc. He is a
member of the Financial Analysts of Philadelphia.
During the past five years, Mr. Deming has served in various capacities at
different times within the Delaware organization.
Gerald S. Frey (51)
Vice President/Senior Portfolio Manager of the Fund, of seven other
investment companies in the Delaware Group and of Delaware Management Company,
Inc.
Before joining the Delaware Group in 1996, Mr. Frey was a Senior Director
with Morgan Grenfell Capital Management, New York, NY from 1986 to 1995.
Gary A. Reed (42)
Vice President/Senior Portfolio Manager of the Fund, of nine other
investment companies in the Delaware Group, of Delaware Management Company, Inc.
and Delaware Capital Management, Inc.
Vice President/Senior Portfolio Manager of Delaware Capital Management,
Inc.
During the past five years, Mr. Reed has served in such capacities within
the Delaware organization.
Gerald T. Nichols (39)
Vice President/Senior Portfolio Manager of the Fund, of 11 other
investment companies in the Delaware Group and of Delaware Management Company,
Inc.
Vice President of 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.
98
<PAGE>
(SAI-DPT/PART B)
Paul A. Matlack (37)
Vice President/Senior Portfolio Manager of the Fund, of 11 other
investment companies in the Delaware Group and of Delaware Management Company,
Inc.
Vice President of Founders Holdings, Inc.
President and Director of Founders CBO Corporation.
During the past five years, Mr. Matlack has served in various capacities
at different times within the Delaware organization.
Babak Zenouzi (34)
Vice President/Portfolio Manager of the Fund and of nine other investment
companies in the Delaware Group.
Vice President/Assistant Portfolio Manager of Delaware Investment
Advisers.
Before joining the Delaware Group in 1992, Mr. Zenouzi held positions of
Assistant Vice President, Senior Financial Analyst and Portfolio Accountant for
The Boston Company, Boston, MA from 1986 to 1991.
Joseph H. Hastings (47)
Vice President/Corporate Controller of the Fund, each of the other 32
investment companies in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Founders Holdings, Inc. and Delaware International Holdings
Ltd.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P., New York, NY from
1989 to 1992. Prior to that, Mr. Hastings served as Controller and Treasurer for
Fine Homes International, L.P., Stamford, CT from 1987 to 1989.
Michael P. Bishof (35)
Vice President/Treasurer of the Fund, each of the other 32 investment
companies in the Delaware Group, Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P., Delaware Service Company, Inc.
and Founders Holdings, Inc.
Vice President/Manager of Investment Accounting of Delaware International
Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS First
Boston Investment Management, New York, NY from 1993 to 1994 and an Assistant
Vice President for Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
99
<PAGE>
(SAI-DPT/PART B)
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Fund and the total compensation received from all Delaware Group funds for the
fiscal year ended October 31, 1996 and an estimate of annual benefits to be
received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of October 31, 1996.
<TABLE>
<CAPTION>
Pension or Total
Retirement Estimated Compensation
Benefits Annual from all 18
Aggregate Accrued Benefits Delaware Group
Compensation as Part of Upon Investment
Name from Fund Fund Expenses Retirement* Companies
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,088 None $30,000 $44,102
Ann R. Leven $2,446 None $30,000 $52,238
Walter P. Babich $2,249 None $30,000 $48,102
Anthony D. Knerr $2,407 None $30,000 $51,238
Charles E. Peck $2,252 None $30,000 $47,238
Thomas F. Madison** $0,000 None $30,000 $00,000
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for Directors/
Trustees, each disinterested director who, at the time of his or her
retirement from the Board, has attained the age of 70 and served on the
Board for at least five continuous years, is entitled to receive payments
from each fund in the Delaware Group for a period equal to the lesser of the
number of years that such person served as a director or the remainder of
such person's life. The amount of such payments will be equal, on an annual
basis, to the amount of the annual retainer that is paid to directors of
each fund at the time of such person's retirement. If an eligible director
retired as of October 31, 1996, he or she would be entitled to annual
payments totaling $30,000, in the aggregate, from all of the funds in the
Delaware Group, based on the number of funds in the Delaware Group as of
that date.
** Mr. Madison joined the Fund's Board of Directors on April 30, 1997.
100
<PAGE>
(SAI-DPT/PART B)
GENERAL INFORMATION
Custody Arrangements
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245
serves as custodian for The Global Fixed Income, The International Equity, The
Labor Select International Equity, The Real Estate Investment Trust, The
High-Yield Bond, The Emerging Markets, The International Fixed Income and The
Global Equity Portfolios. Bankers Trust Company, One Bankers Trust Plaza, New
York, NY 10006 serves as custodian for The Defensive Equity, The Aggressive
Growth, The Fixed Income, The Limited-Term Maturity and The Defensive Equity
Small/Mid-Cap Portfolios. The Chase Manhattan Bank serves as custodian for all
Portfolios with respect to foreign securities.
With respect to foreign securities, The Chase Manhattan Bank makes
arrangements with subcustodians who were approved by the directors of the Fund
in accordance with Rule 17f-5 of the 1940 Act. In the selection of foreign
subcustodians, the directors consider a number of factors, including, but not
limited to, the reliability and financial stability of the institution, the
ability of the institution to provide efficiently the custodial services
required for the Fund, and the reputation of the institutions in the particular
country or region.
Capitalization
The Fund has a present authorized capitalization of one billion shares
of capital stock with a $.01 par value per share. The Board of Directors has
allocated fifty million shares to each Portfolio. While all shares have equal
voting rights on matters affecting the entire Fund, each Portfolio would vote
separately on any matter which affects only that Portfolio, such as any change
in its own investment objective and policy or action to dissolve a Portfolio and
as otherwise prescribed by the 1940 Act. Shares of each Portfolio have a
priority in that Portfolios' assets, and in gains on and income from the
portfolio of that Portfolio. Shares have no preemptive rights, are fully
transferable and, when issued, are fully paid and nonassessable.
The legality of the issuance of the shares offered hereby, pursuant to
registration under the 1940 Act Rule 24f-2, has been passed upon for the Fund by
Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania.
Noncumulative Voting
Portfolio shares have noncumulative voting rights which means that the
holders of more than 50% of the shares of the Fund voting for the election of
directors can elect all the directors if they choose to do so, and, in such
event, the holders of the remaining shares will not be able to elect any
directors.
This Statement of Additional Information does not include all of the
information contained in the Registration Statement which is on file with the
Securities and Exchange Commission.
101
<PAGE>
(SAI-DPT/PART B)
FINANCIAL STATEMENTS
Ernst & Young LLP serves as independent auditors for Delaware Pooled
Trust, Inc. (the "Fund") and, in its capacity as such, audits the financial
statements contained in the Fund's Annual Reports. The Real Estate Investment
Trust Portfolio's and The Defensive Equity, The Aggressive Growth, The
International Equity, The Global Fixed Income, The Labor Select International
Equity and The Fixed Income Portfolios' Statements of Net Assets, Statements of
Operations, Statements of Changes in Net Assets and Notes to Financial
Statements, and The Limited-Term Maturity Portfolio's and The International
Fixed Income Portfolio's Statements of Assets and Liabilities and Notes to
Financial Statements as well as the reports of Ernst & Young LLP for the fiscal
year ended October 31, 1996 are included in the Fund's Annual Reports to
shareholders. The financial statements, the notes relating thereto and the
reports of Ernst & Young LLP, listed above are incorporated by reference from
the Annual Reports into this Statement of Additional Information. Unaudited
financial information for each of the Portfolios listed above and The High-Yield
Bond and The Emerging Markets Portfolios for the period ended April 30, 1997 is
incorporated by reference from the Semi-Annual Reports into this Statement of
Additional Information. Unaudited financial information for the period ended
September 30, 1997 for The International Fixed Income Portfolio and The Emerging
Markets Portfolio follows.
102
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statements of Net Assets
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed above are
incorporated into Part B by reference to the Registrant's Annual
Reports for the fiscal year ended October 31, 1996 for The Defensive
Equity, The Aggressive Growth, The Global Fixed Income, The Fixed
Income, The Real Estate Investment Trust, The International Equity and
The Labor Select International Equity Portfolios. The Statements of
Assets and Liabilities, Notes to Financial Statements and Accountant's
Reports for The Limited-Term Maturity Portfolio and The International
Fixed Income Portfolio are incorporated into Part B by reference to
the Registrant's Annual Reports for these Portfolios for the fiscal
year ended October 31, 1996. Unaudited financial statements for each
Portfolio, except the Defensive Equity Small/Mid-Cap Portfolio, are
incorporated by reference into Part B from the Registrant's
Semi-Annual Reports for the period ended April 30, 1997.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended and
supplemented through November 28, 1995,
incorporated into this filing by reference to
Post-Effective Amendment No. 8 filed September
15, 1995 and Post-Effective Amendment No. 9
filed November 24, 1995.
(b) Executed Articles Supplementary (January 14,
1997) incorporated into this filing by reference
to Post-Effective Amendment No. 14 filed January
16, 1997.
(c) Articles Supplementary (April 14, 1997)
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed May 23,
1997.
<PAGE>
Part C - Other Information
(continued)
(d) Articles Supplementary ( ______, 1997) to be
filed by Amendment.
(2) By-Laws. By-Laws, as amended to date, incorporated into this
filing by reference to Post-Effective Amendment No. 8 filed
September 15, 1995.
(3) Voting Trust Agreement. Inapplicable.
(4) Copies of All Instruments Defining the Rights of Holders.
(a) Articles of Incorporation and Articles
Supplementary.
(1) Articles Fifth and Ninth of the
Articles of Incorporation (May 29,
1991), Article Fifth of Articles of
Amendment (October 10, 1991), Article
Second of Articles Supplementary
(September 21, 1992), Article Second
of Articles Supplementary (August 3,
1993), Article Second of Articles
Supplementary (October 12, 1994)
incorporated into this filing by
reference to Post-Effective Amendment
No. 8 filed September 15, 1995.
(2) Article Fourth of Articles
Supplementary (November 28, 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 9 filed November 24, 1995.
(3) Article Second of Articles
Supplementary (April 14, 1997)
incorporated into this filing by
reference to Post-Effective Amendment
No. 16 filed May 23, 1997.
(4) Article __ of Articles Supplementary
( _____, 1997) attached in Exhibit
24(b)(1)(d) to be filed by
Amendment.
(b) By-Laws. Articles II, III and XIV of the By-Laws
incorporated into this filing by reference to
Post-Effective Amendment No. 8 filed September
15, 1995.
(5) Investment Management Agreements.
<PAGE>
Part C - Other Information
(continued)
(a)(1) Executed Investment Management Agreements
between Delaware Management Company, Inc.
and the Registrant on behalf of The
Defensive Equity, The Aggressive Growth, The
Fixed Income and The Limited-Term Maturity
Portfolios (April 3, 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 8 filed September 15, 1995.
(a)(2) Executed Investment Management Agreements
between Delaware International Advisers Ltd.
and the Registrant on behalf of The
International Equity, The Global Fixed
Income and The International Fixed Income
Portfolios (April 3, 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 8 filed September 15, 1995.
(a)(3) Executed Investment Management Agreements
between Delaware Management Company, Inc.
and the Registrant on behalf of The
Defensive Equity Small/Mid-Cap, The
High-Yield Bond and The Real Estate
Investment Trust Portfolios (November 29,
1995) incorporated into this filing by
reference to Post-Effective Amendment No. 10
filed February 23, 1996.
(a)(4) Executed Investment Management Agreement
between Delaware International Advisers Ltd.
and the Registrant on behalf of The Labor
Select International Equity Portfolio
(November 29, 1995) incorporated into this
filing by reference to Post-Effective
Amendment No. 10 filed February 23, 1996.
(a)(5) Executed Investment Management Agreement
(April 14, 1997) between Delaware
International Advisers Ltd. and the
Registrant on behalf of The Emerging Markets
Portfolio attached as Exhibit.
(a)(6) Proposed Investment Management Agreement
(1997) between Delaware International
Advisers Ltd. and the Registrant on behalf
of The Global Equity Portfolio to be filed
by Amendment.
(a)(7) Proposed Investment Management Agreement
(1997) between Delaware Management Company,
Inc. and the Registrant on behalf of The
Real Estate Investment Trust Portfolio II to
be filed by Amendment.
<PAGE>
Part C - Other Information
(continued)
(b)(1) Executed Sub-Advisory Agreement (November
29, 1995) between Delaware Management
Company, Inc. and Lincoln Investment
Management, Inc. on behalf of the Registrant
for The Real Estate Investment Trust
Portfolio incorporated into this filing by
reference to Post-Effective Amendment No. 10
filed February 23, 1996.
(b)(2) Proposed Sub-Advisory Agreement (1997)
between Delaware International Adviser Ltd.
and Delaware Investment Advisers on behalf
of the Registrant for The Global Equity
Portfolio to be filed by Amendment.
(b)(3) Proposed Sub-Advisory Agreement (1997)
between Delaware Management Company, Inc.
and Lincoln Investment Management, Inc. on
behalf of The Real Estate Investment Trust
Portfolio II to be filed by Amendment.
(6) (a) Distribution Agreements.
(i) Form of Distribution Agreements (April
1995) between Delaware Distributors,
L.P. and the Registrant on behalf of The
Defensive Equity, The Aggressive Growth,
The International Equity, The Global
Fixed Income, The Fixed Income, The
Limited-Term Maturity and The
International Fixed Income Portfolios
incorporated into this filing by
reference to Post-Effective Amendment
No. 9 filed November 24, 1995.
(ii) Form of Distribution Agreements
(November 1995) between Delaware
Distributors, L.P. and the Registrant on
behalf of The Defensive Equity
Small/Mid-Cap, The High-Yield Bond, The
Labor Select International Equity and
The Real Estate Investment Trust
Portfolios incorporated into this filing
by reference to Post-Effective Amendment
No. 9 filed November 24, 1995.
(iii) Executed Distribution Agreement (April
14, 1997) between Delaware Distributors,
L.P. and the Registrant on behalf of The
Emerging Markets Portfolio attached as
Exhibit.
<PAGE>
Part C - Other Information
(continued)
(iv) Proposed Distribution Agreement (1997)
between Delaware Distributors, L.P. and
the Registrant on behalf of The Global
Equity Portfolio to be filed by
Amendment.
(v) Proposed Distribution Agreement (1997)
between Delaware Distributors, L.P. and
the Registrant on behalf of The Real
Estate Investment Trust Portfolio II to
be filed by Amendment.
(vi) Amended and Restated Distribution
Agreement for the Real Estate Investment
Trust Portfolio to be filed by
Amendment.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) attached as Exhibit.
(c) Dealer's Agreement. Dealer's Agreement (as
amended November 1995) attached as Exhibit.
(d) Mutual Fund Agreement for the Delaware Group of
Funds (as amended November 1995) attached as
Exhibit.
(7) Bonus, Profit Sharing, Pension Contracts.
(a)(1) Amended and Restated Profit Sharing
Plan (November 17, 1994)
incorporated into this filing by
reference to Post-Effective
Amendment No. 8 filed September 15,
1995.
(a)(2) Amendment to Profit Sharing Plan
(December 21, 1995) incorporated
into this filing by reference to
Post-Effective Amendment No. 10
filed February 23, 1996.
(8) Custodian Agreements.
(a) Form of Custodian Agreement (1996)
between the Registrant and Bankers
Trust Company on behalf of The
Defensive Equity, The Aggressive
Growth, The Fixed Income, The
Limited-Term Maturity and The
Defensive Equity Small/Mid-Cap
Portfolios incorporated into this
filing by reference to
Post-Effective Amendment No. 12
filed August 23, 1996.
<PAGE>
Part C - Other Information
(continued)
(b) Form of Securities Lending Agreement
(1996) between the Registrant and
Bankers Trust Company on behalf of
The Defensive Equity, The Aggressive
Growth, The Fixed Income, The
Limited-Term Maturity and The
Defensive Equity Small/Mid-Cap
Portfolios incorporated into this
filing by reference to
Post-Effective Amendment No. 12
filed August 23, 1996.
(c) Executed Custodian Agreement (1996)
between the Registrant and The Chase
Manhattan Bank on behalf of The
Global Fixed Income, The
International Equity, The Labor
Select International Equity, The
Real Estate Investment Trust, The
High-Yield Bond and The
International Fixed Income
Portfolios incorporated into this
filing by reference to
Post-Effective Amendment No. 12
filed August 23, 1996.
(d) Form of Securities Lending Agreement
(1996) between the Registrant and
The Chase Manhattan Bank on behalf
of The Global Fixed Income, The
International Equity, The Labor
Select International Equity, The
Real Estate Investment Trust, The
High-Yield Bond and The
International Fixed Income
Portfolios incorporated into this
filing by reference to
Post-Effective Amendment No. 12
filed August 23, 1996.
(e) Executed Custodian Agreement
(April 14, 1997) between the
Registrant and The Chase Manhattan
Bank on behalf of The Emerging
Markets Portfolio attached as
Exhibit.
(f) Form of Securities Lending Agreement
(1997) between the Registrant and
The Chase Manhattan Bank on behalf
of The Emerging Markets Portfolio
incorporated into this filing by
reference to Post-Effective
Amendment No. 14 filed January 16,
1997.
(g) Proposed Custodian Agreement (1997)
between the Registrant and The Chase
Manhattan Bank on behalf of The
Global Equity Portfolio and The Real
Estate Investment Trust Portfolio II
attached as Exhibit.
<PAGE>
Part C - Other Information
(continued)
(h) Proposed Securities Lending
Agreement (1997) between Registrant
and The Chase Manhattan Bank on
behalf of The Global Equity
Portfolio and The Real Estate
Investment Trust Portfolio II
attached as Exhibit.
(9) Other Material Contracts.
(a) Executed Third Amended and Restated
Shareholders Services Agreement
(November 29, 1995) between Delaware
Service Company, Inc. and the
Registrant on behalf of each
Portfolio incorporated into this
filing by reference to
Post-Effective Amendment No. 10
filed February 23, 1996.
(b) Executed Fourth Amended and Restated
Shareholders Services Agreement
(April 1997) between Delaware
Service Company, Inc. and the
Registrant on behalf of each
Portfolio attached as Exhibit.
(c) Form of Fifth Amended and Restated
Shareholders Services Agreement
(July 1997) between Delaware Service
Company, Inc. and the Registrant on
behalf of each Portfolio to be filed
by Amendment.
(d) Executed Delaware Group of Funds
Fund Accounting Agreement (August
19, 1996) between Delaware Service
Company, Inc. and the Registrant on
behalf of each Fund incorporated
into this filing by reference to
Post-Effective Amendment No. 16
filed May 23, 1997.
(i) Executed Amendment No. 4A (April
14, 1997) to Schedule A to
Delaware Group of Funds Fund
Accounting Agreement attached as
Exhibit.
(ii) Amendment to Schedule A to
Delaware Group of Funds Fund
Accounting Agreement attached as
a Module.
<PAGE>
Part C - Other Information
(continued)
(10) Opinion of Counsel. Filed with letter relating to Rule 24f-2
on December 27, 1996.
(11) Consent of Auditors. To be filed by Amendment.
(12) Inapplicable.
(13) Undertaking of Initial Shareholder. Incorporated into this
filing by reference to Pre-Effective Amendment No. 1 filed
August 16, 1991.
(14) Inapplicable
(15) 12b-1 Plan for REIT Fund Class A, REIT Fund Class B and REIT
Fund Class C of The Real Estate Investment Trust Portfolio
to be filed by Amendment.
(16) Schedules of Computation for each Performance Quotation.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 8 filed September
15, 1995, Post-Effective Amendment No. 11 filed
May 24, 1996, Post-Effective Amendment No. 12
filed August 23, 1996, Post-Effective Amendment
No. 13 filed January 15, 1997 and Post-Effective
Amendment No. 16 filed May 23, 1997.
(17) Financial Data Schedules.
(a) Financial Data Schedules for the fiscal year
ended October 31, 1996 are incorporated into
this filing by reference to Post-Effective
Amendment No. 13 filed on January 15, 1997.
Financial Data Schedules for the period ended
April 30, 1997 for The High-Yield Bond Portfolio
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed May 23,
1997.
(b) Financial Data Schedules for the Semi-Annual
period ended April 30, 1997 for each Portfolio
attached as Exhibit.
(18) Plan under Rule 18f-3 to be filed by Amendment.
(19) Other: Directors' Power of Attorney.
<PAGE>
Part C - Other Information
(continued)
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 8 filed
September 15, 1995.
(b) Power of Attorney for Thomas F. Madison and
Jeffrey J. Nick incorporated into this filing by
reference to Post-Effective Amendment No. 16
filed May 23, 1997.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
The Defensive Equity Portfolio:
Common Stock Par Value 35 Accounts as of
$.01 Per Share June 30, 1997
The Aggressive Growth Portfolio:
Common Stock Par Value 44 Accounts as of
$.01 Per Share June 30, 1997
The International Equity Portfolio:
Common Stock Par Value 94 Accounts as of
$.01 Per Share June 30, 1997
The Global Fixed Income Portfolio:
Common Stock Par Value 51 Accounts as of
$.01 Per Share June 30, 1997
<PAGE>
Part C - Other Information
(continued)
Number of
Title of Class Record Holders
-------------- --------------
The Fixed Income Portfolio:
Common Stock Par Value 14 Accounts as of
$.01 Per Share June 30, 1997
The Limited-Term
Maturity Portfolio:
Common Stock Par Value 3 Accounts as of
$.01 Per Share June 30, 1997
The International Fixed
Income Portfolio:
Common Stock Par Value 5 Accounts as of
$.01 Per Share June 30, 1997
The Defensive Equity Small/
Mid-Cap Portfolio:
Common Stock Par Value 0 Accounts as of
$.01 Per Share June 30, 1997
The High-Yield Bond Portfolio:
Common Stock Par Value 5 Accounts as of
$.01 Per Share June 30, 1997
The Labor Select International
Equity Portfolio:
Common Stock Par Value 17 Accounts as of
$.01 Per Share June 30, 1997
The Emerging Markets Portfolio:
Common Stock Par Value 5 Accounts as of
$.01 Per Share June 30, 1997
The Global Equity Portfolio:
Common Stock Par Value 0 Accounts as of
$.01 Per Share June 30, 1997
The Real Estate Investment
Trust Portfolio class:
Common Stock Par Value 0 Accounts as of
$.01 Per Share June 30, 1997
REIT Fund A Class:
Common Stock Par Value 16 Accounts as of
$.01 Per Share June 30, 1997
<PAGE>
Part C - Other Information
(continued)
Number of
Title of Class Record Holders
-------------- --------------
REIT Fund B Class:
Common Stock Par Value 0 Accounts as of
$.01 Per Share June 30, 1997
REIT Fund C Class:
Common Stock Par Value 0 Accounts as of
$.01 Per Share June 30, 1997
REIT Fund Institutional Class:
Common Stock Par Value 0 Accounts as of
$.01 Per Share June 30, 1997
The Real Estate Investment Trust
Portfolio II:
Common Stock Par Value 0 Accounts as of
$.01 Per Share June 30, 1997
Item 27. Indemnification. Incorporated into this filing by reference to initia
Registration Statement filed May 31, 1991.
<PAGE>
Part C - Other Information
(continued)
Item 28. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company, Inc. ("DMC") serves as investment
manager to The Defensive Equity Portfolio, The Aggressive Growth Portfolio, The
Fixed Income Portfolio, The Limited-Term Maturity Portfolio, The Defensive
Equity Small/Mid-Cap Portfolio, The High-Yield Bond Portfolio, The Real Estate
Investment Trust Portfolio and The Real Estate Investment Trust Portfolio II. In
addition, DMC also serves as investment manager or sub-adviser to certain of the
other funds in the Delaware Group (Delaware Group Equity Funds I, Inc., Delaware
Group Equity Funds II, Inc., Delaware Group Trend Fund, Inc., Delaware Group
Equity Funds IV, Inc., Delaware Group Equity Funds V, Inc., Delaware Group
Income Funds, Inc., Delaware Group Government Fund, Inc., Delaware Group
Limited-Term Government Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware
Group Tax-Free Fund, Inc., DMC Tax-Free Income Trust-Pennsylvania, Delaware
Group Tax-Free Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware
Group Global & International Funds, Inc., Delaware Group Adviser Funds, Inc.,
Delaware Group Dividend and Income Fund, Inc., Delaware Group Global Dividend
and Income Fund, Inc., Voyageur Funds, Inc., Voyageur Insured Funds, Inc.,
Voyageur Intermediate Tax Free Funds, Inc., Voyageur Investment Trust, Voyageur
Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II,
Inc., Voyageur Mutual Funds III, Inc., Voyageur Tax Free Funds, Inc., Voyageur
Arizona Municipal Income Fund, Inc., Voyageur Colorado Insured Municipal Income
Fund, Inc., Voyageur Florida Insured Municipal Income Funds, Voyageur Minnesota
Municipal Income Fund, Inc., Voyageur Minnesota Municipal Income Fund II, Inc.
and Voyageur Minnesota Municipal Income Fund III, Inc.) and provides investment
advisory services to institutional accounts, primarily retirement plans and
endowment funds, and to certain other investment companies. In addition, certain
directors of DMC also serve as directors/trustees of the other Delaware Group
funds, and certain officers are also officers of these other funds. A company
indirectly owned by DMC's parent company acts as principal underwriter to the
mutual funds in the Delaware Group (see Item 29 below) and another such company
acts as the shareholder servicing, dividend disbursing, accounting services and
transfer agent for all of the mutual funds in the Delaware Group.
<PAGE>
Part C - Other Information
(continued)
The following persons serving as directors or officers of DMC have
held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.; President, Chief
Executive Officer, Chairman of the Board and
Director of the Registrant, each of the other funds
in the Delaware Group, Delaware Management Holdings,
Inc., DMH Corp., Delaware International Holdings
Ltd. and Founders Holdings, Inc.; Chairman of the
Board and Director of Delaware Distributors, Inc.
and Delaware Capital Management, Inc.; Chairman,
Chief Executive Officer and Director of Delaware
International Advisers Ltd.; and Director of
Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President
of the Registrant and each of the other funds in the
Delaware Group; Senior Vice President of Delaware
Management Holdings, Inc. and Delaware Capital
Management, Inc; and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee,
Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors,
Chairman of Finance Committee, AAA Mid Atlantic,
Inc. since 1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Metron, Inc. since 1995,
11911 Freedom Drive, Reston, VA
Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Inc.,
the Registrant and each of the other funds in the
Delaware Group; Executive Vice President and
Director of Founders Holdings, Inc.; Senior Vice
President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.; Senior Vice
President of Delaware Capital Management, Inc.; and
Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
David K. Downes Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company,Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc.and
Delaware International Holdings Ltd.; Executive Vice
President, Chief Operating Officer and Chief
Financial Officer of the Registrant and each of the
other funds in the Delaware Group, Delaware
Management Holdings, Inc., Founders CBO Corporation
and Delaware Capital Management, Inc.; Chairman and
Director of Delaware Management Trust Company;
President, Chief Executive Officer, Chief Financial
Officer and Director of Delaware Service Company,
Inc.; Chairman and Director of Delaware Investment &
Retirement Services, Inc.; Director of Delaware
International Advisers Ltd.; and Senior Vice
President, Chief Administrative Officer and Chief
Financial Officer of Delaware Distributors, L.P.
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square, PA
George M. Senior Vice President, Secretary, General Counsel
Chamberlain, Jr. and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc.,
Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.; Senior Vice
President, General Counsel and Secretary of the
Registrant, each of the other funds in the Delaware
Group, Delaware Distributors, L.P. and Delaware
Management Holdings, Inc.; Executive Vice President,
Secretary, General Counsel and Director of Delaware
Management Trust Company; Secretary and Director of
Delaware International Holdings Ltd.; and Director
of Delaware International Advisers Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard J. Flannery Senior Vice President/Corporate and International
Affairs of the Registrant, each of the other funds
in the Delaware Group, Delaware Management Holdings,
Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Distributors,
L.P., Delaware Management Trust Company and Delaware
Capital Management, Inc.; Managing
Director/Corporate & Tax Affairs of Delaware Service
Company, Inc. and Delaware Investment & Retirement
Services, Inc.; Senior Vice President/ Corporate and
International Affairs and Director of Founders
Holdings, Inc. and Delaware International Holdings
Ltd.; Senior Vice President of Founders CBO
Corporation; and Director of Delaware International
Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991,
Bulltown Rd., Elverton, PA; Director and Member of
Executive Committee of Stonewall Links, Inc. since
1991, Bulltown Rd., Elverton, PA
Michael P. Bishof Senior Vice President and Treasurer of Delaware
Management Company, Inc.; Senior Vice President of
Delaware Distributors, Inc.; Senior Vice President
and Treasurer of the Registrant and each of the
other funds in the Delaware Group; Vice President
and Treasurer of Delaware Distributors, L.P.,
Delaware Service Company, Inc. and Founders
Holdings, Inc.; Assistant Treasurer of Founders CBO
Corporation; and Vice President and Manager of
Investment Accounting of Delaware International
Holdings Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Joseph H. Hastings Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc., DMH
Corp. and Delaware Management Company, Inc.; Senior
Vice President and Treasurer of Delaware
Distributors, Inc.; Senior Vice President/Corporate
Controller of the Registrant, each of the other
funds in the Delaware Group and Founders Holdings,
Inc.; Vice President and Treasurer of Delaware
Capital Management, Inc.; Vice President/Corporate
Controller of Delaware Distributors, L.P., Delaware
Service Company, Inc., and Delaware International
Holdings Ltd.; Executive Vice President, Chief
Financial Officer and Treasurer of Delaware
Management Trust Company; Chief Financial Officer
and Treasurer of Delaware Investment & Retirement
Services, Inc.; and Assistant Treasurer of Founders
CBO Corporation
Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Company, Inc., Delaware Management Holdings, Inc.,
DMH Corp., Delaware Distributors, L.P., Delaware
Distributors Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Founders
Holdings, Inc., Delaware Capital Management, Inc.
and Delaware Investment & Retirement Services, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., DMH Corp., Delaware Management Trust
Company, Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Founders
Holdings, Inc.; Secretary of Founders CBO
Corporation; and Assistant Secretary of Delaware
International Holdings Ltd.
Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard Salus(1) Vice President/Assistant Controller of Delaware
Management Company, Inc.; and Vice President of
Delaware Management Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp. and
Delaware Management Trust Company; and Vice
President/Internal Audit of Delaware Investment &
Retirement Services, Inc.
Steven T. Lampe(2) Vice President/Taxation of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company,
Founders Holdings, Inc., Founders CBO Corporation,
Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal Registrations of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Distributors, Inc.
Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Investment and
Retirement Services, Inc. and Delaware Service
Company, Inc. and Delaware Management Trust Company
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and Treasurer,
Assistant Secretary and Director of Founders CBO
Corporation
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the tax-exempt funds and the fixed income funds in
the Delaware Group and Delaware Capital Management,
Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and Treasurer,
Assistant Secretary and Director of Founders CBO
Corporation
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the tax-exempt funds and the fixed income funds in
the Delaware Group and Delaware Capital Management,
Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and President
and Director of Founders CBO Corporation.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the tax-exempt funds and the fixed income funds in
the Delaware Group and Delaware Capital Management,
Inc.
Roger A. Early Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the tax-exempt funds and the fixed income funds in
the Delaware Group
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
Name and Principle Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, and each
of the tax-exempt and fixed income funds in the
Delaware Group
George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of
the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of
the equity funds in the Delaware Group and Delaware
Capital Management, Inc.
Gerald S. Frey(4) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of
the equity funds in the Delaware Group
(1) SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
(2) TAX MANAGER, Price Waterhouse prior to October 1995.
(3) INVESTMENT OFFICER, Travelers Insurance prior to January 1997 and RESEARCH
ANALYST, CS First Boston Investment Management prior to March 1995.
(4) SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
(b) Delaware International Advisers Ltd. ("Delaware International")
serves as investment manager to The International Equity Portfolio, The Global
Fixed Income Portfolio, The International Fixed Income Portfolio, The Labor
Select International Equity Portfolio, The Emerging Markets Portfolio and The
Global Equity Portfolio. In addition, Delaware International also serves as
investment manager or sub-adviser to certain of the other funds in the Delaware
Group (Delaware Group Income Funds, Inc., Delaware Group Premium Fund, Inc.,
Delaware Group Global & International Funds, Inc. and Delaware Group Global
Dividend and Income Fund, Inc.) and provides investment advisory services to
institutional accounts primarily retirement plans and endowment funds.
The following persons serving as directors or officers of Delaware
International have held the following positions during the past two years:
Positions and Offices with Delaware International
Name and Principal Advisers Ltd. and its Affiliates and Other Positions
Business Address and Offices Held
- ------------------ -----------------------------------------------------
*Wayne A. Stork Chairman, Chief Executive Officer and Director of
Delaware International Advisers Ltd.; Chairman of the
Board, President, Chief Executive Officer, Chief
Investment Officer and Director of Delaware
Management Company, Inc.; President, Chief Executive
Officer, Chairman of the Board and Director of the
Registrant, each of the other funds in the Delaware
Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware International Holdings Ltd. and Founders
Holdings, Inc.; Chairman of the Board and Director of
Delaware Distributors, Inc. and Delaware Capital
Management, Inc.; and Director of Delaware Service
Company, Inc. and Delaware Investment & Retirement
Services, Inc.
**G. Roger H. Kitson Vice Chairman and Director of Delaware International
Advisers Ltd.
* Business address is 1818 Market Street, Philadelphia, PA 19103.
**Business address if Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Delaware International
Name and Principal Advisers Ltd. and its Affiliates and Other Positions
Business Address and Offices Held
- ------------------ -----------------------------------------------------
**David G. Tilles Managing Director, Chief Investment Officer and
Director of Delaware International Advisers Ltd.
**John Emberson Secretary/Compliance Officer/Finance Director and
Director of Delaware International Advisers Ltd.
*David K. Downes Director of Delaware International Advisers Ltd.;
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company,Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc.and
Delaware International Holdings Ltd.; Executive Vice
President, Chief Operating Officer and Chief
Financial Officer of the Registrant and each of the
other funds in the Delaware Group, Delaware
Management Holdings, Inc., Founders CBO Corporation
and Delaware Capital Management, Inc.; Chairman and
Director of Delaware Management Trust Company;
President, Chief Executive Officer, Chief Financial
Officer and Director of Delaware Service Company,
Inc.; Chairman and Director of Delaware Investment &
Retirement Services, Inc.; and Senior Vice President,
Chief Administrative Officer and Chief Financial
Officer of Delaware Distributors, L.P.
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square, PA
* Business address is 1818 Market Street, Philadelphia, PA 19103.
**Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Delaware International
Name and Principal Advisers Ltd. and its Affiliates and Other Positions
Business Address and Offices Held
- ------------------ -----------------------------------------------------
*Richard G. Unruh, Jr. Director of Delaware International Advisers Ltd.;
Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President of
the Registrant and each of the other funds in the
Delaware Group; and Senior Vice President of Delaware
Management Holdings, Inc. and Delaware Capital
Management, Inc.
Board of Directors, Chairman of Finance Committee,
Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors,
Chairman of Finance Committee, AAA Mid Atlantic, Inc.
since 1989, 2040 Market Street, Philadelphia, PA;
Board of Directors, Metron, Inc. since 1995, 11911
Freedom Drive, Reston, VA
*Richard J. Flannery Director of Delaware International Advisers Ltd.;
Senior Vice President/Corporate and International
Affairs of the Registrant, each of the other funds in
the Delaware Group, Delaware Management Holdings,
Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Distributors,
L.P., Delaware Management Trust Company and Delaware
Capital Management, Inc.; Managing Director/Corporate
& Tax Affairs of Delaware Service Company, Inc. and
Delaware Investment & Retirement Services, Inc.;
Senior Vice President/Corporate and International
Affairs and Director of Founders Holdings, Inc. and
Delaware International Holdings Ltd.; and Senior Vice
President of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991,
Bulltown Rd., Elverton, PA; Director and Member of
Executive Committee of Stonewall Links, Inc. since
1991, Bulltown Rd., Elverton, PA
*John C. E. Campbell Director of Delaware International Advisers Ltd.
* Business address is 1818 Market Street, Philadelphia, PA 19103.
**Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Delaware International
Name and Principal Advisers Ltd. and its Affiliates and Other Positions
Business Address and Offices Held
- ------------------ -----------------------------------------------------
*George M. Director of Delaware International Advisers Ltd.;
Chamberlain, Jr. Senior Vice President, Secretary, General Counsel and
Director of Delaware Management Company, Inc., DMH
Corp., Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware
Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Senior Vice President,
Secretary and General Counsel of the Registrant, each
of the other funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Management Holdings,
Inc.; Executive Vice President, Secretary, General
Counsel and Director of Delaware Management Trust
Company; and Secretary and Director of Delaware
International Holdings Ltd.
*George E. Deming Director of Delaware International Advisers Ltd.
**Timothy W. Senior Portfolio Manager, Deputy Compliance Officer,
Sanderson Director Equity Research and Director of Delaware
International Advisers Ltd.
**Clive A. Gillmore Senior Portfolio Manager, Director U.S. Mutual Fund
Liaison and Director of Delaware International
Advisers Ltd.
**Hamish O. Parker Senior Portfolio Manager, Director U.S. Marketing
Liaison and Director of Delaware International
Advisers Ltd.
**Ian G. Sims Senior Portfolio Manager, Deputy Managing Director
and Director of Delaware International Advisers Ltd.
**Robert Akester Senior Portfolio Manager of Delaware International
Advisers Ltd.
**Elizabeth A. Senior Portfolio Manager of Delaware International
Desmond Advisers Ltd.
**Gavin A. Hall Senior Portfolio Manager of Delaware International
Advisers Ltd.
* Business address is 1818 Market Street, Philadelphia, PA 19103.
**Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.
<PAGE>
Part C - Other Information
(continued)
(c) Lincoln Investment Management Company, Inc. serves as sub-adviser
to The Real Estate Investment Trust Portfolio and The REIT Portfolio. Lincoln
Investment Management Company, Inc. also serves as sub-adviser to Delaware Group
Adviser Funds, Inc. and 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:
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ----------------- --------------------------------------------------
*H. Thomas McMeekin President and Director of Lincoln Investment
Management, Inc., Lincoln National Convertible
Securities Fund, Inc. and Lincoln National Income
Fund, Inc.; President, Chief Executive Officer and
Director of Lincoln National Mezzanine Corporation;
Executive Vice President (previously Senior Vice
President) and Chief Investment Officer of Lincoln
National Corporation; and Director of The Lincoln
National Life Insurance Company, Lynch & Mayer, Inc.
and Vantage Global Advisors, Inc.
*Dennis A. Blume Senior Vice President and Director of Lincoln
Investment Management, Inc. and Lincoln National
Realty Corporation; and Director of Lynch & Mayer,
Inc. and Vantage Global Advisors, Inc.
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ----------------- --------------------------------------------------
*Steven R. Brody Director, Senior Vice President of Lincoln Investment
Management, Inc.; Director and Vice President of
Lincoln National Mezzanine Corporation; Vice
President of The Lincoln National Life Insurance
Company; Director of Lincoln National Realty
Corporation; Treasurer of Lincoln National
Convertible Securities Fund, Inc. and Lincoln
National Income Fund, Inc.; and Assistant Treasurer
of Lincoln Financial Group, Inc., Lincoln National
Aggressive Growth Fund, Inc., Lincoln National Bond
Fund, Inc., Lincoln National Capital Appreciation
Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund,
Inc., Lincoln National Growth and Income Fund, Inc.,
Lincoln National Health & Casualty Insurance Company,
Lincoln National International Fund, Inc., Lincoln
National Life Reinsurance Company, Lincoln National
Managed Fund, Inc., Lincoln National Money Market
Fund, Inc., Lincoln National Reassurance Company,
Lincoln National Social Awareness Fund, Inc. and
Lincoln National Special Opportunities Fund, Inc.
*Ann L. Warner Senior Vice President (previously Vice President) of
Lincoln Investment Management, Inc.; Second Vice
President of Lincoln Life & Annuity Company of New
York; Director of Lincoln National Convertible
Securities Fund, Inc.; and Director and Vice
President of Lincoln National Income Fund, Inc.
*JoAnn E. Becker Vice President of Lincoln Investment Management, Inc.
and The Lincoln National Life Insurance Company; and
Director of LNC Equity Sales Corporation, The Richard
Leahy Corporation and Professional Financial
Planning, Inc.
*David A. Berry Vice President of Lincoln Investment Management,
Inc., Lincoln National Convertible Securities Fund,
Inc. and Lincoln National Income Fund, Inc.; and
Second Vice President of Lincoln Life & Annuity
Company of New York
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ----------------- --------------------------------------------------
*Anne E. Bookwalter Vice President (previously Second Vice President) of
Lincoln Investment Management, Inc.; and Director of
Professional Financial Planning, Inc.
*Philip C. Byrde Vice President of Lincoln Investment Management, Inc.
*Patrick R. Chasey Vice President of Lincoln Investment Management, Inc.
*Garrett W. Cooper Vice President of Lincoln Investment Management, Inc.
*David C. Fischer Vice President of Lincoln Investment Management, Inc.
and Lincoln National Income Fund, Inc.
*Luc N. Girard Vice President of Lincoln Investment Management, Inc.
and The Lincoln National Life Insurance Company
*Donald P. Groover Vice President of Lincoln Investment Management, Inc.
Previously Senior Economist/Senior Consultant,
Chalke, Inc., Chantilly, VA
*William N. Holm, Jr. Vice President of Lincoln Investment Management,
Inc.; and Vice President and Director of Lincoln
National Mezzanine Corporation
*Jennifer C. Hom Vice President (previously Portfolio Manager) of
Lincoln Investment Management, Inc.
*John A. Kellogg Vice President of Lincoln Investment Management, Inc.
and Lincoln National Realty Corporation
*Timothy H. Kilfoil Vice President of Lincoln Investment Management, Inc.
*Lawrence T. Kissko Vice President of Lincoln Investment Management,
Inc.; Vice President and Director Lincoln National
Realty Corporation; and Vice President of The Lincoln
National Life Insurance Company
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ----------------- --------------------------------------------------
*Walter M. Korinke Vice President of Lincoln Investment Management, Inc.
*Lawrence M. Lee Vice President of Lincoln Investment Management, Inc.
and Lincoln National Realty Corporation
*John David Moore Vice President of Lincoln Investment Management, Inc.
*Oliver H. G. Nichols Vice President of Lincoln Investment Management,
Inc., The Lincoln National Life Insurance Company and
Lincoln National Realty Corporation
*David C. Patch Vice President of Lincoln Investment Management, Inc.
*Joseph T. Pusateri Vice President of Lincoln Investment Management, Inc.
and Lincoln National Realty Corporation
*Gregory E. Reed Vice President of Lincoln Investment Management, Inc.
*Bill L. Sanders Vice President of Lincoln Investment Management,
Inc.; and Sales Vice President of The Lincoln
National Life Insurance Company
*Milton W. Shuey Vice President of Lincoln Investment Management, Inc.
*Gerald M. Weiss Vice President of Lincoln Investment Management, Inc.
**Jon A. Boscia Director (previously President) of Lincoln Investment
Management, Inc.; Director of Lincoln National
Foundation, Inc., Lincoln Life & Annuity Company of
New York and First Penn-Pacific Life Insurance
Company; President, Chief Executive Officer and
Director of The Lincoln National Life Insurance
Company; and President of Lincoln Financial Group,
Inc.
* Business address is 200 East Berry Street, Fort Wayne, IN 46802.
**Business address is 1300 S. Clinton Street, Fort Wayne, IN 46802.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ----------------- --------------------------------------------------
*Janet C. Whitney Vice President and Treasurer of Lincoln Investment
Management, Inc., The Financial Alternative, Inc.,
Financial Alternative Resources, Inc., Financial
Choices, Inc., Financial Investments, Inc., Financial
Investment Services, Inc., The Financial Resources
Department, Inc., Investment Alternatives, Inc., The
Investment Center, Inc., The Investment Group, Inc.,
LNC Administrative Services Corporation, LNC Equity
Sales Corporation, The Richard Leahy Corporation,
Lincoln National Aggressive Growth Fund, Inc.,
Lincoln National Bond Fund, Inc., Lincoln National
Capital Appreciation Fund, Inc., Lincoln National
Equity-Income Fund, Inc., Lincoln National Global
Assets Allocation Fund, Inc., Lincoln National Growth
and Income Fund, Inc., Lincoln National Health &
Casualty Insurance Company, Lincoln National
Intermediaries, Inc., Lincoln National International
Fund, Inc., Lincoln National Managed Fund, Inc.,
Lincoln National Management Services, Inc., Lincoln
National Mezzanine Corporation, Lincoln National
Money Market Fund, Inc. Lincoln National Realty
Corporation, Lincoln National Risk Management, Inc.,
Lincoln National Social Awareness Fund, Inc., Lincoln
National Special Opportunities Fund, Inc., Lincoln
National Structured Settlement, Inc., Personal
Financial Resources, Inc., Personal Investment
Services, Inc., Special Pooled Risk Administrators,
Inc., Underwriters & Management Services, Inc.; Vice
President and Treasurer (previously Vice President
and General Auditor) of Lincoln National Corporation;
and Assistant Treasurer of First Penn-Pacific Life
Insurance Company
*Business address is 200 Berry Street, Fort Wayne, IN 46802.
<PAGE>
Part C - Other Information
(continued)
Positions and Offices with Lincoln Investment
Name and Principal Management Company, Inc. and its Affiliates and
Business Address Other Positions and Offices Held
- ----------------- --------------------------------------------------
*C. Suzanne Womack Secretary of Lincoln Investment Management, Inc.,
Corporate Benefit Systems Services Corporation, The
Financial Alternative, Inc., Financial Alternative
Resources, Inc., Financial Choices, Inc., The
Financial Resources Department, Inc., Financial
Investment Services, Inc., Financial Investments,
Inc., Insurance Services, Inc., Investment
Alternatives, Inc., The Investment Center, Inc. (TN),
The Investment Group, Inc., LNC Administrative
Services Corporation, LNC Equity Sales Corporation,
The Richard Leahy Corporation, Lincoln Life Improved
Housing, Inc., Lincoln National (China) Inc., Lincoln
National Convertible Securities Fund, Inc., Lincoln
National Health & Casualty Insurance Company, Lincoln
National Income Fund, Inc., Lincoln National
Intermediaries, Inc., Lincoln National Life
Reinsurance Company, Lincoln National Management
Services, Inc., Lincoln National Mezzanine
Corporation, Lincoln National Realty Corporation,
Lincoln National Reassurance Company, Lincoln
National Reinsurance Company (Barbados) Limited,
Lincoln National Reinsurance Company Limited, Lincoln
National Risk Management, Inc., Lincoln National
Structured Settlement, Inc., Old Fort Insurance
Company, Ltd., Personal Financial Resources, Inc.,
Personal Investment Services, Inc., Professional
Financial Planning, Inc., Reliance Life Insurance
Company of Pittsburgh, Special Pooled Risk
Administrators, Inc. and Underwriters & Management
Services, Inc.; Vice President, Secretary and
Director of Lincoln National Foundation, Inc.;
Secretary and Assistant Vice President of Lincoln
National Corporation and The National Life Insurance
Company; and Assistant Secretary of Lincoln National
Aggressive Growth Fund, Inc., Lincoln National Bond
Fund, Inc., Lincoln National Capital Appreciation
Fund, Inc., Lincoln National Equity-Income Fund,
Inc., Lincoln National Global Asset Allocation Fund,
Inc., Lincoln National Growth and Income Fund, Inc.,
Lincoln National International Fund, Inc., Lincoln
National Managed Fund, Inc., Lincoln National Money
Market Fund, Inc., Lincoln National Social Awareness
Fund, Inc., Lincoln National Special Opportunities
Fund, Inc., Lincoln National Variable Annuity Funds A
& B and Lincoln Life & Annuity Company of New York
*Business address is 200 East Berry Street, Fort Wayne, IN 46802.
<PAGE>
Part C - Other Information
(continued)
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for
all the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager to The
Defensive Equity, The
Aggressive Growth, The Fixed
Income, The Limited-Term
Maturity, The Defensive Equity
Small/Mid-Cap, The High-Yield
Bond and The Real Estate
Investment Trust Portfolios
Delaware Capital
Management, Inc. Limited Partner None
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Senior Vice President, Executive Vice
Chief Administrative Officer President/Chief
and Chief Financial Officer Operating Officer/
Chief Financial Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary Senior Vice President/Secretary/
General Counsel
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
William F. Hostler Senior Vice President/ None
Marketing Services
Dana B. Hall Senior Vice President/ None
Key Accounts
J. Chris Meyer Senior Vice President/ None
Product Development
Stephen H. Slack Senior Vice President/ None
Wholesaler
Henry Orvin Senior Vice President/ None
Eastern Divisional Sales Manager,
Wire/Regional Channel
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/ Corporate
and International Affairs and International Affairs
Michael P. Bishof Vice President/Treasurer Senior Vice President/Treasurer
Joseph H. Hastings Vice President/ Senior Vice President/
Corporate Controller Corporate Controller
Eric E. Miller Vice President/ Vice President/Assistant
Assistant Secretary Secretary/Deputy General
Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Lisa O. Brinkley Vice President/Compliance Vice President/Compliance
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Rosemary E. Milner Vice President/Legal Vice President/Legal
Registrations
Daniel H. Carlson Vice President/Marketing None
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/Client Services None
Jerome J. Alrutz Vice President/ Client Services None
Joanne A. Mettenheimer Vice President/ None
National Accounts
Gregory J. McMillan Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Stephen J. DeAngelis Vice President/Product None
Development
Susan T. Friestedt Vice President/Customer None
Service
Dinah J. Huntoon Vice President/Product None
Management
Soohee Lee Vice President/Fixed Income None
Product Management
Ellen M. Krott Vice President/Communications None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Holly W. Reimel Vice President/Telemarketing None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Debra Afra Marler Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Part C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
John A. Wells Vice President/Marketing None
Technology
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in the Philadelphia office -
1818 Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be certified,
within four to six months from the initial public offering of
shares of The Limited-Term Maturity Portfolio, The International
Fixed Income Portfolio, The Defensive Equity Small/Mid-Cap
Portfolio, The Emerging Markets Portfolio, The Global Equity
Portfolio and The Real Estate Investment Trust Portfolio II.
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal
of any director when requested in writing to do so by the record
holders of not less than 10% of the outstanding shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in this City of Philadelphia and Commonwealth of Pennsylvania
on this 31st day of July, 1997.
DELAWARE POOLED TRUST, INC.
By /s/Wayne A. Stork
-------------------------------------------
Wayne A. Stork
Chairman of the Board, President,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------- ------------------------------- ---------------
<S> <C> <C>
Chairman of the Board, President, July 31, 1997
/s/Wayne A. Stork Chief Executive Officer and Director
- --------------------------------------
Wayne A. Stork
Executive Vice President/Chief
Operating Officer/Chief Financial
Officer (Principal Financial Officer
/s/David K. Downes and Principal Accounting Officer) July 31, 1997
- --------------------------------------
David K. Downes
/s/Walter P. Babich * Director July 31, 1997
- --------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director July 31, 1997
- --------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director July 31, 1997
- --------------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director July 31, 1997
- --------------------------------------
W. Thacher Longstreth
/s/Thomas F. Madison * Director July 31, 1997
- --------------------------------------
Thomas F. Madison
/s/Jeffrey J. Nick * Director July 31, 1997
- --------------------------------------
Jeffrey J. Nick
/s/Charles E. Peck * Director July 31, 1997
- --------------------------------------
Charles E. Peck
* By /s/ Wayne A. Stork
-----------------------------
Wayne A. Stork
as Attorney-in-Fact
for each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B5AV Executed Investment Management Agreement between Delaware
International Adivsers Ltd. and the Registrant on behalf of The Emerging
Markets Portfolio.
EX-99.B6AIII Executed Distribution Agreement (April 14, 1997) between Delaware
Distributors, L.P. and the Registrant on behalf of The Emerging Markets
Portfolio
EX-99.B6B Administration and Service Agreement
(Module Name
ADMIN_SER_AGREE)
EX-99.B6C Dealer's Agreement
(Module Name
DEALERS_AGREE)
EX-99.B6D Mutual Fund Agreement
(Module Name
MFAGMT95)
EX-99.B8E Executed Custodian Agreement (April 14, 1997) between the Registrant and The
Chase Manhattan Bank on behalf of The Emerging Markets Portfolio
EX-99.B8G Proposed Custodian Agreement (1997) between the Registrant and The
(Module Name Chase Manhattan Bank on behalf of The Global Equity Portfolio and The
CHASE_CUST_AGR) REIT Portfolio
EX-99.B8H Proposed Securities Lending Agreement (1997) between the Registrant and
The Chase Manhattan Bank on behalf of The Global Equity Portfolio and
The REIT Portfolio
EX-99.B9B Executed Fourth Amended and Restated Shareholders Services Agreement
(April 4 1997) between Delaware Service Company, Inc. and the Registrant
on behalf of each Portfolio
EX-99.B9DI Executed Amendment No. 4A (April 14, 1997) to Schedule A to Delaware
Group of Funds Fund Accounting Agreement
EX-99.B9DII Amendment to Schedule A to Delaware Group of Funds Fund Accounting
(Module Name Agreement
ACCT_AGT_SCHD_A)
</TABLE>
<PAGE>
DELAWARE POOLED TRUST, INC.
EMERGING MARKETS PORTFOLIO
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE POOLED TRUST, INC., a Maryland
corporation ("Fund") for THE EMERGING MARKETS PORTFOLIO, ("Portfolio") and
DELAWARE INTERNATIONAL ADVISERS LTD., a U.K. company ("Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities, and the
Investment Manager is a registered Investment Adviser under the Investment
Advisers Act of 1940 and engages in the business of providing investment
management services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Portfolio's assets and to administer its
affairs, subject to the direction of the Board ad officers of the Fund for the
period and on the terms hereinafter set forth. The Investment Manager hereby
accepts such employment and agrees during such period to render the services and
assume the obligations herein set forth for the compensation herein provided.
<PAGE>
The Investment Manager shall for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way, or in
any way be deemed an agent of the Fund. The Investment Manager shall regularly
make decisions as to what securities to purchase and sell on behalf of the
Portfolio, shall effect the purchase and sale of investments in furtherance of
the Portfolio's objectives and policies and shall furnish the Board of Directors
of the Fund with such information and reports regarding the Portfolio's
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees.
3. (a) Subject to the primary objective of obtaining the best available
prices and execution, the Investment Manager will place orders for the purchase
and sale of portfolio securities with such
-2-
<PAGE>
broker/dealers who provide statistical factual and financial information and
services to the Fund, to the Investment Manager or to any other fund for which
the Investment Manager provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager provides investment advisory services.
Broker/dealers who sell shares of the funds of which Delaware International
Advisers Ltd. is Investment Manager, shall only receive orders for the purchase
or sale of portfolio securities to the extent that the placing of such orders is
in compliance with Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund and
the Fund may agree to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it and the Investment
Manager have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Investment Manager's overall responsibilities with
respect to the Fund and to other funds and other advisory
-3-
<PAGE>
accounts for which the Investment Manager exercises investment
discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager monthly from the Portfolio's assets, a fee (at a annual
rate) equal to .75% of the daily average net assets of the Portfolio during the
month.
If this Agreement is terminated prior to the end of any calendar
month, the management fee shall be prorated for the portion of any month in
which this Agreement is in effect according to the proportion which the number
of calendar days, during which the Agreement is in effect, bears to the number
of calendar days in the month, and shall be payable within 10 days after the
date of termination.
5. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different services to
others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
6. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to
-4-
<PAGE>
any other investment company, corporation, association, firm or individual.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Investment Manager
to the Fund, the Investment Manager shall not be subject to liabilities to the
Fund or to any shareholder of the Fund for any action or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the date
written below if approved by the vote of a majority of the outstanding voting
securities of the Portfolio. It shall continue in effect for a period of two
years and may be renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by the Board of Directors or by vote
of a majority of the outstanding voting securities of the Portfolio and only if
the terms and the renewal hereof have been approved by the vote of a majority of
the Directors of the Fund who are not parties hereto or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. No amendment to this Agreement shall be effective unless the
terms thereof have been approved by the vote of a majority of the outstanding
voting securities of the Portfolio and by the vote of a majority of Directors of
the Fund who are not parties to the Agreement or interested persons of any such
party,
-5-
<PAGE>
cast in person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund at
any time, without the payment of a penalty, on sixty days' written notice to the
Investment Manager of the Fund's intention to do so, pursuant to action by the
Board of Directors of the Fund or pursuant to vote of a majority of the
outstanding voting securities of the Portfolio. The Investment Manager may
terminate this Agreement at any time, without the payment of a penalty on sixty
days' written notice to the Fund of its intention to do so. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for any obligation to
respond for a breach of this Agreement committed prior to such termination, and
except for the obligation of the Fund to pay to the Investment Manager the fee
provided in Paragraph 4 hereof, prorated to the date of termination. This
Agreement shall automatically terminate in the event of its assignment.
9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority of
the outstanding voting securities"; "interested persons; and "assignment" shall
have the meaning defined in the Investment Company Act of 1940.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their corporate
seals to be affixed and duly attested and their presents to be signed by their
duly authorized officers the 14th day of April, 1997.
Attest: DELAWARE POOLED TRUST, INC.
for THE EMERGING MARKETS PORTFOLIO
/s/ Eric E. Miller By:/s/ Wayne A. Stork
- ------------------------------- ---------------------------------
Eric E. Miller Wayne A. Stork
Vice President/ President and
Assistant Secretary Chief Executive Officer
Attest: DELAWARE INTERNATIONAL ADVISERS LTD.
/s/ John Emberson By:/s/ David G. Tilles
- ------------------------------- ---------------------------------
John Emberson David G. Tilles
Managing Director and
Chief Investment Officer
-7-
<PAGE>
DELAWARE POOLED TRUST, INC.
THE EMERGING MARKETS PORTFOLIO
DISTRIBUTION AGREEMENT
Agreement made as of this 14th day of April, 1997 by and between
DELAWARE POOLED TRUST, INC., a Maryland corporation (the "Fund") for EMERGING
MARKETS PORTFOLIO (the "Portfolio"), and DELAWARE DISTRIBUTORS, L.P. (the
"Distributor"), a Delaware limited partnership.
WITNESSETH
WHEREAS, the Fund is a series investment company regulated
by Federal and State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of the securities of investment companies and, in connection
therewith and acting solely as agent for such investment companies and not as
principal, advertising, promoting, offering and selling their securities to the
public, and
WHEREAS, the Fund desires to distribute its Portfolio securities
(collectively, the "shares") with the assistance of the Distributor as
underwriter,
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the
distribution of Portfolio shares and, in connection
therewith and as agent for the Fund and not as
<PAGE>
principal, to advertise, promote, offer and sell Portfolio
shares to certain large institutional investors.
2. The Distributor agrees to serve as distributor of
Portfolio shares and, as agent for the Fund and not as
principal, to advertise, promote and use its best
efforts to sell Portfolio shares wherever their sale is
legal, either through dealers or otherwise, in such
manner, not inconsistent with the law and the
provisions of this Contract and the Fund's Registration
Statement under the Securities Act of 1933 and the
Prospectus contained therein as may be determined by
the Fund from time to time. The Distributor will bear
all costs of financing any activity which is primarily
intended to result in the sale of Portfolio shares,
including, but not necessarily limited to, advertising,
compensation of underwriters, dealers and sales
personnel, the printing and mailing of sales literature
and distribution of Portfolio shares.
3. (a) The Fund agrees to make available for sale by the
Fund through the Distributor all or such part of the
authorized but unissued Portfolio shares as the
Distributor shall require from time to time, all
subject to the further provisions of this Contract,
and except with the Distributor's written consent or
as provided in Paragraph 3(b)
-2-
<PAGE>
hereof, it will not sell Portfolio shares other than
through the efforts of the Distributor.
(b) The Fund reserves the right from time to time (1)
to sell and issue shares other than for cash; (2)
to issue shares in exchange for substantially all
of the assets of any corporation or trust, or in
exchange for shares of any corporation or trust;
(3) to pay stock dividends to its shareholders, or
to pay dividends in cash or stock at the option of
its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable
from time to time in cash, or to split up or
combine its outstanding shares of common stock;
(4) to offer shares for cash to its stockholders
as a whole, by the use of transferable rights or
otherwise, and to sell and issue shares pursuant
to such offers; and (5) to act as its own
distributor in any jurisdiction where the
Distributor is not registered as a broker-dealer.
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered
investment company, and any and all Portfolio shares
which it will sell through the Distributor are, or
will be, properly registered with the Securities and
Exchange Commission ("SEC").
-3-
<PAGE>
(b) The provisions of this Contract do not violate the
terms of any instrument by which the Fund is bound,
nor do they violate any law or regulation of any body
having jurisdiction over the Fund or its property.
5. (a) The Fund will supply to the Distributor a
conformed copy of the Registration Statement, all
amendments thereto, all exhibits, and each
Prospectus.
(b) The Fund will register or qualify Portfolio shares
for sales in such states as is deemed desirable.
(c) The Fund, without expense to the Distributor,
(1) will give and continue to give such financial
statements and other information as may be
required by the SEC or the proper public
bodies of the states in which the shares may
be qualified;
(2) from time to time, will furnish the
Distributor as soon as reasonably practicable
the following information: (a) true copies of
its periodic reports to stockholders, and
unaudited quarterly balance sheets and income
statements for the period from the beginning
of the then current fiscal year to such
balance sheet dates; and (b) a profit and loss
statement and a balance sheet at the end
-4-
<PAGE>
of each fiscal half year accompanied by a copy
of the certificate or report thereon of an
independent public accountant (who may be the
regular accountant for the Fund), provided
that in lieu of furnishing at the end of any
fiscal half year a statement of profit and
loss and a balance sheet certified by an
independent public accountant as above
required, the Fund may furnish a true copy of
its detailed semi-annual report to its
stockholders;
(3) will promptly advise the Distributor in
person or by telephone or telegraph, and
promptly confirm such advice in writing, (a)
when any amendment or supplement to the
Registration Statement becomes effective, (b)
of any request by the SEC for amendments or
supplements to the Registration Statement or
the Prospectus or for additional information,
and (c) of the issuance by the SEC of any Stop
Order suspending the effectiveness of the
Registration Statement, or the initiation of
any proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop
Order suspending the effectiveness of the
Registration Statement, will make every
-5-
<PAGE>
reasonable effort to obtain the lifting of
such order at the earliest possible moment;
(5) will from time to time, use its best efforts
to keep a sufficient supply of Portfolio
shares authorized, any increases being subject
to approval of the Fund's shareholders;
(6) before filing any further amendment to the
Registration Statement or to the Prospectus,
will furnish the Distributor copies of the
proposed amendment and will not, at any time,
whether before or after the effective date of
the Registration Statement, file any amendment
to the Registration Statement or supplement to
the Prospectus of which the Distributor shall
not previously have been advised or to which
the Distributor shall reasonably object (based
upon the accuracy or completeness thereof) in
writing;
(7) will continue to make available to its
stockholders (and forward copies to the
Distributor) such periodic, interim and any
other reports as are now, or as hereafter may
be, required by the provisions of the
Investment Company Act of 1940; and
-6-
<PAGE>
(8) will, for the purpose of computing the
offering price of Portfolio shares, advise the
Distributor within one hour after the close of
the New York Stock Exchange (or as soon as
practicable thereafter) on each business day
upon which the New York Stock Exchange may be
open of the net asset value per share of
Portfolio shares of common stock outstanding,
determined in accordance with any applicable
provisions of law and the provisions of the
Articles of Incorporation, as amended, of the
Fund as of the close of business on such
business day. In the event that prices are to
be calculated more than once daily, the Fund
will promptly advise the Distributor of the
time of each calculation and the price
computed at each such time.
6. The Distributor agrees to submit to the Fund, prior to its
use, the form of all sales literature proposed to be generally
disseminated by or for the Distributor on behalf of the Fund,
all advertisements proposed to be used by the Distributor, and
all sales literature or advertisements prepared by or for the
Distributor for such dissemination or for use by others in
connection with the sale of Portfolio shares. The Distributor
also agrees that the Distributor will submit such sales
-7-
<PAGE>
literature and advertisements to the NASD, SEC or other
regulatory agency as from time to time may be appropriate,
considering practices then current in the industry. The
Distributor agrees not to use or to permit others to use such
sales literature or advertisements without the written consent
of the Fund if any regulatory agency expresses objection
thereto or if the Fund delivers to the Distributor a written
objection thereto.
7. The purchase price of each share sold hereunder shall be the
net asset value per share of Portfolio shares outstanding,
determined by the Fund in accordance with any applicable
provision of law and the provisions of its Articles of
Incorporation and in accordance with Rule 26(e) of the Rules
of Fair Practice of the National Association of Securities
Dealers, Inc.
8. The responsibility of the Distributor hereunder shall be
limited to the promotion of sales of Portfolio shares. The
Distributor shall undertake to promote such sales solely as
agent of the Fund, and shall not purchase or sell such shares
as principal. Orders for Portfolio shares and payment for such
orders shall be directed to the Fund for acceptance or to the
Fund's agent, Delaware Service Company, Inc. ("DSC") for
acceptance on behalf of the Fund. The Distributor is not
empowered to approve orders for sales of Portfolio
-8-
<PAGE>
shares or accept payment for such orders. Sales of Portfolio
shares shall be deemed to be made when and where accepted by
the Fund or by DSC on behalf of the Fund.
9. With respect to the apportionment of costs between the Fund
and the Distributor of activities with which both
are concerned, the following will apply:
(a) The Fund and the Distributor will cooperate in
preparing the Registration Statements, the
Prospectus, and all amendments, supplements and
replacements thereto. The Fund will pay all costs
incurred in the preparation of the Fund's
registration statement, including typesetting, the
costs incurred in printing and mailing prospectuses
to its own shareholders and fees and expenses of
counsel and accountants.
(b) The Distributor will pay the costs incurred in
printing and mailing copies of prospectuses to
prospective investors.
(c) The Distributor will pay advertising and
promotional expenses, including the costs of
literature sent to prospective investors.
(d) The Fund will pay the costs and fees incurred in
registering Portfolio shares with the various
states and with the SEC.
-9-
<PAGE>
(e) The Distributor will pay the costs of any additional
copies of the Fund reports and other Fund literature
supplied to the Distributor by the Fund for sales
promotion purposes.
10. The Distributor may engage in other business, provided such
other business does not interfere with the performance by the
Distributor of its obligations under this Contract. The
Distributor may serve as distributor for and promote the
distribution of and sell and offer for sale the securities of
other investment companies.
11. The Fund agrees to indemnify, defend and hold harmless
from the assets of the Portfolio, the Distributor and
each person, if any, who controls the Distributor
within the meaning of Section 15 of the Securities Act
of 1933, from and against any and all losses, damages,
or liabilities to which, jointly or severally, the
Distributor or such controlling person may become
subject, insofar as the losses, damages or liabilities
arise out of the performance of its duties hereunder,
except that the Fund shall not be liable for
indemnification of the Distributor or any controlling
person thereof for any liability to the Fund or its
security holders to which they would otherwise be
subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of their duties
-10-
<PAGE>
hereunder or by reason of their reckless disregard of their
obligations and duties under this Contract.
12. Copies of financial reports, registration statements
and prospectuses, as well as demands, notices,
requests, consents, waivers, and other communications
in writing which it may be necessary or desirable for
either party to deliver or furnish to the other will be
duly delivered or furnished, if delivered to such party
at its address shown below during regular business
hours, or if sent to that party by registered mail or
by prepaid telegram filed with an office or with an
agent of Western Union, in all cases within the time or
times herein prescribed, addressed to the recipient at
1818 Market Street, Philadelphia, Pennsylvania 19103,
or at such other address as the Fund or the Distributor
may designate in writing and furnish to the other.
13. This Contract shall not be assigned, as that term is
defined in the Investment Company Act of 1940, by the
Distributor and shall terminate automatically in the
event of its attempted assignment by the Distributor.
This Contract shall not be assigned by the Fund without
the written consent of the Distributor signed by its
duly authorized officers and delivered to the Fund.
Except as specifically provided in the indemnification
provisions contained in Paragraph 11 hereof, this
Contract and all conditions and
-11-
<PAGE>
provisions hereof are for the sole and exclusive benefit of
the parties hereto and their legal successors and no express
or implied provision of this Contract is intended or shall be
construed to give any person other than the parties hereto and
their legal successors any legal or equitable right, remedy or
claim under or in respect of this Contract or any provisions
herein contained. The Distributor shall look only to the
assets of the Portfolio to meet the obligations of, or claims
against, the Fund under this Contract and not to the holder of
any share of the Fund.
14. (a) This Contract shall remain in force for a period
of two years from the date of this Agreement and
from year to year thereafter, but only so long as
such continuance is specifically approved at least
annually by the Board of Directors or by vote of a
majority of the outstanding voting securities of
the Portfolio and only if the terms and the
renewal thereof have been approved by the vote of
a majority of the Directors of the Fund, who are
not parties hereto or interested persons of any
such party, cast in person at a meeting called for
the purpose of voting on such approval.
(b) The Distributor may terminate this Contract on
written notice to the Fund at any time in case the
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<PAGE>
effectiveness of the Registration Statement shall
be suspended, or in case Stop Order proceedings are
initiated by the SEC in respect of the Registration
Statement and such proceedings are not withdrawn or
terminated within thirty days. The Distributor may
also terminate this Contract at any time by giving
the Fund written notice of its intention to terminate
the contract at the expiration of three months from
the date of delivery of such written notice of
intention to the Fund.
(c) The Fund may terminate this Contract at any time
on at least thirty days prior written notice to
the Distributor (1) if proceedings are commenced
by the Distributor or any of its stockholders for
the Distributor's liquidation or dissolution or
the winding up of the Distributor's affairs; (2)
if a receiver or trustee of the Distributor or any
of its property is appointed and such appointment
is not vacated within thirty days thereafter; (3)
if, due to any action by or before any court or
any federal or state commission, regulatory body,
or administrative agency or other governmental
body, the Distributor shall be prevented from
selling securities in the United States or because
of any action or conduct on the Distributor's
part, sales of Portfolio shares are not qualified
for sale.
-13-
<PAGE>
The Fund may also terminate this Contract at any time
upon prior written notice to the Distributor of its
intention to so terminate at the expiration of three
months from the date of the delivery of such written
notice to the Distributor.
15. The validity, interpretation and construction of this
Contract, and of each part hereof, will be governed by
the laws of the Commonwealth of Pennsylvania.
16. In the event any provision of this Contract is determined to
be void or unenforceable, such determination shall not affect
the remainder of the Contract, which shall continue to be in
force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
Attest
/s/ David P. O'Connor By: /s/ Bruce D. Barton
- ------------------------------- ------------------------------------
Name:David P. O'Connor Name: Bruce D. Barton
Title:Assistant Vice President Title: President and Chief
Assistant Secretary Executive Officer
DELAWARE POOLED TRUST, INC.
for THE EMERGING MARKETS PORTFOLIO
Attest:
/s/ Eric E. Miller By: /s/ Wayne A. Stork
- ------------------------------- ------------------------------------
Name: Eric E. Miller Name: Wayne A. Stork
Title: Vice President Title: President and Chief
Assistant Secretary Executive Officer
-14-
<PAGE>
DELAWARE GROUP
Administration and Service Agreement
Gentlemen:
We are the national distributor of the shares of all of the classes
(now existing or hereafter added) of all of the Funds in the Delaware Group of
Funds. The term "Fund" as used in this Agreement refers to each fund in the
Delaware Group which retains the Distributor to promote and sell its shares, and
any fund which may hereafter be added to the Delaware Group and retain us as
national distributor. You have indicated that you wish to provide certain
services to your customers relating to their ownership of Fund shares, in
accordance with the terms of this Agreement.
TERMS
1. With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), which 12b-1 Plans
provide for the payment of service fees, we expect you to provide administrative
and other services, including, but not limited to, furnishing personal and other
services and assistance to your customers who own Fund shares, answering routine
inquiries regarding a Fund, assisting in changing dividend options, account
designations and addresses, maintaining such accounts, or such other services as
a Fund may require, to the extent permitted by applicable statutes, rules, or
regulations. For such services, we shall pay you a fee, as established by us
from time to time, based on the value of the shares of each class of each Fund
which are attributable to customers of your firm. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time.
2. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to this Agreement.
3. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under
<PAGE>
the Plan by us with respect to the relevant Fund and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon any act of
insolvency by you. Notwithstanding the termination of this Agreement, you shall
remain liable for any amounts otherwise owing to the Distributor or the Funds
and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Distributor or the Fund, or upon any one or
more of the Distributor's dealers, based upon a claim that you and such dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
5. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
6. The 12b-1 Plans in effect on the date of this Agreement are
described in the Funds' Prospectuses. Each Fund reserves the right to terminate
or suspend its 12b-1 Plan(s) at any time as specified in such Plan(s) and we
reserve the right, at any time, without notice, to modify, suspend or terminate
payments hereunder in connection with such 12b-1 Plan(s).
7. This Agreement shall take effect on the date set forth below.
8. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of Pennsylvania, without reference to that
state's choice of law doctrine.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
11. Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
<PAGE>
to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
13. Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
By:
--------------------------------
Agreed and Accepted:
- ------------------------------
(Name)
By:
---------------------------
(Authorized Officer)
Date:
-------------------------
<PAGE>
DEALER'S AGREEMENT
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the classes (now existing or hereafter
added) of all of the Funds in the Delaware Group of Investment Companies which
retain us, Delaware Distributors, L.P., to act as exclusive national
distributor. The term "Fund" as used in this Agreement, refers to each Fund in
the Delaware Group which retains us to promote and sell its shares, and any Fund
which may hereafter be added to the Delaware Group and retain us as national
distributor. Such additional Funds will be included in this Agreement upon our
providing you with written notice of such inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by a
Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's Prospectus.
The manner of computing the net asset value of shares, the public offering price
and the effective time of orders received from you are described in the
Prospectus for each Fund. We reserve the right, at any time and without notice,
to suspend the sale of Fund shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession as
set forth in the then current Prospectus of a Fund from the purchase price of
certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to modify,
suspend or eliminate such concessions by amendment, sticker or supplement to the
Prospectus for the Fund. If any shares confirmed to you under the terms of this
Agreement are redeemed or repurchased by the Fund or by us as agent for the
Fund, or are tendered for redemption or repurchase, within seven business days
after the date of our confirmation of the original purchase order, you shall
promptly refund to us the concession allowed to you on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special plans
and accounts (e.g., volume purchases, letters of intent, rights of accumulation,
combined purchases privilege, exchange and reinvestment privileges and
<PAGE>
retirement plan accounts) as set forth from time to time in the Prospectus. We
must be notified when an order is placed if it qualifies for a reduced sales
charge under any of these plans. We reserve the right, at any time, without
prior notice, to modify, suspend or eliminate any such plans or accounts by
amendment, sticker or supplement to the Prospectus for the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no transaction
shall you have any authority to act as agent for the Fund, for any other
selected dealer or for us. No person is authorized to make any representations
concerning the shares to the Fund except those contained in the Prospectus and
in written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund shares, you shall rely only on such
representations.
All sales must be made subject to confirmation and orders are subject
to acceptance or rejection by the Fund in its sole discretion. Your orders must
be wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received and
that you will not, as principal, sell Fund shares unless purchased by you from
the Fund under the terms hereof. You also agree that you will not withhold
placing with us orders received from your customers so as to profit yourself
from such withholding. Each of your orders shall be confirmed by you in writing
on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within
three business days after our acceptance of your order. If not so paid, we
reserve the right to cancel the sale and to hold you responsible for any loss
sustained by us or the Fund (including lost profit) in consequence. Certificates
representing the Fund's shares will not be issued unless (i) the Fund's
Prospectus indicates that certificates may be issued for the class of shares
being purchased, and (ii) a specific request is received from the purchaser.
Certificates, if requested, will be issued in the names indicated by
registration instructions accompanying your payment.
-2-
<PAGE>
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will redeem shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their shares other than the statements contained in the Prospectus
and the underlying organizational documents of the Fund, to which it refers, and
that you will quote as the redemption price only the price determined by the
Fund. You shall not repurchase any shares from your customers at a price below
that next quoted by the Fund for redemption. You may charge a reasonable fee for
services in connection with the repurchase by you from your customers of shares.
You may hold such repurchased shares only for investment purposes or submit such
shares to the Fund for redemption.
12b-1 PLAN: With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), we expect you to
provide distribution and marketing services in the promotion of the Fund's
shares. In connection with the receipt of distribution fees and/or the receipt
of service fees as set forth under the 12b-1 Plan(s) applicable to the class or
classes of Fund shares purchased by your customers, we expect you to provide
administrative and other services to your customers who own Fund shares,
including, but not limited to, furnishing personal and other services and
assistance, answering routine inquiries regarding a Fund, assisting in changing
dividend options, account designations and addresses, maintaining such accounts,
or such other services as the Fund may require, to the extent permitted by
applicable statutes, rules, or regulations. For such services we will pay you a
fee, as established by us from time to time, based on a portion of the net asset
value of the accounts of your clients in the Fund. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time. The 12b-1 Plans in effect on the
date of this Agreement are described in the Funds' Prospectuses. Each Fund
reserves the right to terminate or suspend its 12b-1 Plan at any time as
specified in the Plan and we reserve the right, at any time, without notice, to
modify, suspend or terminate payments hereunder in connection with such 12b-1
Plan. You will furnish the Fund and us with such information as may be
-3-
<PAGE>
reasonably requested by the Fund or its directors or trustees or by us with
respect to such fees paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws in
each jurisdiction in which you are required to be qualified to act as a
broker/dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); or (b) a foreign
broker/dealer not eligible for membership in the NASD and otherwise in
compliance with applicable U.S. federal and state securities laws. You agree to
notify us promptly in writing and immediately suspend sales of Fund shares if
this representation ceases to be true. You also agree that, whether you are a
member of the NASD or a foreign broker/dealer not eligible for such membership,
you will comply with the rules of the NASD including, in particular, Sections 2
and 26 of Article III thereof, and that you will maintain adequate records with
respect to your transactions with the Funds.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we may furnish you with information identifying the states and jurisdictions
under the securities laws of which it is believed a Fund's shares may be sold.
You will not transact orders for Fund shares in states or jurisdictions in which
we indicate Fund shares may not be sold. You agree to offer and sell Fund shares
outside the United States only in compliance with all applicable laws, rules and
regulations of any foreign government having jurisdiction over such transactions
in addition to any applicable laws, rules and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicity available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall file
Fund sales literature and promotional material with the NASD and SEC as
required.
-4-
<PAGE>
You may not publish or use any sales literature or promotional materials with
respect to the Funds without our prior review and written approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance with
the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection Act,
or any other act of insolvency by you. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Funds and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, or us, or upon any one or more of the
selected dealers based upon the claim that the selected dealers or any of them
constitute a partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will be
deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach and we may offset any
such damages, losses, costs and expenses against any amounts due to you
hereunder. Nothing contained herein shall constitute you, us and any dealers an
association or partnership. All references in this Agreement to the "Prospectus"
refer to the then current version of the Prospectus and include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto. This Agreement supercedes and replaces any prior agreement
-5-
<PAGE>
between us and you with respect to your purchase and sale of Fund shares and is
to be construed in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement
below and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
By:/s/Keith E. Mitchell
----------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
-6-
<PAGE>
DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges
that any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms and
conditions stated in the Agreement. The undersigned hereby acknowledges receipt
of Prospectuses relating to the Fund shares and confirms that, in executing the
Dealer's Agreement, it has relied on such Prospectuses and not on any other
statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
By: DATE
------------------------------- ----------------------------
Name:
-----------------------------
Title:
----------------------------
- ----------------------------------
FIRM
- ----------------------------------
FIRM'S TAX IDENTIFICATION NUMBER
- ----------------------------------
STREET ADDRESS
- ----------------------------------
CITY/STATE/ZIP
<PAGE>
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co., Inc., will be at the public
offering price applicable to each order as set forth in the Prospectus. The
manner of computing the net asset value, the public offering price and the
effective time of orders received from you are described in the Prospectus for
each Fund. We reserve the right at any time, without notice, to suspend the sale
of Fund shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
<PAGE>
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
full by check payable to the Fund at its office within three business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1Plan") of the Investment Company Act of 1940 (the "1940 Act"), we
expect you will provide shareholder and administrative services to your
customers who own Fund shares, such as: answering inquiries regarding the Fund;
assisting in changing dividend options, account designations and addresses;
establishing and maintaining shareholder accounts and records; arranging for
bank wires; or such other services as the Fund may require to the extent
permitted by applicable statutes, rules or regulations. You will promptly answer
all written complaints received by you relating to Fund accounts or promptly
forward such complaints to us and assist us in answering such complaints. For
such services we will pay you a fee as set by us from time to time, based on a
portion of the net asset value of the accounts of your clients in the Fund. We
are permitted to make this payment under the terms of the 12b-1 Plan adopted by
2
<PAGE>
certain of the Funds, as such 12b-1 Plans may be in effect from time to time.
Each Fund reserves the right, at any time, to suspend payments under its 12b-1
Plan. You will furnish the Fund and us with such information as may be
reasonably requested by the Fund or its directors or trustees or by us with
respect to fees paid to you pursuant to this Agreement. In accordance with
interpretations and rulings to the Staff of the Commission, you will not charge
your customers any fees for services for which you are being compensated under a
12b-1 Plan of a Fund.
SALES OF NO-LOAD - NON 12b-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness you will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities and Exchange Act of 1934
(or other financial institution) and not otherwise required to register as a
broker or dealer under such Act. You agree to notify us promptly in writing if
this representation ceases to be true. You also agree that you will comply with
the rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, you
will be responsible in that relationship for insuring compliance with all laws
and regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states which we indicate Fund shares may
not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
3
<PAGE>
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional material with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The name of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
4
<PAGE>
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date: DELAWARE DISTRIBUTORS, L.P.
----------------------------
BY: DELAWARE DISTRIBUTORS, INC.
General Partner
BY:
--------------------------------
Accepted and Agreed to:
- ---------------------------------
(Name of Firm)
BY:
------------------------------
Name:
Title:
5
<PAGE>
One Commerce Square
Philadelphia, PA 19103
215.255.1200
Delaware Group of Funds
As of April 14, 1997
VIA UPS OVERNIGHT
- -----------------
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996 between
The Chase Manhattan Bank and those registered
investment companies (and on behalf of certain series
thereof), listed on Schedule A attached thereto
("Agreement")
--------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the
undersigned, on behalf of Delaware Pooled Trust, Inc. for the benefit of The
Emerging Markets Portfolio (the "Portfolio") hereby appoints The Chase Manhattan
Bank to provide custodial services for the Portfolio under and in accordance
with the terms of the Agreement and accordingly, requests that the Portfolio be
added to Schedule A to the Agreement effective April 14, 1997. Kindly
acknowledge your agreement to provide such services and to add the Portfolio to
Schedule A by signing in the space provided below.
DELAWARE POOLED TRUST, INC.
on behalf of the Emerging
Markets Portfolio
By: /s/ David K. Downes
------------------------------
David K. Downes
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
By: /s/ Rosemary M. Stidmon
--------------------------
Its: Vice President
CHASE
GLOBAL CUSTODY AGREEMENT
AGREEMENT, effective May 1, 1996, between THE CHASE MANHATTAN BANK, N.A.
(the "Bank") and those registered investment companies listed on Schedule A
hereto (each a Customer ) on behalf of certain of their respective series,
as listed on Schedule A (individually and collectively the Series ).
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer on behalf of each
Series ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar property
whether certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b) A deposit account in the name of the Customer on behalf of each
Series ("Deposit Account") for any and all cash in any currency received by
the Bank or its Subcustodian for the account of the Customer, which cash
shall not be subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same class in place of those
deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
To the extent available and permissible under applicable law and
regulation, Cash held pursuant to Instructions shall be held in interest
bearing accounts. If interest bearing accounts are not available, such cash
may be held in non-interest bearing accounts. The Bank is authorized to
maintain cash balances on deposit for the Customer with itself or one of its
affiliates. Interest bearing accounts shall bear interest at such reasonable
rates of interest as may from time to time be paid on such accounts by the
Bank or its affiliates.
(iii) For each Series that is exclusively a domestic Series, the following
additional provisions shall apply:
(x) In the event that during a given calendar month a Series has maintained
an average daily cash balance greater than zero, the Bank shall provide an
earnings credit against custody fees otherwise owing hereunder by such Series
during such calendar month in an amount equal to the product of (A) 75% of
the 90 day U.S. government Treasury bill rate as quoted in the Wall Street
Journal for the last Business Day (being a day on which the Bank is open
for the transaction of all its ordinary business) of such calendar month, (B)
the average daily cash balance for such month, and (C) the number of days in
such calendar month divided by 365.
(y) In the event that during a given calendar month a Series has maintained
an average daily cash balance less than or equal to zero, the Bank shall be
paid interest on such amount by such Series in an amount equal to the product
of (A) the Overnight Fed Funds Rate (as defined below) plus 25 basis points
for the last Business Day of such calendar month, (B) the average daily cash
balance for such month, and (C) the number of days in such calendar month
divided by 365.
(z) For purposes of (y) above, the term Overnight Fed Funds Rate shall mean
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published by the Federal Reserve Bank of New York (with the rate for the
last Business Day of a given calendar month being the rate so published on
the Business Day immediately following such Day), or, if such rate is note so
published, the average quotations, for the last Business Day of a given
calendar month, of such transactions received by the Bank from three Federal
funds brokers of recognized standing selected by the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule B of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in their account
with any securities depository in which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule B. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
Upon receipt of Instructions, the Bank shall cease using any
Subcustodian with respect to the customer, and arrange for delivery of
Securities held with such Subcustodian to another entity as designated by the
Customer; provided that, the Bank shall have no responsibility for the
performance of such other entity.
4. Use of Subcustodian.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of
the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that: (i) such assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian except for safe custody or administration, (ii) the
beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration;
(iii) adequate records will be maintained identifying the assets held
pursuant to such agreement as belonging to the customers of the Bank; (iv)
subject to applicable law, Subcustodian shall permit independent public
accountants for Bank and customers of the Bank reasonable access to
Subcustodian s books and records as they pertain to the subcustody account in
connection with such accountants' examination of the books and records of
such account; and (v) the Bank will receive periodic reports with respect to
the safekeeping of assets in the subcustody account, including advices and/or
notifications of any transfers to or from such subcustody account. The
foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
(e) Upon request of the Customer, the Bank shall deliver to the Customer
annually a report stating: (i) the identity of each Subcustodian then acting
on behalf of the Bank and the name and address of the governmental agency or
other regulatory authority that supervises or regulates such Subcustodian;
(ii) the countries in which each Subcustodian is located; and (iii) as long
as Securities and Exchange Commission ("SEC") Rule 17f-5 under the Investment
Company Act of 1940, as amended ("1940 Act"), requires the Customer s Board
of Directors/Trustees directly to approve its foreign custody arrangements,
such other information relating to such Subcustodians as may reasonably be
requested by the Customer to ensure compliance with Rule 17f-5. As long as
Rule 17f-5 requires the Customer s Board of Directors/Trustees directly to
approve its foreign custody arrangements, the Bank shall also furnish
annually to the Customer information concerning such Subcustodians similar in
kind and scope as that furnished to the Customer in connection with the
initial approval hereof. The Bank shall timely advise the Customer of any
material adverse change in the facts or circumstances upon which such
information is based where such changes would affect the eligibility of the
Subcustodian under Rule 17f-5 as soon as practicable after it becomes aware
of any such material adverse change in the normal course of its custodial
activities.
5. Deposit Account Transactions
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required
by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank shall credit or debit the Accounts on a contractual
settlement date with cash or Securities with respect to any sale, exchange or
purchase of Securities in those countries set forth in Appendix A hereto;
provided that, the Bank may amend Appendix A from time to time in its sole
discretion and shall advise the Customer of such amendments. Otherwise,
transactions will be credited or debited to the Accounts on the date cash or
Securities are actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction; provided that, the Bank shall
give Customer prior notification of any such reversal. Where the foregoing
notification is oral, the Bank shall promptly provide written confirmation of
the same (which confirmation may be electronic).
(ii) If any Securities delivered pursuant to this Section 6 are returned
by the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian, subject to applicable SEC rules and regulations under the Act.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer advises the Bank orally and then promptly sends
the Bank a written exception or objection to any Bank statement within 180
days of receipt, the Customer shall be deemed to have approved such
statement.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. Subject to the standard of care in Section 12 hereof, the Bank shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Bank or by its Subcustodians of any payment, redemption or other
transaction regarding Securities in the Custody Account in respect of which
the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies; Tax Reclaims.
a. Corporate Actions. Whenever the Bank receives information
concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), the Bank will give the Customer written notice (which
may be electronic) of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person (as defined in Section
10 hereof), but if Instructions are not received in time for the Bank to take
timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit Account with the
proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. With respect to domestic U.S. and Canadian Securities
(the latter if held in DTC), the Bank will send to the Customer or the
Authorized Person (as defined in Section 10) for a Custody Account, such proxies
(signed in blank, if issued in the name of the Bank's nominee or the nominee
of a central depository) and communications with respect to Securities in the
Custody Account as call for voting or relate to legal proceedings within a
reasonable time after sufficient copies are received by the Bank for
forwarding to its customers. In addition, the Bank will follow coupon
payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise the Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of which
the Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by the Bank for
this purpose.
With respect to Securities other than the foregoing, proxy voting
services shall be provided in accordance with separate proxy voting agreement
annexed hereto a Appendix B.
The foregoing proxy voting services may be provided by Bank, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third parties to the same extent as the Bank would
have been if it performed such services itself..
c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will
apply for a reduction of withholding tax and any refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer which the Bank
believes may be available to such Customer. Where such reports are available,
the Bank shall periodically report to Customer concerning the making of
applications for a reduction of withholding tax and refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer.
(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Bank shall use reasonable means to advise the Customer of the declarations,
documentation and information which the Customer is to provide to the Bank in
order for the Bank to provide the tax reclaim services described herein. The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup
withholding tax will be deducted from U.S. source income. The Customer shall
provide to the Bank such documentation and information as it may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. The Customer undertakes to notify the Bank
immediately if any such information requires updating or amendment.
(iii) Subject to subsection (vii) hereof, the Bank shall not be liable
to the Customer or any third party for any tax, fines or penalties payable by
the Bank or the Customer, and shall be indemnified accordingly, whether these
result from the inaccurate completion of documents by the Customer or any
third party, or as a result of the provision to the Bank or any third party
of inaccurate or misleading information or the withholding of material
information by the Customer or any other third party, or as a result of any
delay of any revenue authority or any other matter beyond the control of the
Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the Cash Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at
its absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this sub-
clause, the Bank shall have no responsibility with regard to the Customer's
tax position or status in any jurisdiction. Except as provided in Section
8(c)(ii) and pursuant to Instructions, the Bank shall take no action in the
servicing of the Customer s Securities which, in and of itself, creates a
taxable nexus for the Customer in any jurisdiction other than with respect to
interest, dividends and capital gains that may otherwise be subject to tax by
such jurisdiction with respect to a foreign investor not otherwise engaged in
a trade or business in such jurisdiction in a given taxable year. Bank shall
not be liable for any tax liability caused, directly or indirectly, by
Customer's actions or status in any jurisdiction.
(vi) In connection with obtaining tax relief, the Customer confirms
that the Bank is authorized to disclose any information requested by any
revenue authority or any governmental body in relation to the Customer or the
Securities and/or Cash held for the Customer. This provision does not
authorize any other voluntary disclosure to any revenue authority or any
governmental body without the prior written consent of Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank reasonably believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded. For
purposes hereof, reasonableness shall mean compliance with applicable
procedures.
Any Instructions delivered to the Bank by telephone (including cash
transfer instructions as described below) shall promptly thereafter be
confirmed in writing by any two Authorized Persons (which confirmation may
bear the facsimile signature of such Persons), but the Customer will hold the
Bank harmless for the failure of such Authorized Persons to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time; provided that, where the Bank receives
a telephone Instruction from an Authorized Person requiring the transfer of
cash, prior to executing such Instruction the Bank will, to confirm such
Instruction, call back any one of the individuals on a list of persons
authorized to confirm such oral transfer Instructions (which Person shall be
a person other than the initiator of the transfer Instruction) and the Bank
shall not execute the Instruction until it has received such confirmation.
Either party may electronically record any Instructions given by telephone,
and any other telephone discussions with respect to the Custody Account. The
Customer shall be responsible for safeguarding any testkeys, identification
codes or other security devices which the Bank shall make available to the
Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable
to the Customer for any loss which shall occur as the result of the failure
of a Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In the event that
Securities are lost by reason of the failure of the Bank or its Subcustodian
to use reasonable care, the Bank shall be liable to the Customer based on the
market value of the property which is the subject of the loss on the date it
is replaced by the Bank and without reference to any special conditions or
circumstances, it being understood that for purposes of measuring damages
hereunder, the value of Securities which are sold by the Customer prior to
the replacement thereof shall be equal to the sale price thereof less the
expenses of such sale incurred by the Customer. The Bank shall act with
reasonable promptness in making such replacements. In no event shall the
Bank be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Bank
has been advised of the likelihood of such loss or damage and regardless of
the form of action. Subject to the Bank's obligations pursuant to Section 4(e)
hereof, the Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or affiliate of Bank.
(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) (a) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise pursuant to this Agreement if such act or omission
was in good faith, without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any Customer document
which it reasonably believes in good faith to have been validly executed.
(b) The Bank shall hold Customer harmless from, and shall indemnify Customer
for, any loss, liability, claim or expense incurred by Customer (including,
but not limited to, Customer's reasonable legal fees) to the extent that such
loss, liability, claim or expense arises from the negligence or willful mis-
conduct on the part of the Bank or a Subcustodian; provided that, in no event
shall the Bank be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if the Bank has been advised of the likelihood of such loss or damage
and regardless of the form of action. Subject to the Bank's obligations
pursuant to Section 4(e) hereof, the Bank will not be responsible for the
insolvency of any Subcustodian which is not a branch or affiliate of Bank.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than a
Security.
(iv) except as may be otherwise provided in any securities lending
agreement between the Customer and the Bank, evaluate or report to the
Customer or an Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered or payments
are made pursuant to this Agreement;
(v) except for trades settled at DTC where the broker provides to the
Bank the trade confirmation and the Customer provides for the Bank to receive
the trade instruction, review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in Section 10)
issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by the
Bank.
(c) The Customer authorizes the Bank to act, hereunder, in its capacity
as a custodian notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction, or circumstances
are such that the Bank may have a potential conflict of duty or interest
including the fact that the Bank or any of its affiliates may provide
brokerage services to other customers, act as financial advisor to the issuer
of Securities, act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material interest in
the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing ("Fee Schedule"),
together with the Bank's reasonable out-of-pocket or incidental expenses (as
further defined in the Fee Schedule), including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification
of such other facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank against all
losses, liability, claims or demands arising directly or indirectly from any
such certifications.
(c) Access to Records. Applicable accounts, books and records of the
Bank shall be open to inspection and audit at all reasonable times during
normal business hours upon reasonable advance notice by Customer s
independent public accountants and by employees of Customer designated to the
Bank. All such materials shall, to the extent applicable, be maintained and
preserved in conformity with the Act and the rules and regulations
thereunder, including without limitation, SEC Rules 31a-1 and 31a-2. Subject
to restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the
examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are Mutual Fund assets subject to certain
Securities and Exchange Commission ("SEC") rules and regulations.
This Agreement consists exclusively of this document together with
Schedules A and B, Appendices 1 and 2, Exhibits I - _______ and the following
Rider(s) [Check applicable rider(s)]:
X MUTUAL FUND
----
X SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement, and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right under
this Agreement operates as a waiver, nor does any single or partial exercise
of any power or right preclude any other or further exercise, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
-------------------------------------
Customer: Delaware Group of Funds
1818 Market St.
Philadelphia, PA 19103
att: Messrs. Bishof and O Conner
or telex:
--------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under
Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver
the Assets, the Bank, at its election, may deliver the Assets to a bank or
trust company doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold the Assets until Instructions are provided to the Bank;
provided that, where the Bank is the terminating party and the Bank had not
notified the Customer that termination was for breach of this Agreement by
the Customer, such 60 day period shall be extended for an additional period
as requested by Customer of up to 120 days.
Termination as to One or More Series. This Agreement may be terminated
as to one or more Series (but less than all the Series) by delivery of an
amended Schedule A deleting such Series, in which case termination as to the
deleted Series shall take effect sixty (60) days after the date of such
delivery. The execution and delivery of an amended Schedule A which deletes
one or more Series, shall constitute a termination hereof only with respect
to such deleted Series, shall be governed by the preceding provisions of
Section 14 as to the identification of a successor custodian and the delivery
of the Assets of the Series so deleted to such successor custodian, and shall
not affect the obligations of the Bank and the Customer hereunder with
respect to the other Series set forth in Schedule A, as amended from time to
time.
(j) Several Obligations of the Series. With respect to any obligations
of the Customer on behalf of the Series and their related Accounts arising
hereunder, the Custodian shall look for payment or satisfaction of any such
obligation solely to the assets and property of the Series and such Accounts
to which such obligation relates as though the Customer had separately
contracted with the Custodian by separate written instrument with respect to
each Series and its Accounts.
CUSTOMER
By: /s/ Michael P. Bishof
---------------------
Title Vice President and Treasurer
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Rosemary M. Stidmon
-----------------------
Title Vice President
STATE OF Pennsylvania)
: ss.
COUNTY OF Philadelphia)
On this 9th day of July, 1996, before me personally came Michael P. Bishof,
to me known, who being by me duly sworn, did depose and say that he resides
in Blue Bell, PA at 110 Spyglass Drive; that he is Vice President/Treasurer
of Delaware Group of Funds, the entity described in and which executed the
foregoing instrument; that he knows the seal of said entity, that the seal
affixed to said instrument is such seal, that it was so affixed by order of
said entity, and that he signed his name thereto by like order.
/s/ Maritza H. Cruzado
-----------------------
Maritza H. Cruzado
Notary
Sworn to before me this 9th
day of July, 1996.
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 24th day of May, 1996, before me personally came Rosemary
Stidmon, to me known, who being by me duly sworn, did depose and say that she
resides in New Providence, NJ at 31 Sagamore Drive; that she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that she signed her name thereto
by like order.
Sworn to before me this 24th
day of May, 1996.
/s/ Laiyee Ng
- -------------
Laiyee Ng
Notary
Schedule A
Delaware Pooled Trust, Inc. - Global Fixed Income Portfolio
Delaware Pooled Trust, Inc. - International Equity Portfolio
Delaware Pooled Trust, Inc. - Labor Select International Equity Portfolio
Delaware Pooled Trust, Inc. - Real Estate Investment Trust Portfolio
Delaware Pooled Trust, Inc. - High Yield Portfolio
Delaware Pooled Trust, Inc. - International Fixed Income Portfolio
Delaware Pooled Trust, Inc. - Defensive Equity Utility Portfolio
Delaware Group Global & International Funds, Inc. - International Equity Fund
Delaware Group Global & International Funds, Inc. - Global Assets Fund
Delaware Group Global & International Funds, Inc. - Global Bond Fund
Delaware Group Global & International Funds, Inc. - Emerging Markets Fund
Delaware Group Premium Fund, Inc. - International Equity Series
Delaware Group Premium Fund, Inc. - Equity Income Series
Delaware Group Premium Fund, Inc. - High Yield Series
Delaware Group Premium Fund, Inc. - Capital Reserves Series
Delaware Group Premium Fund, Inc. - Money Market Series
Delaware Group Premium Fund, Inc. - Growth Series
Delaware Group Premium Fund, Inc. - Multiple Strategy Series
Delaware Group Premium Fund, Inc. - Value Series
Delaware Group Premium Fund, Inc. - Emerging Growth Series
Delaware Group Premium Fund, Inc. - Global Bond Series
Delaware Group Delchester High-Yield Bond Fund, Inc.
Delaware Group Delaware Fund, Inc. - Delaware Fund
Delaware Group Delaware Fund, Inc. - Devon Fund
Delaware Group Value Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Dividend & Income Fund, Inc.
Delaware Group Advisor Funds, Inc. - Enterprise Fund
Delaware Group Advisor Funds, Inc. - U.S. Growth Fund
Delaware Group Advisor Funds, Inc. - World Growth Fund
Delaware Group Advisor Funds, Inc. - New Pacific Fund
Delaware Group Advisor Funds, Inc. - Federal Bond Fund
Delaware Group Advisor Funds, Inc. - Corporate Income Fund
March, 1996 Schedule B
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
<TABLE>
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<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT
EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Merita Bank KOP Merita Bank KOP
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Ghana Barclays Bank
Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, N.A.,
GREECE London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
Deutsche Bank AG, Bombay Branch Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya
LUXEMBOURG
Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Banking The Hongkong and Shanghai Banking
Corporation Ltd Corporation Ltd.
Curepipe Road Curepipe
Curepipe
MAURITIUS
MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
(Equities)Montes Urales no. 470, 4th Floor
Col. Lomas de Chapultepec
11000 Mexico D.F.
(Government Banco Nacional de Mexico, No correspondent Bank
Bonds) Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO
NETHERLANDS
ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND
National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
I.I. Chundrigar Road Karachi
AWT Plaza
Karachi
PAKISTAN
Deutsche Bank Deutsche Bank
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES
The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
Curtis Plaza Warsaw
Woloska 18
02-675 Warsaw
POLAND
For Mutual Funds:
Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial Banco Nacional Ultra Marino
de Lisboa Lisbon
Servico de Gestaode Titulos
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL
SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
(CHINA) Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SLOVAK REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
SOUTH AFRICA
Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA
The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya,
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND
Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
115 Min Sheng East Road - Sec 3,
9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
Tunisia
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
Turkey
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Tanganyika House
Corner of 3rd Street & Union Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE>
SECURITIES LENDING AGREEMENT ("Lending Agreement"), dated as of
, 1996 between ("Lender"), having its principal place of
business at , and The Chase Manhattan Bank, N.A. ("Chase"), having its
principal place of business at One Chase Manhattan Plaza, New York, New York
10081.
It is hereby agreed as follows:
Section 1 - Definitions
Unless the context clearly requires otherwise, the following words
shall have the meanings set forth below when used herein:
a. "Account" shall mean the securities account established and
maintained by Chase on behalf of Lender pursuant to, as the case may be, a
separate custody agreement or a separate directed trust agreement ("Agreement")
between Chase and Lender, which Agreement provides, inter alia, for the
safekeeping of Securities received by Chase from time to time on behalf of
Lender.
b. "Agreement" shall have the meaning assigned thereto in Section 1(a)
hereof.
c. "Authorized Investment" shall mean any type of instrument, security,
participation or other property in which Cash Collateral may be invested or
reinvested, as described in Section 5(f) hereof and Appendix 4 hereto (and as
such Appendix may be amended from time to time by written agreement of the
parties).
d. "Authorized Person" shall mean, except to the extent that Chase is
advised to the contrary by Proper Instruction, any person who is authorized to
give instructions to Chase pursuant to the Agreement and any mandates given to
Chase in connection with such Agreement. An Authorized Person shall continue to
be so until such time as Chase receives Proper Instructions that nay such person
is no longer an Authorized Person.
e. "Borrower" shall mean an entity listed on Appendix 1 hereto, other
than an entity which Chase shall have been instructed to delete from list
pursuant to Written Instructions and as such Appendix may be amended in
accordance with Section 4(b) hereof.
f. "Business Day" shall have the meaning assigned thereto in the
applicable MSLA.
g. "Buy-in" shall have the meaning assigned thereto in Section 7(c)
hereof.
<PAGE>
h. "Cash Collateral" shall mean fed funds, New York Clearing House
Association funds and such non-U.S. currencies as may be pledged by a Borrower
in connection with a particular Loan.
i. "Collateral" shall have the meaning assigned thereto in the
applicable MSLA, together with Cash Collateral.
j. "Collateral Account" shall mean, as the case may be, an account
maintained by Chase with itself, with any Depository or with any Triparty
Institution and designated as a Collateral Account for the purpose of holding
any one or more of Collateral, Authorized Investments, and Proceeds in
connection with Loans hereunder.
k. "Collateral Amount" shall have the meaning assigned thereto in
Section 5(c) hereof.
l. "Collateral Criterion" shall have the meaning assigned thereto in
Section 5(c) hereof.
m. "Depository" shall mean: (1) the Depository Trust Company, the
Participants' Trust Company and any other securities depository or clearing
agency (and each of their respective successors and nominees) registered with
the U.S. Securities and Exchange Commission or registered with or regulated by
the applicable foreign equivalent thereof or otherwise able to act as a
securities depository or clearing agency, (ii) any transnational depository,
(iii) the Federal Reserve book-entry system for the receiving and delivering of
U.S. Government Securities, and (iv) any other national system for the receiving
and delivering of that country's government securities.
n. "Difference" shall have the meaning assigned thereto in Section 7(c)
hereof.
o. "Distributions" shall have the meaning assigned thereto in Section
3(b)(v) hereof.
p. "Dollars" shall have the meaning assigned thereto in Section 7(b)
hereof.
q. "Due Date" shall have the meaning assigned thereto in Section 7(b)
hereof.
r. "Insolvency Event" shall have the meaning assigned thereto in
Section 7(b) hereof.
s. "Letter of Credit" shall have the meaning assigned thereto in the
applicable MSLA and be issued by a bank listed on Appendix 2 hereto (as such
list may be amended by Chase from time to time on notice to Lender), other than
a bank deleted from such list pursuant to Written Instruction.
<PAGE>
t. "Loan" shall mean a loan of Securities hereunder and under the
applicable MSLA.
u. "Loan Fee" shall mean the amount payable by a Borrower to Chase
pursuant to the applicable MSLA in connection with Loans collateralized other
than by Cash Collateral.
v. "Market Value" shall have the meaning assigned thereto in the
applicable MSLA.
w. "MSLA" shall mean a master securities lending agreement between
Chase and a Borrower, pursuant to which Chase as agent lends securities on
behalf of its customers (including Lender) from time to time. A copy of Chase's
standard form of MSLA, including the international addendum thereto, is annexed
as Appendix 3.
x. "Net Assets" shall have the meaning assigned thereto in Section 8
hereof.
y. "Net Realized Income" shall have the meaning thereto in Section 8
hereof.
z. "Oral Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
aa. "Proceeds" shall mean interest, dividends and other payments and
Distributions received by Chase in connection with Authorized Investments.
bb. "Proper Instructions" shall mean Oral Instructions and Written
Instructions.
cc. "Rebate" shall mean the amount payable by Chase on behalf of Lender
to a Borrower in connection with Loans collateralized by Cash Collateral.
dd. "Return Date" shall have the meaning assigned thereto in Section
7(c) hereof.
ee. "Securities" shall mean government securities (including U.S.
Government Securities), equity securities, bonds, debentures, other corporate
debt securities, notes, mortgages or other obligations, and any certificates,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein and held pursuant to the Agreement.
ff. "Term Loan" shall have the meaning assigned thereto in Section 5(i)
hereof.
<PAGE>
gg. "Triparty Institution" shall mean a financial institution with
which Chase shall have previously entered a triparty agreement among itself,
such Triparty Institution and a particular Borrower providing, among other
things, for the holding of Collateral in a Collateral Account at such Triparty
Institution in Chase's name on behalf of Chase's lending customers and for the
substitution of Collateral; provided, however, that any substituted Collateral
shall meet the then standards for acceptable Collateral set by Chase.
hh. "U.S. Government Security" shall mean book-entry securities issued
by the U.S. Treasury defined in Subpart 0 of Treasury Department Circular No.
300 and any successor provisions) and any other securities issued or fully
guaranteed by the United States government or any agency, instrumentality or
establishment of the U.S. government, including, without limitation, securities
commonly known as "Ginnie Maes," Sally Maes," "Fannie Maes" and "Freddie Maes".
ii. "Written Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
Section 2 - Appointment, Authority
(a) Appointment. Lender hereby appoints Chase as its agent to lend
Securities in the Account on Lender's behalf on a fully disclosed basis to
Borrowers from time to time in accordance with the terms hereof and on such
terms and conditions and at such times as Chase shall determine and Chase may
exercise all rights and powers provided under any MSLA as may be incidental
thereto, and Chase hereby accepts appointment as such agent and agrees to so
act.
(b) Authority. Lender hereby authorizes and empowers Chase to execute
in Lender's name on its behalf and at its risk all agreements and documents as
may be necessary to carry out any of the powers herein granted to Chase. Lender
grants Chase the authority set forth herein notwithstanding its awareness that
Chase, in its individual capacity or acting in a fiduciary capacity for other
accounts, may have transactions with the same institutions to which Chase may be
lending Securities hereunder, which transactions may give rise to actual or
potential conflict of interest situations. Chase shall not be bound to: (i)
account to Lender for any sum received or profit made by Chase for its own
account or the account of any other person or (ii) disclose or refuse to
disclose any information or take any other action if the same would or might in
Chase's judgment, made in good faith, constitute a breach of any law or
regulation or be otherwise actionable with respect to Chase; provided that, in
circumstances mentioned in (ii) above, Chase shall promptly inform Lender of the
relevant facts (except where doing so would, or might in Chase's judgment, made
in good faith, constitute a breach of any law or regulation or be otherwise
actionable as aforesaid).
<PAGE>
Section 3 - Representation and Warranties
(a) Representations of each party. Each party hereto represents and
warrants to the other that: (i) it has the power to execute and deliver this
Lending Agreement, to enter into the transactions contemplated hereby, and to
perform its obligations hereunder; (ii) it has taken all necessary action to
authorize such execution, delivery, and performance; (iii) this Lending
Agreement constitutes a legal, valid, and binding obligation enforceable against
it; and (iv) the execution, delivery, and performance by it of this Lending
Agreement shall at all times comply with all applicable laws and regulations.
(b) Representations of Lender. Lender represents and warrants to Chase
that: (i) this Lending Agreement is, and each Loan shall be, legally and validly
entered into, and does not and shall not violate any statute, regulation, rule,
order or judgment binding on Lender, or any provision of Lender's charter or
by-laws, or any agreement binding on Lender or affecting its property, and is
enforceable against Lender in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or similar laws, or by equitable
principles relating to or limiting creditors' rights generally; (ii) the person
executing this Lending Agreement and all Authorized Persons acting on behalf of
Lender has and have been duly and properly authorized to do so; (iii) it is
lending Securities as principal and shall not transfer, assign or encumber its
interest in, or rights with respect to, any Securities available for Loan
hereunder; (iv) it is the beneficial owner of all Securities or otherwise has
the right to lend Securities; and (v) it is entitled to receive all interest,
dividends and other distributions ("Distributions") made by the issuer with
respect thereto. Lender shall promptly identify to Chase by notice, which notice
may be oral, any Securities that are no longer subject to the representations
contained in (b).
Section 4 - Borrowers
(a) MSLA. Lender hereby acknowledges receipt of the form of MSLA and
authorizes Chase to lend Securities in the Account to Borrowers thereunder
pursuant to an agreement substantially in the form thereof.
(b) Borrowers. Securities may be lent to any Borrower selected by Chase
in Chase's sole discretion, in accordance with the terms hereof. In that
connection, Appendix 1 may be amended from time to time by Chase on notice to
Lender.
<PAGE>
Section 5 - Loans
(a) Securities to be lent, Lending opportunities, Loan initiation. All
Securities of Lender held by Chase that are issued, settled or traded in the
markets that have been approved by Chase from time to time for purposes of
Chase's discretionary securities lending program shall be subject to the terms
hereof. Chase shall seek to assure that Lender receives a fair allocation of
lending opportunities vis-a-vis other lenders, taking into account the demand
for and availability of Securities, types of Collateral, eligibility of
Borrowers, limitations on investments of Cash Collateral, tax treatment, and
similar commercial factors. From time to time, Chase may lend to Borrowers
Securities held in the Account (except Securities that are no longer subject to
the representations set forth in Section 3) and shall deliver such Securities
against receipt of Collateral in accordance with the applicable MSLA. Chase
shall have the right to decline to make any Loans to any Borrower and to
discontinue lending to any Borrower in its sole discretion and without notice to
Lender.
(b) Receipt of Collateral, Collateral substitution. For each Loan,
Chase shall receive and hold Letters of Credit received as Collateral and Chase
or a Triparty Institution shall receive and hold all other Collateral required
by the applicable MSLA in a Collateral Account, and Chase is hereby authorized
and directed, without obtaining any further approval from Lender, to invest and
reinvest all or substantially all Cash Collateral. Chase shall credit, or where
applicable shall have a Triparty Institution credit, all Collateral, Authorized
Investments and Proceeds to a Collateral Account and Chase shall not mark its
books and records to identify Lender's interest therein, it being understood,
however, that all monies credited to a Collateral Account may for purposes of
investment be commingled with cash collateral held for other lenders of
securities on whose behalf Chase may act. Chase may, in its sole discretion,
liquidate any Authorized Investment and credit the net proceeds in a Collateral
Account. Chase shall accept substitutions of Collateral in accordance with the
applicable MSLA and shall credit, or where applicable shall have a Triparty
Institution credit, all such substitutions to a Collateral Account.
(c) Mark to market procedures. (i) Chase shall require initial
Collateral for a Loan in an amount determined by applying the then applicable
"Collateral Criterion" (as defined below) to the Market Value of the Security
that is the subject of the Loan. The Collateral Criterion with respect to a
given Security shall be an amount equal to the then applicable percentage
(currently 102% for securities issued in the U.S. and 105% for securities issued
outside of the U.S.) of the Market Value of the Security (plus accrued interest,
if any, with respect to debt securities) which is the subject of a Loan as
determined as of the close of trading on the preceding Business Day. (ii) Each
Business Day Chase shall determine if the Market Value of all Collateral
received by Chase from a given Borrower in connection with all loans to such
Borrower from all lenders is at least equal to the aggregate amount ("Collateral
Amount") determined by applying the applicable Collateral Criterion to each
security on loan to such Borrower from all lenders. (iii) In accordance with
general market practice, the Market Value of certain securities (including,
without limitation, U.S. Government Securities) whether on Loan or received as
Collateral, may be determined on a same day basis by reference to recognized
pricing services.
<PAGE>
(d) Demand for additional Collateral. If the determination made in
Section 5(c)(ii) above demonstrates that the Market Value of all Collateral
received from a given Borrower is not at least equal to the Collateral Amount,
Chase shall demand additional Collateral from such Borrower in accordance with
the applicable MSLA so as to meet the Collateral Amount by making specific
Loans; provided that, Chase may from time to time establish de minimis
guidelines pursuant to which a mark would not be made even where the aggregate
Collateral Amount has not been met.
(e) Changes in procedures applicable to Collateral. The Collateral
procedures set forth in Sections 5(b)-(d) above reflect Chase's current practice
and may be changed by Chase from time to time based on general market conditions
(including volatility of Securities on Loan and of securities Collateral), the
Market Value of Securities on Loan to a given Borrower, and in accordance with
general market practice and regulatory requirements. Chase shall notify Lender
of material revisions to the foregoing procedures.
(f) Investment of Cash Collateral. (i) Chase is hereby authorized to
invest and reinvest cash Collateral in accordance with the investment guidelines
(and the interpretations, procedures and definitions included therewith) annexed
hereto as Appendix 4. (ii) Authorized Investments are made for the account of,
and at the sole risk of, Lender. In that connection, Lender shall pay to Chase
on demand in cash an amount equal to any deficiency in the amount of Collateral
available for return to a Borrower pursuant to an applicable MSLA.
(g) Lender's rights with respect to Securities on Loan; Distribution
and voting rights. (i) An amount equal to the amount of all Distributions paid
with respect to Securities on Loan that Lender would have received had such
Securities not been on Loan shall be credited to Lender's account on the date
such Distributions are delivered by Borrower to Chase. Any non-cash Distribution
on Securities on Loan which is in the nature of a stock split or a stock
dividend, shall be added to the Loan (and shall be considered to constitute
Securities on Loan) as of the date such non-cash Distribution is received by the
Borrower and shall be subject to the provisions of this Lending Agreement;
provided that the Lender may, by giving chase ten (10) Business Days' notice
prior to the date of such non-cash Distribution (or such different amount of
time as Chase may from time to time require on advice to Lender), direct Chase
to request that the Borrower deliver such non-cash Distribution to Chase
pursuant to the applicable MSLA, in which case Chase shall credit such non-cash
Distribution to Lender's account on the date it is delivered to Chase. Without
regard to the reference to "delivered" in the foregoing, the "AutoCredit"
provisions of the Agreement shall apply where a Borrower fails to make a
Distribution payment to Chase, the effect of which would be for Chase to credit
Lender's account with Distributions on the payable date. (ii) During the term of
any Loan, Chase will permit the Securities on Loan to be transferred into the
name of and be voted by the Borrower or others. Lender shall not be entitled to
participate in any dividend reinvestment program or to vote proxies with respect
to Securities that are eligible for Loan (whether or not actually on Loan) as of
the applicable record date for such Securities.
(h) Advances, overdrafts and indebtedness, Security Interest. Chase
may, in its sole discretion, advance funds on behalf of Lender in order to pay
to Borrowers any Rebates or to
<PAGE>
return to Borrowers Cash Collateral to which they are entitled pursuant to the
applicable MSLA. Lender shall repay Chase on demand the amount of any advance or
any other amount owned by Lender hereunder plus accrued interest at a rate per
annum not to exceed the rate customarily charged by Chase for such loans at the
time such loan is made and shall otherwise be on such terms and conditions as
Chase customarily makes such loans available. In order to secure repayment of
any advance or other indebtedness of Lender to Chase arising hereunder, Chase
shall have a continuing lien and security interest in and to all assets now or
hereafter held in the Account and any Collateral Account (to which Lender is
entitled hereunder) and any other property at any time held by it for the
benefit of Lender or in which Lender may have an interest which is then in
Chase's possession or control or in the possession or control of any third party
acting on Chase's behalf. In this regard, Chase shall be entitled to all the
rights and remedies of a pledgee under common law and a secured party under the
New York Uniform Commercial Code and/or any other applicable laws and/or
regulations as then in effect.
(i) Termination of a Loan. (i) Loans shall generally be terminable on
demand. With the prior approval of Lender, however, Loans may be made on the
basis of a reasonably anticipated termination date ("Term Loan") and without
providing for the right of substitution of equivalent Securities. Termination of
a Term Loan prior to its anticipated termination date by either Lender or
Borrower may result in the terminating party having to pay non-terminating party
damages based on the cost of obtaining a replacement loan. (ii) Chase shall
terminate any Loan of Securities to a Borrower as soon as practicable after (a)
receipt by Chase of a notice of termination of the respective MSLA; (b) receipt
by Chase of Written Instructions directing it to terminate a Loan; (c) receipt
by Chase of Written Instructions instructing it to delete from Appendix 2 the
Borrower to whom such Loans was made; (d) receipt by Chase of Written
Instructions advising that the Security subject to a Loan is no longer subject
to the representation contained in Section 3 hereof; (e) receipt by Chase of
notice advising that an Event of Default (as defined in the applicable MSLA) has
occurred and is continuing beyond any applicable grace period; (f) whenever
Chase, in its sole discretion, elects to terminate such Loan other than a Term
Loan; or (g) termination of this Lending Agreement. (iii) If Securities which
are the subject of a Loan being terminated are to be sold by Lender, Written
Instructions shall in no event be given to Chase later than the trade date
established by Lender for such sale or such earlier date of which Chase may
advise Lender from time to time with respect to particular markets. Chase shall
not be liable for any failure of a Borrower to return Securities on Loans in a
time fashion.
(j) Recordkeeping and Reports. Chase shall establish and maintain such
records as are reasonably necessary to account for Loans that are made and the
income derived therefrom. Chase shall provide Lender with a monthly statement
describing the Loans made during the preceding month, and the income derived
from Loans, during the period covered by such statement. A party shall comply
with the reasonable requests of the other party for information necessary to the
requester's performance of its duties hereunder.
Section 6 - Default by Borrower
(1) Chase may assume (unless it has actual knowledge to the contrary)
that any representations made by a Borrower in connection with any Loan are
true, that no event which is
<PAGE>
or may become an Event of Default (as defined in the applicable MSLA) has
occurred and that a Borrower has complied with its obligations under the
applicable MSLA. Subject to Sections 7(b)-(d), Chase shall have no
responsibility for the accuracy or completeness of any information supplied, or
for any breach of any obligation, by any Borrower under or in connection with
any MSLA or Loan. Chase shall not be liable as a result of taking or omitting to
take any action provided that Chase shall have carried out its responsibilities
hereunder in good faith. (ii) If any Borrower with respect to any Loan affected
pursuant hereto and pursuant to the applicable MSLA fails to return any loaned
Securities when due thereunder for reasons other than relating to the solvency
of the Borrower, Chase shall then take whatever action its deems appropriate in
accordance with general market practice and Chase's reasonable judgment,
including, but no necessarily limited to, claiming compensation from such
Borrower on behalf of Lender in the event a trade executed by Lender fails on
account of such Borrower's failure timely to have returned Securities on Loan
or, where Chase deems it necessary, such other action as may be permitted by the
applicable MSLA, including collecting any applicable MSLA fails to return any
Securities on Loan when due thereunder for reasons relating to the solvency of
the Borrower, Chase shall take such action as its deems appropriate in
accordance with Chase's reasonable judgment under the applicable MSLA.
Section 7 - Standard of Care, Liabilities, Indemnification
(a) Standard of care, Liabilities. Except as provided in paragraphs (b)
and (c) hereof, Chase shall be liable for any costs, expenses, damages,
liabilities or claims (including attorneys' and accountants' fees) incurred by
Lender, except those costs, expenses, damages, liabilities and claims arising
out of the negligence, bad faith or willful misconduct of Chase. Chase shall
have no obligation hereunder for: (i) costs, expenses, damages, liabilities or
claims (including attorneys' and accountants' fees), which are sustained or
incurred by Lender by reason of any action or inaction by any pricing service,
any Depository or a Triparty Institution or their respective successors or
nominees; and (ii) any failure to perform any obligation due to any matters
beyond the control of Chase. In no event shall Chase be liable for indirect or
consequential damages or lost profits or loss of business, arising hereunder or
in connection herewith, even if previously informed of the possibility of such
damages and regardless of the form of action.
Except for any costs or expenses incurred by Chase in performing its
obligations pursuant to paragraphs (b) and (c) hereof any ordinary operating
expenses incurred by Chase in providing services hereunder, Lender shall
indemnify Chase and hold it harmless from and against any and all costs,
expenses, damages, liabilities or claims, including reasonable fees and expenses
of counsel, which Chase may sustain or incur or which may be asserted against
Chase by reason of or as a result of any action taken or omitted by Chase in
connection with operating under this Lending Agreement or enforcing Lender's
rights under the applicable MSLA, other than those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of Chase. The foregoing indemnity shall be a continuing obligation of
the Lender, its successors and assigns, notwithstanding the termination of any
Loans hereunder or of this Lending Agreement. Chase may charge any amounts to
which it is entitled hereunder against the Account, and Lender shall be entitled
to an accounting of all amounts so charged. Actions taken
<PAGE>
or omitted in reliance upon Proper Instructions, or upon any information, order,
indenture, stock certificate, power of attorney, assignment, affidavit or other
instrument reasonably believed by Chase, in good faith, to be genuine or bearing
the signature of a person or persons believed, in good faith, to be authorized
to sign, countersign or execute the same, shall be conclusively presumed to have
been taken or omitted in good faith.
(b) Indemnification of Lender in respect to Distributions. If the
Borrower in respect of any Loan effected pursuant hereto and pursuant to the
applicable MSLA fails, as a result of its bankruptcy, insolvency,
reorganization, liquidation, receivership or similar event (each an "Insolvency
Event"), to remit to Chase for Lender's account any Distributions on or with
respect to Securities on Loan when due (the "Due Date") in accordance with such
MSLA and such Due Date occurs at least one day prior to an Insolvency Event then
Chase shall at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Due Date, undertake the following: (i) with respect to
Distributions in the form of cash, Chase shall credit Lender's account with the
full amount of such Distributions and (ii) with respect to Distributions in the
form of securities, Chase shall, at its option, either purchase replacement
securities (of an equal amount of the same issue, class, type or series as the
Distributions) on the principal market in which such securities are traded or
credit Lender's account with the market value in United States dollars
("Dollars") of such Distributions on the Due Date as determined by Chase in good
faith. Market value shall be determined by Chase in accordance with the
applicable MSLA, including the computation of Dollar equivalents where
Securities on Loan and/or Collateral (and Proceeds) are denominated in a
currency other than Dollars.
(c) Indemnification of Lender in respect of Securities. If the Borrower
in respect of any Loan effected pursuant hereto and pursuant to the applicable
MSLA fails to return any Securities on Loan to Chase for Lender's account when
due thereunder (the "Return Date") which is the date of default, then Chase
shall, at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Return Date, credit Lender's account in Dollars with the
difference ("Difference") (where a positive number), if any, between (x) the
market value of such lent Securities on the Return Date (including, in the case
of debt Securities, accrued but unpaid interest), and (y) in the case of Loans
collateralized by (i) Cash Collateral, the greater of (A) the Market Value of
the Cash Collateral on the date of initial pledge as adjusted for any subsequent
marks-to-market through the Return Date and (B) the Market Value of Cash
Collateral investments on the Return Date, (ii) non-Cash Collateral comprising
securities Collateral, the greater of the Market Value of such Collateral on the
(A) Business Day immediately preceding the Return Date and (B) Return Date, or
(iii) non-Cash Collateral comprising Letter of Credit Collateral, the Market
Value of the Letter of Credit Collateral on the date of initial pledge as
adjusted for any subsequent marks-to-market through the Return Date. Market
Value shall be determined by Chase in accordance with the applicable MSLA,
including the computation of Dollar equivalents where Securities on Loan and/or
Collateral (and Proceeds) are denominated in a currency other than Dollars.
Where Cash Collateral and non-Cash Collateral have each been allocated to a Loan
as of the Return Date, the Difference payable by Chase shall be computed in
accordance with the foregoing as if there had been two Loans in effect on the
Return Date, one collateralized by Cash Collateral and the other collateralized
by non-Cash Collateral. In lieu of paying Lender the Difference, Chase may, at
its sole option and expense, purchase for Lender's
<PAGE>
account ("Buy-in") replacement securities of the same issue, type, class, and
series as that of the Securities on Loan.
(d) Subrogation. If Chase makes a payment or a purchase pursuant to
Section 7(b) or effects a Buy-in pursuant to Section 7(c), or if Chase effects a
Difference payment pursuant to Section 7(c) on account of a failure to return
Securities on Loan not arising from an Insolvency Event, Chase shall, to the
extent of such payment, purchase, Difference payment or Buy-in, be subrogated
to, and Lender shall assign and be deemed to have assigned to Chase, all of its
rights in, to and against the Borrower (and any guarantor thereof) in respect of
such Loan, any Collateral pledged by the Borrower in respect of such Loan, and
all proceeds of such Collateral. In the event that Lender receives or is
credited with any payment, benefit or value from or on behalf of the Borrower in
respect of rights to which Chase is subrogated as provided herein, Lender shall
promptly remit or pay to Chase the same (or its Dollar equivalent) but only to
the extent that Lender has been paid all amounts owed to it by Borrower.
Section 8 - Chase Compensation
(a) In connection with each Loan hereunder, Lender shall pay to Chase a
fee equal to ___% of (i) earnings (less any Rebate paid by Chase to a Borrower)
derived from Authorized Investments in connection with Loans collateralized by
cash, and (ii) any Securities Loan Fee paid or payable by the Borrower on Loans
not collateralized by cash. (b) The fee payable to Chase for services performed
pursuant to Section 5(f) hereof shall be equal to one tenth of the one percent
(0.1%) of the Fund's average daily Assets (with "Fund" being as defined in
Appendix 4 hereto). All securities in the Fund shall be valued based on their
amortized cost. Fees shall be accrued and charged daily against the Fund's yield
or assets, as appropriate, and shall be payable monthly in arrears on the first
business day of the month following the month in which earned. (c) Chase is
authorized, on a monthly basis, to charge all the foregoing fees (together with
reasonable expenses incurred by Chase hereunder) and any other amounts owed by
Lender hereunder against the Account and/or a Collateral Account.
Section 9 - Taxes
Lender shall be responsible for all filings, tax returns and reports on
any Loans undertaken by Chase on Lender's behalf which are to be made to any
authority whether governmental or otherwise and for the payment of all unpaid
calls, taxes (including, without limitations, any value added tax), imposts,
levies or duties due on any principal or interest, or any other liability or
payments arising out of or in connection with any Securities or any Collateral,
and in so far as Chase is under obligation (whether of a governmental nature or
otherwise) to pay the same on Lender's behalf Chase may do so out of any monies
or assets held by it pursuant to the terms of the Agreement or hereunder.
Section 10 - Instructions
(a)(i) Written Instructions. "Written Instructions" shall mean written
communications actually received by Chase from an Authorized Person or from a
person reasonably believed by
<PAGE>
Chase to be an Authorized Person by letter, memorandum, telegram, cable, telex,
telecopy facsimile, computer, video (CRT) terminal or other on-line system, or
any other method reasonably acceptable to Chase and whereby Chase is able to
verify with a reasonable degree of certainty the identity of the sender of such
communications or with communications are transmitted with proper testing or
authentication pursuant to terms and conditions which Chase may specify. (ii)
Oral Instructions. "Oral Instructions" shall mean oral communications actually
received by Chase from an Authorized Person or from a person reasonably believed
by Chase to be an Authorized Person. Oral Instructions shall promptly thereafter
be confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but Lender will hold Chase harmless for the
failure of an Authorized Person to send such confirmation in writing, the
failure of such confirmation to conform to the Oral Instructions received, or
Chase's failure to produce such confirmation at any subsequent time. Lender
shall be responsible for safeguarding any testkeys, identification codes or
other security devices which Chase may make available to Lender or its
Authorized Persons.
(b) Unless otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until canceled or superseded.
Section 11 - Pricing Services
Chase may use any pricing service referred to in an applicable MSLA and
any other recognized pricing service (including itself and any of its
affiliates) in order to perform its valuation responsibilities with respect to
Securities, Collateral and Authorized Investments, and Lender shall hold Chase
harmless from and against any loss or damage suffered or incurred as a result of
errors or omissions of any such pricing service.
Section 12 - Termination
This Lending Agreement may be terminated at any time by either party
upon delivery to the other party of notice specifying the date of such
termination, which shall be not less than 30 days after the date of receipt of
such notice. Notwithstanding any such notice, this Lending Agreement shall
continue in full force and effect with respect to all Loans outstanding on the
termination date, which Loans shall, however, be terminated as soon as
reasonably practicable.
Section 13 - Miscellaneous
(a) Legal proceedings. Chase may refrain from bringing any legal action
or proceeding arising out of or in connection with any Loan until it shall have
received such security as it may require for all costs, expenses (including
legal fees) and liabilities which it will or may expend or incur in relation
thereto.
(b) Integration, Lending Agreement to Govern. This Lending Agreement
and the Agreement contain the complete agreement of the parties with respect to
the subject matter hereof and supersede and replace any previously made
proposals, representations, warranties or
<PAGE>
agreements with respect thereto by the parties. In the event of any conflict
between this Lending Agreement, and the Agreement, this Lending Agreement shall
govern.
(c) Notice. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by telecopier, overnight express
mail, first-class postage prepaid, delivered personally or by receipt courier
service. All such notices which are mailed shall be deemed delivered upon
receipt. Notices shall be addresses as follows (or to such other address as a
party may from time to time designate on notice duly given in accordance with
this paragraph): notices to Chase shall be addressed to it at 2 Chase Manhattan
Plaza, 19th Floor, New York, New York 10081, Attention: Securities Lending
Division; notices to be given to Lender shall be addressed to it at its offices
at Attention: .
(d) Amendments, Waiver. This Lending Agreement may be modified only by
a written amendment signed by both parties, and no waiver of any provisions
hereof shall be effective unless expressed in a writing signed by the party to
be charged.
(e) Government Law, Consent to Jurisdiction, Waiver of Immunity. This
Lending Agreement shall be construed in accordance with laws of the State of New
York, without regard to the conflict of laws principles thereof. Chase and
Lender each hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and Lender hereby waives any claim of forum non conveniens to the
extent that it may lawfully do so. To the extent that in any jurisdiction Lender
may now or hereafter be entitled to claim, for itself or its assets, immunity
from suit, execution, attachment (before or after judgment) or other legal
process, Lender irrevocably shall not claim, and it hereby waives, such
immunity.
<PAGE>
(f) Counterparts, Headings. This Lending Agreement may be executed in
several counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument. The headings of the sections
hereof are included for convenience of reference only and do not form part of
this Lending Agreement.
(g) Severability. Any provisions of this Lending Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceably in any jurisdiction
shall not invalidate or render unenforceable such provisions in any other
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Lending Agreement as
of the date first above-written.
[Insert name of LENDER] THE CHASE MANHATTAN BANK, N.A.
By: By:
Title: Title:
<PAGE>
DELAWARE POOLED TRUST, INC.
FOURTH AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made this 14th day of April, 1997 by and between
DELAWARE POOLED TRUST, INC. ("Fund"), a Maryland corporation, for THE AGGRESSIVE
GROWTH PORTFOLIO, THE DEFENSIVE EQUITY PORTFOLIO, THE DEFENSIVE EQUITY
SMALL/MID-CAP PORTFOLIO, THE EMERGING MARKETS PORTFOLIO, THE FIXED INCOME
PORTFOLIO, THE GLOBAL FIXED INCOME PORTFOLIO, THE HIGH-YIELD BOND PORTFOLIO, THE
INTERNATIONAL EQUITY PORTFOLIO, THE INTERNATIONAL FIXED INCOME PORTFOLIO, THE
LABOR SELECT INTERNATIONAL EQUITY PORTFOLIO, THE LIMITED-TERM MATURITY
PORTFOLIO, and THE REAL ESTATE INVESTMENT TRUST PORTFOLIO (individually, a
"Portfolio" and collectively, "Portfolios"), and DELAWARE SERVICE COMPANY, INC.
("DSC"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Fund on
behalf of the Portfolios and Delaware Management Company, Inc. and Delaware
International Advisers Ltd. provide that the Fund shall conduct its own business
and affairs and shall bear the expenses and salaries necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
in: the maintenance of its corporate existence; the maintenance of its own
<PAGE>
books, records and procedures; dealing with its own shareholders; the payment of
dividends; transfer of stock, including issuance, redemption and repurchase of
shares; preparation of share certificates; reports and notices to stockholders;
calling and holding of stockholders' meetings; miscellaneous office expenses;
brokerage commissions; custodian fees; legal and accounting fees; taxes; and
federal and state registration fees;
WHEREAS, the Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
and
WHEREAS, the Fund and DSC previously consolidated and restated the
separate Shareholder Services Agreements dated November 12, 1991 for The
Defensive Equity Portfolio, The Aggressive Growth Portfolio, The International
Equity Portfolio, The Fixed Income Portfolio and The Limited-Term Maturity
Portfolio into a combined agreement including The Global Fixed Income Portfolio;
such Amended and Restated Shareholder Services Agreement was dated November 2,
1992 ("1992 Agreement"); and
WHEREAS, the 1992 Agreement was amended on February 28, 1994 to include
The International Fixed Income Portfolio ("Second Amended and Restated
Agreement"); and
WHEREAS, the Second Amended and Restated Agreement was amended on
November 29, 1995, to include The Defensive Equity Small/Mid-Cap Portfolio, The
Defensive Equity Utility Portfolio, The High-Yield
-2-
<PAGE>
Bond Portfolio, The Labor Select International Equity Portfolio and The Real
Estate Investment Trust Portfolio ("Third Amended and Restated Agreement");
WHEREAS, the Fund and DSC wish to amend the Third Amended and Restated
Agreement to add The Emerging Markets Portfolio;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Portfolios to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
-3-
<PAGE>
(a) The Articles of Incorporation or other documents evidencing the
Fund's form of organization and any current amendments or supplements thereto.
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Portfolios, or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of Directors of
the Fund appointing DSC as Shareholder Services Agent for the Portfolios and
authorizing the execution of this Agreement;
(e) The forms of share certificates for the Portfolios in the forms
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectus and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other documents
relating to stockholder accounts in the Portfolios;
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans, if any;
-4-
<PAGE>
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Portfolios issued or proposed to
be issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
(j) A certified copy of any resolution of the Board of Directors of
the Fund authorizing any person to give instructions to DSC under this Agreement
(with a specimen signature of such person if not already provided), setting
forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering, adding,
qualifying or repealing any document or authority called for under this Section
2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Portfolios or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificate or the books recording the
same, the Fund shall deliver or make available to DSC:
-5-
<PAGE>
(a) A certified copy of any document authorizing or effecting such
change;
(b) Written instructions from an authorized officer implementing
such change; and
(c) An opinion of counsel to the Fund as to the validity of such
action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Portfolio
shares which it issues will be properly registered and lawfully issued under
applicable federal and state laws.
(b) The provisions of this Agreement do not violate the terms of
any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of 1934 and is duly authorized to serve, and
may lawfully serve as such.
(b) The provisions of this Agreement do not violate the terms of
any instrument by which DSC is bound; nor do they violate any law or regulation
of any body having jurisdiction over DSC or its property.
-6-
<PAGE>
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Portfolios, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.
-7-
<PAGE>
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Portfolios, DSC shall issue, redeem and
transfer shares of the Portfolios, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the total
shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by debiting
transferor-stockholder accounts and crediting such shares to accounts created
and/or maintained for transferee-stockholders; if applicable, issue and/or
cancel stock certificates.
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash due
and paid, shares issued and to be issued, cash remitted and to be remitted and
shares debited and credited to accounts;
provide such notices, instructions or authorizations as the Fund may require.
-8-
<PAGE>
4.2 DSC shall not be required to issue, transfer or redeem Portfolio
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Portfolio shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Portfolios, DSC shall disburse
and cause to be disbursed to Portfolio stockholders Portfolio dividends, capital
gains distributions or any payments from other sources as directed by the Fund.
In connection therewith, but not in limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder, as
aforesaid, for which Portfolio shares are to be issued and authorized and
instruct the issuance of Portfolio shares therefor in accordance with Section IV
hereof.
-9-
<PAGE>
(d) Prepare and mail or deliver such forms and notices pertaining
to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Portfolios, DSC shall
provide those services ancillary to but in implementation of the services
provided under Sections I through V hereof, and those generally defined and
accepted as shareholder services. In connection therewith, but not in limitation
thereof, DSC shall:
(a) Except where instructed in writing by the Fund not to do so,
and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.
-10-
<PAGE>
(b) Receive, record and respond to communications of stockholders
and their agents.
(c) As instructed by the Fund, prepare and mail stockholder account
information, mail Portfolio stockholder reports and Portfolio prospectuses.
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to investor and
Portfolio stockholders, including retirement plans, including activities not
otherwise provided in Section I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Portfolio stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or
-11-
<PAGE>
its own counsel with respect to any matter arising in connection with the
performance of its duties hereunder, and shall not be liable for any action
taken or omitted by it in good faith in accordance with such instructions or
opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
-12-
<PAGE>
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), advantages and benefits to the Fund in the employment of DSC
hereunder can be available which may not generally be available to it from
others providing similar services
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested person of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Portfolios and their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
-13-
<PAGE>
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in
-14-
<PAGE>
person at a meeting called for the purpose of voting on such approval. It shall
continue in effect for an indeterminate period, and is subject to termination on
sixty (60) days notice by either party unless earlier terminated or amended by
agreement among the parties. Compensation under this Agreement shall require
approval by a majority vote of the Board of Directors of the Fund, including an
affirmative vote of the majority of the non-interested members of the Board cast
in person at a meeting called for the purpose of voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
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<PAGE>
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
Attest:
By:/s/ Eric E. Miller /s/ David K. Downes
-------------------- --------------------------
Eric E. Miller David K. Downes
Vice President/ President
Assistant Secretary Chief Executive Officer
Chief Financial Officer
DELAWARE POOLED TRUST, INC. for
THE AGGRESSIVE GROWTH PORTFOLIO,
THE DEFENSIVE EQUITY PORTFOLIO,
THE DEFENSIVE EQUITY SMALL/MID-CAP
PORTFOLIO,
THE EMERGING MARKETS PORTFOLIO,
THE FIXED INCOME PORTFOLIO,
THE GLOBAL FIXED INCOME PORTFOLIO,
THE HIGH-YIELD BOND PORTFOLIO,
THE INTERNATIONAL EQUITY PORTFOLIO,
THE INTERNATIONAL FIXED INCOME PORTFOLIO,
THE LABOR SELECT INTERNATIONAL
EQUITY PORTFOLIO,
THE LIMITED-TERM MATURITY PORTFOLIO,
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
Attest:
By:/s/Eric E. Miller /s/ Wayne A. Stork
----------------- -----------------------
Eric E. Miller Wayne A. Stork
Vice President/ Chairman of the Board
Assistant Secretary
-16-
<PAGE>
SCHEDULE A
COMPENSATION
DSC's compensation for shareholder services to the Fund shall be $25,000. DSC
will bill and the Fund shall pay such compensation monthly ($2,083.33 per month)
allocated among the Portfolios of the Fund based on the relative percentage of
assets of each portfolio at the time of billing and adjusted appropriately to
reflect the length of time a particular portfolio is in operation during any
billing period.
-17-
<PAGE>
AMENDMENT NO. 4A
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
- --------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Decatur Total Return Series
Delaware Series
Delchester Series
DelCap Series
Global Bond Series (New)
International Equity Series
Trend Series
Value Series
2
<PAGE>
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust - Pennsylvania (doing business as Tax-Free
Pennsylvania Fund)
Dated as of: April 14, 1997
----------------
3
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-----------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
By: /s/ Wayne A. Stork
-----------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
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Wayne A. Stork
President and
Chief Executive Officer
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SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*
[NAME OF INVESTMENT COMPANIES]
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* Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of _________ __, 199_ ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
Dated as of: __________ __, 199_
